Repeat after me: It's not (only) about price.
Why is it that in the end, negotiations so often come down to price? I have worked with sellers for many years now, and I am often dismayed at how little power they feel during a negotiation, and even during the whole buying process. We feel that the buyer has all the power, and often we have capitulated most of the power, so in fact, they do have it.
It does not have to be that way. Power balances get set early in the buying process, and it is difficult, but not impossible, to reset them as the process move on. But in truth, as a seller, you need to establish a give and take relationship from the very beginning.
My tone here may sound arrogant, but I recently found myself in a weak selling position and had to reset the relationship with my buyer before we could close the deal. I was selling that most personal of possessions, my car. When it gets that personal, theory can suffer, and I found myself reducing the negotiation to price and buckling at that.
Here was my situation: I had bought a nice sports car while living in California, and now that I'm back in Toronto, I decided to sell it. It's too much car for my urban lifestyle. (Need I run down the specs? 8 cylinder, 340 hp, quattro, convertible...) Needless to say this was not an easy decision, but it was the right decision. In fact I returned to my bicycle for work commuting to get some exercise and make up for some of those 8 cylinder drives.
But when I returned to Toronto, Audi had reduced the price of the S4 to make room in the lineup for the RS4 at the very high end, and I think also to account for currency shifts. In any case, it was time to sell, and I set my price at $48,500.
A buyer arrived. I had several inquiries, but only this one serious buyer who came to test drive the car. He was in his 70's, and came with his wife; clearly they were not buying only on price. He shared some personal information with me that told me that this was very much an emotional purchase. (And how could one buy an S4 Cab for anything other than emotion?)
Yet when he called to make me an offer at $46, I started to buckle. My own situation started (time pressure, desire to have it done, going on vacation soon) to make me want to close him no matter what the price. I made some pretty pathetic comments about the value of the car, but he had to know that I was willing to drop my drawers and accept his offer. He told me to think about it over night.
That night, I was riding home on my bicycle, and kicking myself for my own weakness. Afterall, I have been trained in negotiation, and I have coached others as well. What would that training tell me to do right now?
- first of all, determine whether my car is the one he wants to buy. Ask him if he has selected my car, and what it is that made the decision. The truth is that most people make a choice, and once the choice is made, they don't usually change their mind based on price, especially +/- 5% or so. $2,000 is peanuts when we're talking about a $50k car.
- find some polite ways of saying no. In this case, I asked him whether he had seen some defects that would make the car worth less than market value.
- find something else to ask for. He has to give to get! I had to widen the discussion a little bit.
I did all three. The third one was the hardest. After all, I had no idea what he had that I wanted other than cash! In corporate sales, we can ask for reference calls, case studies, and press releases, and we can give things other than discounts, such as training, services, and so on. But in my case I wasn't sure what to ask for.
Then it donned on me: He had given me a business card, and I saw that his company manufactures and sells commercial flagpoles! Perhaps somehow I could get a flagpole out of this deal? My parents have just moved to a lakefront property, and they would love a nice big flagpole.
So I was settled. I prepared my negotiation sheet, and called my buyer the next day:
A: "Hello Norm"
N: "Hello Alan. So, did you talk that price over with your wife? I was going to offer you $45, but I came up to $46 because you're a family man and I want to be fair."
A: "Well Norm, have you decided that this is the car you want to buy?"
N: "Yes. I was looking at a VW Eos, but I think I'll go with the S4. It has a lot more power and I like the ride."
A: "Norm, did you feel there was something wrong with the car that doesn't make it worth $48.5?"
N: "No. But $46 is what I am willing to pay."
A: "I'm sorry to hear that Norm. I can't let it go for that price. I'm holding firm at $48.5"
N: "Well, I could come up a bit. $46.5. But that is my final offer. You think about it and let me know. Otherwise it's ok, I'll look elsewhere."
A: "Norm, you are asking me to give you this car below market value. The only way I could even consider a consession is if you could give me something first." (4-second pause, according to my negotiation manual!)
N: "Hm. What did you have in mind?"
A: "Well, I saw from your business card that your company manufactures and sells flagpoles."
N: "Why, yes we do."
A: "And I looked on your website, and those look like very nice flagpoles."
N: "Why, yes they are."
A: "In fact, Norm, it looks like your company is the leading producer of flagpoles in Canada."
N: "Why, yes we are!"
A: "Norm, my parents just purchased a property on the lake, and I would love to give them a housewarming gift by having a nice big flagpole installed on their property."
N: "Well, what kind of pole were you thinking of?"
A: "A 40' pole"
N: "You could go 40', but it might look out of balance with the house. 30' is still substantial, but more balanced."
A: "OK then, 30'."
N: "You would need an anchor bolt, and some other hardware."
A: "And a flag, and I'd need it delivered to their house."
N: "I think we could do that."
A: "Well Norm, if you would be willing to deliver and install a flagpole at my parents house along with a nice flag, I would be willing to lower my price to $47,000."
N: "How about $46.5 + the flagpole?"
I was pretty happy with myself. But not nearly has happy as my parents, who have been wanting a flagpole for their property.