A quick word first
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I’m a big fan of the work of Chris Voss, the retired FBI hostage negotiator and author of Never Split the Difference: Negotiating as if your life depended on it. Chris has a lot of hard-earned street wisdom, including dealing with hardball bargainers.
When you’re confronted by somebody like that—and the sole issue is money—he recommends using the Ackerman Model, a four-stage process of sequencing your offers. Here are its steps:
Set your target price (your goal).
Set your first offer at 65 percent of your target price.
After that, calculate three raises to 85 percent of target, 95 percent, and finally 100 percent.
Each time, wait for the other party to counteroffer before improving your number. Never bargain against yourself.
That’s the sequence for would-be buyers. If you’re a seller, the flip would have you start with an ask that’s 135 percent of what you’re looking for, cutting that to 115 percent, then 105 percent, and finally down to your target price.
Either way, the routine is meant to protect you from getting into a situation where you split the difference between your reasonable figure and their ridiculous number. Moreover, the diminishing size of your adjustments serves as a signal that they’re pushing you ever closer to your breaking point (when in fact you’re merely approaching where you hope to get).
“Use lots of empathy,” Chris says that when rejecting their proposals, find different ways of saying no. It might be, “No harm in asking, but I just can’t see how we can make anything like that work.” When putting out your final amount, he also recommends making it precise, not round. There’s ample research that $31,897 carries more credibility and weight than $32,000. (And that’s true even if we’re aware of the ploy.)
Caveat Negotiator
Chris acknowledges that this approach is only appropriate for zero-sum, single-issue transactions. If there are multiple things to settle, the Ackerman model squeezes out opportunities for value-creation, that is, trading across different provisions to expand the pie. It also turns negotiation into an arm-wrestling contest that can damage relationships.
On that latter point, I’d advise anyone looking for a signing bonus on top of an attractive job offer to use this technique cautiously (if at all), lest the employer read it as a signal that everything going forward will be a haggle with this person.
I’m wary, as well, about the 65 > 85 > 95 >100 formula. If you go to a car dealership these days and try to start a conversation with an offer of 65% of the sticker price, the salesperson will show you to the door.
And that’s true in any market where there’s a degree of transparency about prices. In the U.S., at least, the real estate market is ultra-hot. You might dream about getting a lovely home for a bargain price, but what you’ll likely have to do instead is gauge how much higher than the asking price you’ll have to go to top competing bidders. By contrast, if you’re selling your services to do unique project, or if you’re buying an antique, there may be more room to be bold.
Even when the range of plausible numbers is tighter, the point about tapering the size of concessions (whether by the buyer or the seller) appears valid.
A recent Harvard Business Review article reported on three lab studies confirming that it’s effective, at least in that context. The researchers also experimented with the pace of concessions. Moving at moderate pace was more effective than dragging out the process. Another study found that that the effectiveness of tapered concessions is more effective when towards the end, you tell your counterparty that you’re reaching your bottom line.
What’s your counterstrategy?
Chris’s Never Split the Difference book has had great sales—and rightfully so. Harvard Business Review has good readership, too. So you may have been on the receiving end of this approach. Or you may see it in the future. What’s the best way to respond?
I’ll put up a post on this question in the coming days, but I’d like to see your suggestions first. Here’s a link to a quick (and anonymous) poll I just put up. I’m eager to hear your ideas!
Housekeeping
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