We are now ready to begin our look at the four stage negotiation process. And we begin with preparing for a negotiation, planning your negotiation strategy. Most people, when they think of negotiation and when they take negotiation courses, focus on the second stage. Which is actually negotiating, being in the room with another person, arguing, trying to persuade that other person. Often, the analogy is two gunfighters in the room, seeing who can draw the fastest, who has the best tools and techniques for persuading somebody else to do what you want. And of course, that's an important part of negotiation, but equally important, and perhaps more important, is first of all, how you prepare for a negotiation. And then after you've reached an agreement how you bring that agreement to closure through forming a contract. And then finally how you perform the contract. Sometimes people will ask, well were you successful with your negotiation, and they'll respond yes, I got the price I wanted, or I got the quantity and the quality of goods that I wanted from the supplier, but that's not the right answer that's not the right question where you're successful in the negotiation. The question should be, were you successful with performance of the contract? Were you successful with this whole process? So we're going to take a very holistic view of the negotiation process. And now we start with unit one, on preparing for negotiation. Perhaps the most important unit of the four, and perhaps the most time-consuming, we're going to spend quite a bit of time on how you prepare for negotiation. Specifically, we're going to ask these seven questions and we start with a preliminary question the people don't often think about and that is should I even be negotiating? Here's a depiction, a simple depiction of your question, yes or no? Now In my courses at the University of Michigan, I ask my students to do a real life negotiation where they go into the city of Ann Arbor, they walk into retail stores, they walk into restaurants. They might walk into, for instance, a McDonald's. And their assignment is to try to negotiate a lower price on what they are purchasing. They can't go into a market where goods, where the price is normally negotiated. They have to go into a retail establishment where the price is fixed, and try to negotiate a lower price. Now, I want you to estimate how many students, what percentage of my students do you think are successful in this attempt to negotiate a lower price? You think you would be successful if run into a retail establishment like a McDonald, and attempted to negotiate a lower price? Please write down in a piece of paper, what percentage of my students do you think are successful in negotiating a lower price. Here's the data from the last time I ran this exercise. First of all, I asked my class the same question before they did the negotiations, and a large percentage of the class, over 90% of the class predicted that most students would not be successful. What were the results? Well, you can see here. 69% of the class was successful. They obtained discounts ranging from 6% to 100%. The 100% included students who, for example, negotiated for a free cup of coffee or a free breakfast. The average discount was 40%, and you can see here the total savings in the class was over $1500. Now in performing these negotiations, students used a variety of strategies. They used a BATNA strategy, stretch goals, relationship building. These are all strategies that we're going to cover in this course, and you're going to be very well versed in how to use these strategies. They also used some unconventional strategies that I don't teach and that I don't particularly recommend. Some people would put these in the category of tricks. But some people argued that they were poor and deserved a discount. Some people stretched the truth a little bit. They used a timing strategy, they used sympathy strategy. Let me give you an example of the unconventional strategies used by one of the students. This student wanted to buy some sushi for his family. So he went into a sushi restaurant. And he arrived late at night, five minutes before the restaurant was going to close, realizing that the restaurant had already prepared what are called Bento boxes, which are little boxes of sushi and other Japanese food. And realizing that the restaurant might want to get rid of them at that time of the night. Before he walked into the negotiation, he put a $20 in one of his pockets and a $10 in the other pocket, so that he could argue depending on the amount that was being negotiated. He could pull out the 20 or the 10 and say, this is all the money I have. So he played poverty, he stretched the truth a little bit. He used timing, and then finally he used sympathy. He told the person running the sushi restaurant that he had three hungry children at home and they loved sushi. End result, he negotiated a 50% discount off of the normal price of the Bento boxes that he bought. He saved around $50 from this negotiation. Though again, those may fall into the category of tricks. I'm not going to teach tricks in this course. This course is more stratigicly oriented, and we're going to get to stretching the truth leader in the course when we talk about ethics and some ethical standards that you should use in negotiation. How did my students feel about this experience? Well, as you can guess, there was a mixed bag of feelings. Many students felt about this experience the way that many people feel about negotiation in general. Some people are simply uncomfortable with negotiating in any situation, or they're embarrassed, or some of my students were terrified, hesitant, guilty. It felt weird, it felt strange. Some felt it was a dreadful experience. And others enjoyed the experience. And in fact, some students enjoy this experience so much that they continue to engage in this type of experience following the course, and they will send me emails about their negotiating experiences. Here's an example. I received an email from a student who had settled in San Francisco. And this is what he said in the email, Professor just wanted to alert you that the negotiation skills that I picked up in your class saved me $130 per month on an apartment in San Francisco. Every penny counts. But they failed to win me a free desert at a restaurant last night. I'll keep trying. Here's another example. A student who sent me a message about the good news and bad news he had with his negotiating experience. The good news was, he said I tremendously enjoyed the tactics, especially for hotels. i always get a big discount, and I frequently found I don't have a big enough stretch goal. So that was the good news. The bad news is, my wife won't go with me anymore to the front desk. And here's an international example, a student I taught in Europe. She said that the mafia stole her father's car, and a tactic used by the mafia after they steal a car is often to then sell it back to you at a lower price. Her father refused to deal with the mafia and she wanted to test out her negotiation skills, she negotiated with the mafia and successfully got her father's car back. So some people thoroughly enjoy the experience. Now, if you decide to negotiate, there are some factors to consider. What do you think about this situation? Here we have a negotiation professor, in fact, one of the top negotiation professors in the country, buying a big screen TV. He does lots of research on different models and on dealer costs. He visits several dealers and he packages, he bundles the price of the TV with installation, satellite dish, and other features, and he obtains a last price concession by mentioning a competitor's offer, and as a result, he saved $120. Now what do you think about this? Would you call this a successful negotiation or not? Here's somebody who went down the path of negotiation. He decided to negotiate, but should he have negotiated? Is it successful? Write down yes or no. Successful or not. Whether you call this successful or not depends a little bit on your personality. But what happened? The aftermath of this case was, he went home, he probably announced to his wife that he had saved $120, and she asked him this question. She said well, congratulations how much time did you spent on this negotiation? He thought for a second and he said well, 20 hours. And she said is your time really worth $6 an hour? So I think we all have to make this kind of decision in deciding whether to negotiate. Some people love to negotiate, some people have no problem with this. Other people might ask, is this the way we want to spend our brief time on Earth? Do we want to spend time engaged in negotiations like this, we rather spend time with our family and friends, would we rather spend time in other pursuits? If you enjoy this, if this is what turns you on, then I would call this a success because you enjoy it. But I think it's also important to think of the costs and the benefits, especially the cost in pulling you away from other opportunities. Here's one final example of somebody who decided to negotiate. This happened very recently and created quite a buzz in the United States. We have a college offering a job to a professor. And she replies by email, granting some of the following provisions would make my decision whether to accept your job offer easier. Let me know what you think. For example, she wondered if they would consider a higher salary. And she wondered if they would consider no more than three new class preparations per year for the first three years. Well, the college search committee received her email and replied immediately. We have decided to withdraw the offer of employment to you. Now, later on in the course, we're going to talk about contract negotiations and whether the search committee in this case, for example, could legally withdraw the job offer after it was made. But, here's another factor in considering whether or not to negotiate. You have to consider the risks, and balance those against the benefits. So, bottom line In answering this first preliminary question; should I negotiate? You have to consider not only your feelings about negotiating in general, but also the risks as illustrated by the professor case and do a cost benefit analysis of your rewards as illustrated by the TV negotiation. So that concludes our look at the first question of whether you should negotiate at all before you dive in to additional preparation.