Price is Always Distributive!

You can’t have a collaboration over price.  Price is always win-lose.  What you gain the other party loses (or pays) and vice versa.  There is no way to grow the proverbial pie when it comes to price.  Unfortunately as luck would have it, price also seems to always be a very important element in negotiation.  If you constantly equate all other trading variables back to price you will, whether you like it or not, create a distributive environment.  The key is to shift your focus to profit!  Instead of thinking in terms of cost or price think in terms of value.  The ability to incorporate intangibles into a deal is what separates a skilled negotiator from the average bazaar merchant (although hard bargaining also takes a certain type of skill).  The ability to link variables other than price to create incremental value is where all the value is in negotiation.

Having said that (stealing a line from “Curb Your Enthusiasm”), there is a time and place when a good old fashioned price negotiation is just what the situation calls for, so don’t be afraid to shift gears in either direction.  After all, negotiation is all about the circumstance and your ability to determine what is appropriate.

Characteristics and Behaviors of an Auction Style Negotiation

Auctions aren’t just for eBay and Sotheby’s anymore.  An auction doesn’t require a barker or online presence either.  An auction can be held by a buyer or a seller.  The primary characteristic is a one to many relationship.  Auctions are always one-off transactions where price is usually to only factor and at the very least the dominant driver of the deal.  The hallmark of an auction is utilizing game plan theory to take advantage of competitive behavior to maximize value without respect to the other party.

The perfect opportunity to hold your own auction is the very next time you are shopping for a new car.  Think about it, it’s a commodity, and price is the primary concern.  You flip the script on the dealers and make them compete for your business.  Don’t believe the hype of these online sites that claim to provide this service for you, you are better off running the auction yourself.  3rd parties have ulterior motives, just remember who is paying their bills.  I’ll post a step by step guide to running the new car auction in a future post.

EXTERNAL CHARACTERISTICS: An auction exists when there is a one-to-many situation for either the buyer or the seller.  Price is the primary objective and many times the only variable.  This type of transaction is strictly a one–off and any future transactions are not predicated or dependent upon the terms of this transaction.  There may be subsequent deals, however, each one will be unrelated and negotiated separately.  The focus of an auction is solely on short-term gain without consideration for the other party’s financial situation.

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