We all like rules of thumb.
They conserve mental energy.
Negotiation, like wisdom, seems especially prone to rules of thumb, shortcuts to success.
Example: “Never bargain against yourself.”
No matter how little you know about negotiation, you know that you never bargain against yourself.
If I offer you $8,000 for your classic MG, and you tell me that it is not for sale, I don’t then up the offer to $12,000 because, if I do, I show tremendous weakness in the area somewhere near that mode of my brain that evaluates leverage, which has got to be the neocortex.
That is what some people call “feeding an alligator”, which may be construed as demeaning to alligators, but I will leave that subject for another day.
You simply cannot keep throwing money at a reluctant recipient if you are trying to reach a wise and fair agreement – unless you come from Saudi Arabia.
In Negotiation 101, we learn that we have to get a counter-offer before we up our bid.
“I’ll take no less than $17,500.”
Now, I increase my offer to $8,900; you come down to $16,000; and the dance goes on until the space between us is worth less than losing the agreement.
If I don’t wait for you to say “17,500”, we will be lost in the woods.
I may pay way too much; we may not do a deal at all; there is no logical progression to agreement.
So, is it ever ok to go from $8,000 to $9,000 without a counter-offer first?
I believe so – when I cannot justify my initial offer.
It may be that (a) I cannot justify it to begin with, or (b) I discover after I make the offer that it is not sustainable as my best case scenario.
Let’s say that, instead of playing the offer-counter-offer game, you and I agree that we will hire two classic car experts to appraise your MG.
One appraiser values it at $13,000, and the other values it at $20,000.
At that point, $8,000 is, apparently, wholly unrealistic.
Unless the loan sharks are after the seller, an offer of 38.4% under the lowest appraisal is unrealistic.
I thought my best case was $8,000; now I learn that it is $13,000.
What to do?
Withdraw the initial offer and send a new first offer based upon new information.
If that does not attract a counter, look for other deals.
Withdrawing an offer based upon new information is a negotiation strategy that comes under the general category of strategic retreats.
More about strategic retreats in future posts.