The value of a service always appears to go down quickly as soon as those services have been performed. The value of any material object you buy may go up in value over the years, but the value of services always appears to decline rapidly after you have performed those services.
Power Negotiators know that any time you make a concession to the other side in a negotiation you should ask for a reciprocal concession right away. The favor that you did the other side loses value very quickly. Two hours from now the value of it will have diminished rapidly.
Real estate salespeople are very familiar with the principle of the declining value of services. When a seller has a problem getting rid of a property, and the real estate salesperson offers to solve that problem for a 6 percent listing fee, it doesn't sound as though it's an enormous amount of money. However, the minute the Realtor has performed the service by finding the buyer, then suddenly that six- percent starts to sound like a tremendous amount of money. “Six percent. That's $12,000!” the seller is saying. “For what? What did they do? All they did was put it in a multiple listing service.”
The Realtor did much more than that to market the property and negotiate the contract but remember the principle: The value of a service always appears to diminish rapidly after you have performed that service. I'm sure you've experienced that, haven't you? A person with whom you do a small amount of business has called you. He's in a state of panic because the supplier from whom they get the bulk of their business has let them down on a shipment. Now their entire assembly line has to shut down tomorrow unless you can work miracles and get a shipment to them first thing in the morning. Sound familiar?
So you work all day and through the night, re-scheduling shipments all over the place. Against all odds, you're able to get a shipment there just in time for the assembly line to keep operating. You even show up at their plant and personally supervise the unloading of the shipment, and the buyer loves you for it. He comes down to the dock, where you are triumphantly wiping the dirt off your hands and says, “I can't believe you were able to do that for me. That is unbelievable service. You are absolutely incredible. Love you, love you, love you.”
So, you say, “Happy to do it for you, Joe. That's the kind of service we can give when we have to. Don't you think it's time we looked at my company being your main supplier?” He replies, “That does sound good, but I don't have time to talk about it now because I've got to get over to the assembly line and be sure that it's running smoothly. Come to my office Monday morning at 10 o'clock and we'll go over it. Better yet, come by at noon and I'll buy you lunch. I really appreciate what you did for me. You are fantastic. Love you, love you, love you.”
So all weekend long, you think to yourself, “Boy. Have I gotten this one made. Does he owe me.” Monday rolls around, however, and negotiating with him is just as hard as ever. What went wrong? The declining value of services came into play. The value of a service always appears to decline rapidly after you have performed the service.
If you make a concession during a negotiation, get a reciprocal concession right away. Don't wait. Don't be sitting there thinking that because you did them a favor, they owe you and that they will make it up to you later. With all the goodwill in the world, the value of what you did goes down rapidly in their mind. For the same reason, consultants know that you should always negotiate your fee up front, not afterward.
Plumbers know this, don't they? They know that the time to negotiate with you is before they do the work, not after. I had a plumber out to the house. After looking at the problem he slowly shook his head and said, “Mr. Dawson, I have identified the problem, and I can fix it for you. It will cost you $150.”
I said, “Fine, go ahead.”
You know how long it took him to do the work? Five minutes. I said, “Now wait a minute. You're going to charge me $150 for five minutes work? I'm a nationally known speaker, and I don't make that kind of money.” He replied, “I didn't make that kind of money either-when I was a nationally known speaker.”
Key points to remember:
- The value of a material object may go up, but the value of services always appears to go down.
- Don't make a concession and trust that the other side will make it up to you later.
- Negotiate your fee before you do the work.