Whether you're bargaining in your favorite antique store, negotiating for an increase in pay, or trying to get the rock-bottom price for a new car, you'll do better if you use a technique that negotiators call Bracketing. This means that your initial proposal should be an equal distance on the other side of your objective as their proposal.
Let me give you some simple examples:
The antique dealer is asking $1200 for that antique desk that would be perfect in the corner of your living room. You are willing to pay $1000. You should offer him $800. You hope that your boss will give you a 10 percent increase in pay. You should ask him for 20 percent.
The car dealer is asking $25,000 for the car. You want to buy it for $22,000. You should make an opening offer of $19,000. Of course it's not always true that you'll end up in the middle, but that is a good assumption to make if you don't have anything else on which to base your opening position. Assume that you'll end up in the middle, mid-way between the two opening negotiating positions. If you track that, I think that how often it happens will amaze you. In little things and in big things.
In Little Things
Your son comes to you and says he needs $20 for a fishing trip he's going to take this weekend. You say, “No way. I'm not going to give you $20. Do you realize that when I was your age I got 50 cents a week allowance and I had to work for that? I'll give you $10 and not a penny more.”Your son says, “I can't do it for $10, dad.” Now you have established the negotiating range. He's asking for $20. You're willing to pay $10. See how often you end up at $15. In our culture, splitting the difference seems fair.
In Big Things
In 1982, we were negotiating the pay-off of a huge international loan with the government of Mexico. They were about to default on an $82 billion dollar loan. Their chief negotiator was Jesus Herzog, their finance minister. Treasury Secretary Donald Regan and Federal Reserve Board Chairman Paul Volcker represented our side. In a creative solution, we asked Mexico to contribute huge amounts of petroleum to our strategic petroleum reserve, which Herzog agreed to do. That didn't settle it all, however. We proposed to the Mexicans that they pay us a $100 million dollar negotiating fee, which was a politically acceptable way for them to pay us accrued interest. When President Lopez Portillo heard what we were asking for, he went ballistic. He said the equivalent of: You tell Ronald Reagan to drop dead. We're not paying the United States a negotiating fee. Not one peso.
So now we had the negotiating range established. We asked for $100 million dollars. They're offering zero. Guess what they ended up paying us? That's right. $50 million dollars. So often, in little things and in big things, we end up splitting the difference. With bracketing, Power Negotiators are assured that if that happens, they still get what they want.
To bracket, you must get the other person to state his position first. If the other person can get you to state your position first, then he can bracket you so that, if you end up splitting the difference as so often happens, he ends up getting what he wanted. That's an underlying principle of negotiating: Get the other person to state his position first. It may not be as bad as you fear, and it's the only way you can bracket his proposal.
Conversely, don't let the other person trick you into committing first. If the status quo is fine with you, and there is no pressure on you to make a move, be bold enough to say to the other person, “You're the one who approached me. The way things are satisfies me. If you want to do this, you'll have to make a proposal to me.”
Another benefit of bracketing is that it tells you how big your concessions can be as the negotiation progresses. Let's take a look at how this would work with the three situations I described earlier: The antique dealer who is asking $1200 for that antique. You are willing to pay $1000. You offer him $800. He comes down to $1150, which means that you can raise your offer to $850, and still have your objective mid-way between the two proposals that are on the table.
You hope that your boss will give you a 10 percent increase in pay, so you asked him for 20 percent. He offers you 5 percent, so you can now lower your demand to 15 percent. The car dealer who is asking $25,000 for the car. You want to buy it for $22,000. You made an opening offer of $19,000. Then if the dealer comes down to $24,500, you can go up to $19,500 and you will still have your objective bracketed. If the dealer's next move is to $24,200, you can also shift your position by $300 and go to $19,800.
There's a danger here, however. You should not become so predictable with your responses that the other side cannot detect your pattern of concessions. I illustrated this with mathematically computed concessions to make my point clear, but you should vary your moves slightly so that your reason for making a move cannot easily be determined.
About five years ago, I bought one hundred acres of land in Eatonville, Washington, a beautiful little town located just west of Mount Rainier. The seller of the land was asking $185,000. I decided that it would be a super buy if I could get it for $150,000, so I Bracketed my objective and offered $115,000. To my astonishment, the seller accepted my offer, but had we have ended up negotiating further and ended up in the middle between our two opening negotiating positions, I still would have made my objective of $150,000. Inexperienced negotiators get into trouble because they don't have the courage to start that low. Someone who didn't understand Bracketing might offer $140,000 for the land, hoping that the seller will come down from his asking price of $185,000 to the buyer's objective of $150,000. That's hard to do. It's hard to get the other side to come down $35,000, when you're only willing to go up $10,000. Or worse yet, the buyer is so uncomfortable with negotiating that he offers the seller $150,000 with a take-it-or-leave-it attitude. That's almost impossible to do. It's virtually impossible to get the seller to keep on making concessions to you, when you are not willing to make any reciprocal concessions-even if selling for $150,000 would be the right thing for the seller to do.
If you want to be a better bargainer, take a tip from the professional negotiators. Get the other side committed to a position first, and then bracket your objective. You're far more likely to end up with what you want.