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- The Art of Effective Business Negotiation
Negotiation : Streetwise Tactical Ploys
Possibly the subject of the largest number of seminars and courses being offered today is "Successful Negotiation Techniques" or some similar title. Also many books can be found on the shelves of any bookstore, written by authors of very different backgrounds, from academicians to business executives. The reason for the high demand for these seminars, courses and "how to" books is obviously the perceived need of possessing, and the perceived possibility of acquiring the very valuable skill of being a successful negotiator.
Since negotiation can be defined as an art and not a science or a technology, it is natural that the advice given at seminars and found in books differs very much.
According to the basic approach taken, the type of advice given can be grouped into three differentiated schools of thought:
* Streetwise Tactical Ploys (STP)
* Principled Negotiation, and
* Negotiation as a phased process
In this Module of the Effective Business Negotiation course we will discuss the first of the three approaches:
Streetwise Tactical Ploys (STP)
This system was probably practiced since prehistoric times, but in modern times it was first promoted by Chester Karass of the Center for Effective Negotiation in Southern California.
Since it is natural to perceive at first sight that our counterparts in a negotiation are our rivals or even our enemies, it is not surprising that the promotion of the STP method was very successful, especially during the 80´s.
Karras belonged to the academic world holding nothing less than a Ph.D. in negotiation behavior from the University of California. But he also had considerable "real world" experience acquired as an executive of Hughes Aircraft. He published a first book targeted at an academic audience (The Negotiating Game) in 1970.
But in 1974 he published a second book (Give and take: The Complete Guide to Negotiating Strategies and Tactics), targeted to a wider audience. It was very successful, because many people felt that their counterparts in past negotiations had taken advantage of them and were desperate for some way to stop being street dumb. They wanted to be able to defend themselves from the plots of their streetwise adversaries and come out on top in their negotiations.
The STP approach is still quite popular, and very expensive; and professional seminars concentrate in teaching the ploys supposed to help attendees to "defeat" their adversaries. The STP approach defines negotiations as duels where the "strong" will always defeat the "weak". And to evolve from a weakling to a strong fighter, you need to know these ploys. You can then use them yourself in your negotiations and defeat your adversaries.
TEACHER: This is a good point. The value of knowing the STP ploys lays more in the fact that you will be able to recognize them and defend yourself against them, than in using them yourself against your counterpart.
STUDENT: As you wrote on the previous Module, "a ploy identified is a ploy neutralized".
TEACHER: Exactly, because practically for any ploy there is a defense or counter. This is why it is important for any negotiator to be able to recognize ploys when used by a counterpart.
On the other hand, while knowing the STP is a necessary condition to be a successful negotiator, it is not sufficient in most cases. Admittedly, you can sometimes use them yourself against some "street dumb" counterpart, but there seems to be a scarcity of this type of negotiator, and in most cases your counterpart will belong to the streetwise species.
Also, in complicated, long term and repetitive negotiations the use of ploys and counter-ploys is useless and tends to create hard feelings between the negotiators.
STUDENT: Which is the best approach, then?
TEACHER: Have a little patience, please. First let me tell you about those famous ploys you ought to know about in order to recognize them and defend yourself.
Karass did not claim to invent them, but he standardized and popularized three basic ploys: The Bogey, the Krunch and the Nibble.
According to Karass, this ploy is simple, effective and ethical. We can also call it "the poor boy approach", because it consists in claiming you as prospective buyer love your counterpart’s product or service (be it a piece of candy or a tractor) but that you can’t afford it (because your parents cut your allowance or because the giant corporation you represent is stingy and you have a very restricted budget).
The meaning of these statements is that the seller will make a sale if he comes down in price to the buyer’s price range. The promoters of the Bogey claim that it tests the seller’s asking price credibility. They also claim that the seller may be inclined to review his or her estimate of the buyer’s economic possibilities. And eventually, in trying to justify the asking price, the seller may come forward with information which can be useful to the buyer. To quote Karass, "before long it is discovered that some things in the original price can be trimmed away, others can be changed and still others can be adjusted by the buyer himself to meet the budget. Each party has helped the other reach its overall goals".
Actually most of the times the Bogey works it will mean a confirmation of the fact that all prices are padded in advance in order to be protected from the buyer’s possible use of the Bogey.
This writer has perceived a seller’s trick Karass did not describe. We may call it "the seller’s voluntary Bogey". This trick usually disarms the Bogey before the buyer uses it, or at least makes it more difficult to propose.
STUDENT: Give me an example, please.
TEACHER: Sure. Let’s assume I am trying to sell you a car. I would tell you: "Dear Student, the regular price of this car is $10,000. I already sold three today at this price. But I know you are a student, and I am sure you are on a tight budget. I will give you my best possible price at once; for you, only $ 9,500. And I hope my boss will not fire me for this. And of course, you have to close the deal today".
At this point in our negotiations you (the buyer) might resort to the Krunch, the second of the most popular proposals of Karass.
The buyer tells the seller: "You have to do better than that to close a deal with me".
In our example, the car salesperson, after a lot of protestations, will come down say to $ 9,000 for the car. You may be happy to see that the Krunch worked and accept the lowered price. But most probably the car seller has anticipated your possible use of the Krunch and has padded his price. It is very likely that he could give you a better deal.
STUDENT: You mean the Krunch never works?
TEACHER: Most of the times it is self-defeating, because the sellers anticipate it and the buyers may be tricked into believing their use of the Krunch got them the best deal when it actually did not.
STUDENT: Let me draw attention to a weak point in your reasoning. If sellers have already padded their prices in preparation for these ploys, it becomes necessary to use them in order to get a better price. It would be silly to accept the first, padded price of the seller. Even (and especially) if we think the seller has padded the price in preparation for them, we MUST use the ploys.
TEACHER: Certainly, in the type of negotiations illustrated, such as purchasing a car (especially an used car!). Not necessarily in serious, repetitive business negotiations.
The third ploy Karass mentions as useful is the Nibble. I assume you already know what it is.
STUDENT: Oh, come on, writer, you have to do better than that to teach me!
TEACHER: Fine, I see you just applied a variant of the Krunch to me! I will give you a good explanation, but please be aware that I had anticipated your ploy and was ready to give you a good explanation anyway!
Nibbling means "to take tiny bites at something", as in "fish nibbling at the bait".
According to Karass, the philosophy of the "nibbler" is "if I can’t get a dinner, I'll be happy with a sandwich". Karass argues that the Nibble pays; while it may not do much for the nibblers ego, it helps their pocketbooks.
Karass says "buyers nibble on sellers and sellers nibble on buyers. Sellers nibble by making over shipments, by supplying slightly inferior merchandise, by not performing promised services, by delivering late, by adding special charges".
"Buyers nibble by paying bills late, by taking discounts not earned, by requesting special delivery or warehousing services, by asking for slightly better quality than contracted for, by demanding extra reports, certifications or invoices, by getting free engineering charges and by requesting extra consulting and training help for nothing".
The Nibble may work in some special instances, but it is the source of a lot of conflict. A nibbler is soon recognized as such and this will surely damage the business relationship. As Kennedy says, "ultimately this kind of behavior is self-destructive". This is true, because the use of these type of tricks creates hard feelings and participants tend to get angry with each other. This may be acceptable in a disarmament treaty between potential enemies who already hate and are angry at each other anyway; but it is deadly in business relationships. Most business people will accept and even admire a tough negotiator, but once an agreement is reached, they will expect the other party to respect the terms of the deal.
STUDENT: I have prepared myself a little for these classes, and I browsed through a book by Kennedy. He asks the following question, which I will put forward to you: "How do we stop the cycle of ploy-counter ploy by those who are trying to do business together".
TEACHER: I can’t tell you how to stop it, but I can tell you why it should be stopped or not started at all. Because most of the time people who use these ploys and simultaneously keep on the defensive can not advance in complex negotiations. Ploys and counter ploys mean constant confrontation between negotiators and a total lack of confidence in their counterpart’s good faith and fairness. To quote Kennedy again, "Only by addressing each party’s interests, through debate and proposals on issues and positions, is it possible to secure a lasting and implementable deal". And we want to stress "implementable". Many times negotiators finish a negotiation with a deal they are very happy about because they are sure they got the upper hand, only to discover later that it can not be implemented. Many times this is only discovered after both parties have wasted a lot of time, money and energy.
STUDENT: I’ll buy this, especially because I was involved in such a deal. A well known hardware supplier I used to work for sold a powerful computer to a large wholesaler. Both parties tricked each other in some ways. Basically the buyer exaggerated his capability and commitment to adapt his manual procedures to a computer, and the seller started to nibble at the support he was willing to give to the conversion effort. Soon a period of continued confrontation began, resulting in delays. As may happen with computer hardware, this specific model became obsolete before installation and the contract had to be re-negotiated. This was used by the buyer as a pretext to cancel the contract without penalty; in the process both parties lost a lot of time, money and effort.
TEACHER: Good real-life example. In this case, obviously the parties did not address each one’s interests.
Aim High ("shock them with your opening offer")
This is Karass’ advice: aim high, do not be modest with your opening offer. This is valid for buyers and for sellers. The reasoning behind this streetwise injunction is that the party using it will make the other believe he or she has a lot of bargaining power, this not being actually true.
In other words, the maxim means "go ahead and bluff". Because if you actually had a lot of bargaining power, as, for example, being a monopoly supplier of a scarce good, you wouldn’t need Karass’ advice. You would just use your power and force your counterpart to deal with your terms.
Followers of this method are convinced that, as Karass claims his research proved, behaving as if you had power and "aiming high" will increase your chances of getting a good deal. The experiments conducted by Karass are supposed to show that negotiators aiming low are frequently "losers", making large concessions and settling for a mediocre deal; while negotiators aiming high are frequently "winners", making smaller concessions and getting better deals.
The idea is that "a high unexpected demand or offer can succeed rather than lead to a deadlock because the initial high demand is likely to structure the other negotiator’s expectations" (Kennedy, "Pocket Negotiator").
STUDENT: Let me tell you something that happened to me when I was in my early teens, and we may try to see how it relates with the subject of this Module.
Once I saw a nice stereo in the window of a store selling used goods (I now suspect some were stolen). I didn’t have any money, but I wanted to have a look at the equipment. So, I walked into the store and said I was interested in the merchandise. The owner let me listen to it and told me the price was $300. I wasn’t going to purchase it at any price, simply because I had just enough money for the fare back home. But being reluctant to confess it, I decided to make a ridiculous offer assuming that the seller would reject it and then I would walk out with my ego intact. I decided that $30, compared with the asking price of $300, was low enough. Showing regret, I told the owner that I loved the stereo, but that I had only $30 and that I would be ashamed to make such a low offer. The owner looked at me in surprise and told me: "Why, is $30 not money". There I was: the guy was ready to give me for $30 a good he had previously told me was worth $300, and I did not have the $30. I don’t remember the excuse I used to get away, but I always remember the incident as an interesting practical learning experience.
TEACHER: Interesting story. Let’s try to see what happened. To begin with, the owner seems to have used the "aim high" approach, thinking he could convey that he had power over you, a young inexperienced person fascinated by a shining stereo device. He certainly had padded his price a lot, just in case you were not as stupid as you looked (sorry!) and came out with the Bogey.
STUDENT: Yes, and then I responded with a "fake Bogey" telling him I had only the imaginary $30.
TEACHER: Sure, and we can also say your false counteroffer was also a "aim high" (in this case you being the buyer an "aim low") countermove, and an unintentional bluff. The owner may have felt that you had "power" because he actually believed your statement that you had only $30, because of you being so young. In his mind this gave you the power of refusing any higher price, even if you thought the price was fair.
But I feel that the best part of this anecdote is the conclusion we may draw that many times the limits of a negotiation are wider that the participants think at the entry point. And that even an experienced negotiator as the owner of the store surely was, after using a "aim high" ploy, may be persuaded to reduce his price considerably when confronted with a believable Bogey and/or a "aim low" countermove by the other negotiator.
STUDENT: Also, I think this episode shows how some of the "streetwise" ploys can be self-defeating. After this experience I never returned to that particular store even when I actually had money, because I concluded that a seller asking for $300 for a good he was prepared to sell for $30, was the type of person I would not want to deal with.
TEACHER: OK, now we may hold our customary session of questions and answers. But you may want to review this Module before we start with it.
What is the name of the negotiation approach based on the theory that "negotiations are like duels where the strong will always defeat the weak"?
Streetwise Tactical Ploys (STP)
If the opinion of experienced negotiators is that streetwise ploys are not effective in serious business negotiations... what is the use of learning them?
The value of knowing the STP ploys lays more in the fact that you will be able to recognize them and defend yourself against them.
Define The Bogey in your own words.
Basically, claiming that the prospective buyer loves the seller’s product or service but that he or she can’t afford it. This is supposed to induce the seller to lower his or her price.
You quote the price of a product to a prospective customer and he or she tells you: "You can’t be serious. You certainly have to lower this price a lot if you expect me to even consider buying from you". What type of streetwise ploy is the buyer using on you?
How would you call a negotiator who thinks "if I can’t get a dinner, I’ll be happy with a sandwich"?
What does it mean that a deal must be "implementable"?
That it should be capable of being successfully completed
"Shock them with your opening offer". What is the name of the maxim recommending this behavior?
- Sem1.Effective Business Negotiation (8)
- Sem10.General Management - Core Management Competencies (5)
- Sem2.Economics for Business and Management - Macroeconomics (8)
- Sem3.Economics for Business and Management - Microeconomics (3)
- Sem4.Strategic Management-Strategy and Competitive Advantage (8)
- Sem6.Financial Management-Financial Accounting (8)
- Sem8.Marketing Management-Strategic Marketing Planning (8)