How many times did you hear Sgt. Joe Friday say, “Just the facts ma’am, just the facts” during the black and white TV drama “Dragnet”?
Even though the show premiered in the 1950s, that statement holds true today while discussing preparing for a negotiation.
There are two types of power that can be applied to any negotiation that deals with the facts: 1) information and 2) expert. Both are powerful, especially if you are dealing with a fact laden negotiation. Many of us have either leased or purchased a car, a piece of machinery or office equipment. In these cases you need to be knowledgeable about what the interest rates are, the length of the agreement, warrantees, service frequencies and other issues.
Prior to entering into any negotiation regarding these issues, it’s time to do your homework and collect the facts. When I was teaching, I always instructed my graduate students to select three potential vendors with which to negotiate prior to making their final decision on a purchase or lease. I also suggested they use the Internet to research prices, models, trade-in values and consumer reviews. This was the beginning of their BATNA (Best Alternative to a Negotiated Agreement) development. The information gathered from the first vendor assists in preparing for the second and the final negotiation. Now you’ve built your reservoir of information, which will aid in the formulation of your strategy for the final negotiation.
If the purchase in question is a vehicle, you need to know range of prices, interest rates, warrantees and type of service you will receive from a particular dealer. To better understand the financing options, you may involve your CFO or your banker. Both are considered sources of expert power.
You are now armed with the information you need to enter into the final negotiation. You should have at least two other dealers who have helped establish a price range, warrantees, accessories and delivery dates. These would be considered your BATNA. If the negotiation is with the dealer of choice, you have options. Your ZOPA, (Zone of Potential Agreement) provides you with your range of acceptable options. Your WATNA, (Worst Alternative to a Negotiated Agreement) provides you with that “line in the sand” you don’t want to cross. Now that you have the three dimensions of your negotiation, you need to proceed.
These negotiations usually open with the dealer informing you of the latest promotion; for example, “zero down” and “no interest for a period of time.” What they don’t say is that the rate is based on your credit score. You need excellent credit to get that deal. Do you know what your credit score is before you walk into the dealership? I doubt most people do and are surprised when their credit score is revealed by the dealership’s financial person. This information needs to be acquired during your preparation process.
Because you have met with the other dealers prior to this negotiation, you have acquired the necessary information on finances, features, service and warrantees you need to successfully execute this negotiation. This information provides you the power to walk away if you feel the deal does not meet your needs.
This approach was demonstrated by Professor Roger Fisher of Harvard University when he purchased a new car. He took his deal, including the desired equipment, from one dealer and put it into an envelope and went to two other dealerships and asked them to better his deal by $500. Each dealer questioned the price and equipment, but he was unwilling to expose any information. Only one dealer provided a price, and when compared to the deal in the envelope, he surpassed the $500 threshold.
What does this example demonstrate? The dealer has all the information you desire, the rebates, the financial incentives and the value of your trade in. This is why you need to build your reservoir of information; otherwise it will be a one-sided negotiation. These dealers are negotiating every day, while you purchase or lease a car every two or three years. Unless you assemble the necessary pertinent information, you will be at a disadvantage. If you want a level playing field, do your homework and get the facts.
Cary Silverstein, MBA, is the president of SMA LLC and The Negotiating Edge. He leads a group that provides services in the areas of strategic planning, negotiation training and conflict resolution with offices in Fox Point and Scottsdale, Ariz. He can be reached at (414) 403-2942 or at csilve1013@aol.com.
