Negotiation - Power

In any negotiation power goes to the side that has the most tools and resources and knows how to use them. The skills of using time investment and information have been covered already. Here are some more of the many sources of power that can be used in negotiating. Some are obvious, but some you may not have thought about.

There will be somewhat repetitive explanations of these in the chapter on specific negotiating techniques. Repetition is good, though, as it helps us remember.

1. Competition

Know the nature of your competition better than the people you are negotiating with, and you'll be in a better position. You don't want to be the only one who doesn't know what your competition is offering them. In fact, when they bring up their alternatives, you want to be able to authoritatively explain exactly why you have the better offer.

Know everything about their competition, and you'll be in a very strong position. If a supplier tells you he has the lowest prices, it can be powerful to be able to say, "Your prices are low, but XYZ Company has slightly lower prices. Also, ABC Company charges more, but their product may be better than what you're offering. Now if you could cut the delivery costs, and include..."

2. Legitimacy

When I first sold real estate, it was not entirely clear to me why it mattered what kind of car I drove, or whether I wore a tie. Of course, if I showed up in my t-shirt, driving an old pickup truck, buyers wouldn't take me seriously. Whether or not we like it, things like these do matter. You have to dress and act the part you are playing.

Apart from the personal legitimacy issues, you need to clearly establish the legitimacy of your company and your offer. If you are buying a strip mall, for example, you should have a written report outlining other deals like this that you have done. If you don't have such experience, you'll have to demonstrate your legitimacy by being so well prepared that they'll assume you have experience.

3. Precedent

Citing precedent is a powerful way to overcome fears or uneasiness on the other side. If you are an architect selling an unconventional idea for a building, you need to show them that it has been done successfully before. If it is the first of its kind, you need to have examples ready to show the success of other first-of-their-kind buildings.

It is even more powerful if you can use their own precedents. If you are negotiating sponsorship for your attempt to climb Everest, for example, you would want to find examples of other successful sponsorships their company has done. Then you can say something like, "This could get you a lot of valuable publicity, like that time you sponsored John Allen's cross-country bicycle race."

4. Identification

If you can get the negotiators on the other side to identify with you, they are more likely to work well with you. Even better if you can also use the power of identification in presenting your demands. How do you do this?

Start by establishing personal rapport. If you know that the other guy is a family-oriented man like you, bring it up at the appropriate time. You could say, for example, "You know, we both would probably rather spend the weekend with our families than here, so..."

Use common experiences to elicit a sympathetic response during negotiations. "I'm sure you can remember being in my situation. I want to give you everything you need, but I need to make a decent profit too." If they DO remember being in that situation, They will be more sympathetic.

5. Expertise

I remember looking at a property once with an agent that was pointing out exactly what was to "code" and what wasn't. He had suggestions for converting the basement into livable space, knew what size windows would make it legal, and how much it would cost. He was so helpful with his expertise that it was easy to forget that his job was to sell the place to me at the highest price he could get.

In negotiation power comes from expertise. We respect it when we perceive it to be real. To use this, have expert opinions and research to back up what you say. There is no reason to tell a seller that you think his business is worth x. Lay an appraisal on the table and show him an experts opinion of value.

6. Risk Taking

There is great power in taking calculated risks. I have seen inexperienced real estate investors successfully use zero-down techniques that "professional" investors say won't work. They just take the small risk to try. My friends thought it was unusual for me to offer half the price of a new book, but the owner said yes. All I had to do was ask.

Notice in that in these examples the risk is small compared to the benefit. This is often the case in risks that we don't take. Think like the guy that just keeps asking women out until one says yes. You never know what you might get by asking, and you usually don't have much to lose.

7. Morality

If there are ethical issues involved in a negotiation, they can be a source of power. For example, if you are buying a business and the employees have certain benefits, you could say, "I could only pay that much if I cut employee benefits, which I could do legally, I suppose, but it just isn't right. They were promised certain things, and that's part of why I have to offer a bit less than you want."

Also use peoples sense of right and wrong to keep them from changing their minds. Let's assume, for example, you are renegotiating a renovation of a building and the contractor tries to raise the price, because of rising lumber costs. You could remind him that he was the one who said he'd take the risk of rising material costs, and based the initial price on that. Then see what you can do to make it work (you don't want to bankrupt him).

8. Commitment

In a negotiation power comes from gaining commitment from the other side. It's a matter of morality and momentum. Most decent people want to keep their commitments. They also tend to keep moving forward when there is a true commitment. What does this mean in a negotiation?

It means you want to build commitments to assure progress. You could do this by asking the other side to commit to trying everything possible to make the deal work, which may or may not be appropriate. You can also say things like "Can I get you to commit to this if I do that?" In buying a property, for example, you might ask for them to pay closing costs if you agree to a higher interest rate.

Continues here... Negotiating Power - Another eight sources of power.