A note on this photo. Since I’m posting every Tuesday, I have decided to post my favorite photo taken during the previous week. These photos have nothing to do with the post their in, but I’m sure the creatives can draw parallels.

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“Seek first to understand, then to be understood.”

-what excellent communicators do

 

Here’s what’s been on my mind today. The dynamics of negotiation.

 

Let’s say for the purposes of this discussion we’re that talking about an item with nebulus value. Say, a beautiful abalone shell.

Let’s also say that we, as the interested party, have an idea of what it is worth to us ($100).

And, let’s assume the seller knows its real market value ($50).

 

Instance 1:

Us: “I’ll give you $75 for that nifty abalone.”

Seller: “Deal”

Deal closes.

End result: We should be thrilled. Afterall we got the abalone for $75 when we “knew” it to be worth $100. We should be thrilled. But we’re not. No, we’re not at all. In fact, part of us thinks that we should have gotten a better deal. We wonder if we should have offered $40 first. We still purchase the abalone, but it just doesn’t feel as good as we thought it would.

We simply don’t feel like we got a deal.

 

Instance 2:

Us: “I’ll give you $75 for that nifty swifty ultra spiffy abalone, good sir.”

Seller: “No way! You dare insult me with that price for such a gem?!? I shouldn’t even talk to you anymore. Ok fine I will, but this time you must offer something close to what it’s actually worth!”

Us (a bit perturbed, but eyes set on the ‘lone): “Hmm… How about $90?”

Seller: (Still showing a bit of disgust) “Still too low pal. Either offer me $125 or get out of here. This kind of lowballing is no good for my prized abalone’s ego.”

Us: “You drive a hard bargain jabroney.” (Taking out a crisp 100 dollar bill and slapping it on that magnificent shell.) “Here’s my final offer. Take it or leave it”

Seller: “no….”

Us: (We pick up mr. Franklin and start walking away)

Seller (waits until we’re 20 feet away): “Alright! Fine. You want it for $100? My wife is going to kill me. Fine. You can have it, just don’t tell anyone.”

Deal closes.

End result: We feel like we got a deal! A great deal at that. It doesn’t matter that this is the EXACT same abalone as the above example. All that matters is that we haggled with the best of them. And won! We’re going to be telling this story to all of our friends for a long time to come.

We ‘know’ we got a great deal.

 

 

What’s the difference in the two situations?

In both examples we’re allowing the other to dictate the value for us. Instead of absolutely knowing without a doubt what the value (to us) is, we let the seller dictate the value. This leaves us open for an emotional experience dictated entirely by the seller.

 

In order to negotiate correctly, we must see the subject of negotation (abalone) as two separate elements:

1. The True Value. This is the value that we know it holds. How we find this is not important. What is important, is that we arrive at this conclusion with sufficient evidence for us to be 100% confident in the value we attribute to it.

2. The seller’s Perceived Value. This can vary wildly. Often times it is higher than our True Value. The seller’s Perceived Value is whatever the seller deems it to be. It can be based on lots of logical things or it can be plucked out of thin air. At the end of the day, It doesn’t matter where the seller gets this value. It is what it is.

 

The Negotiation Process

First. We must internalize what we believe to be the True Value.

Second. We must seek to understand the seller’s Perceived Value.

Third. If the seller’s Perceived Value is higher than the True Value, we must educate them on why the True Value is what it is. If however, the seller’s Perceived Value is lower than the True Value, you can have it for whatever the seller’s Perceived Value is, assuming you can get the seller to tell you the Perceived Value before you tell them your True Value.

When you boil it down. Negotiation is all about understanding the other party’s Perceived Value regardless if you’re the buyer or seller.

 

Skilled negotiators will play their cards close to their chest. Their mission is to determine what value you hold with the subject of negotiation before you determine theirs.  The best negotiators will tease out your perceived value, challenge you a bit and make you jump through a hoop or two, then reward you with a deal that you think is excellent.

This way both parties leave feeling good which, at the end of the day, is all we’re looking for.

 

Your thoughts? Let’s hear ’em in the comments below.