Case 3 September 14, 2006 Wharton
This case was interesting, exciting and dramatic. I was again a seller. Being an entrepreneur, most of my time is in selling rather than buying. Well. Not really true. But selling gives me more satisfaction then buying.
Preparation
I sold a car, sold a truck and this time I was selling an aircraft Cessna, my father, a retired pilot’s best friend in the sky. He used to teach flying lesson. My opponent is Jordan, a senior from Wharton. Like many Wharton seniors, he is confident and self-assertive. I expect him to be a tough negotiator and he may use tricks. I must be very careful in dealing with him.
I do not have much information about him though he came for a test fly. I must find out more about him.
1. Why does he want to buy the aircraft? What does he use it for?
2. Is he an experienced pilot?
3. Did he own an aircraft before? If he did, why he is no longer using it?
4. How did he feel about the test flight?
5. What are the most important factors and features he is looking for in an aircraft he wants to buy? Does Cessna fit his requirement?
Recently I was listening to an audio book by Guy Kawasaki in how to build a good foundation in doing investment and he mentioned a point: To become a successful investor, the first mind set that one must have is having no fear. One must not fear to lose. Then he can reduce the distraction to minimum and focus on how to invest instead of how not to lose. I quite agree with Kawasaki and I am going to try out this concept in negotiation. I must be confident and convince myself to act as if I am the one who has a lot of leverages and who is at the advantageous side. In this particular case, I want to project an image to show that I am the seller, but I am not a seller that begs the buyer to buy my aircraft; Instead, my aircraft is so good that I want to choose whom I want to sell it to. So, to set up the stage, I changed the story to tell the buyer.
1. My father was a great pilot and he loves his aircraft. He cannot fly Cessna anymore but he wants to sell the aircraft to someone who can take care of the aircraft. So, the buyer must not only offer a decent price to show that he is sincere and respectful, he must be a good pilot and he can take care of aircraft.
2. I have offers from second dealer and my father’s teenager student. They are both pretty high price. However, my father and I are still considering. Second dealer does not appreciate the true value of Cessna and they just want to make money. The teen loves the aircraft because he learned how to fly using it. But he is not that kind who will take good care of it.
3. I am not in a hurry to sell the aircraft (which in fact, I am very urgent to sell it away). I want to find the best buyer and sell it to him without hesitation.
Well. Again, I am going to lie… I feel so sick of myself lying. But that is the game. I lie because I want to make a better deal. Monkey See Monkey Do and Create a sense of urgency were the first two things I learned when I was a direct salesman 3 years ago in Singapore. Yes. That time, after high school and before college, I sold watches on the street. This maybe something I want to talk about in another journal.
So how do I use Monkey See Monkey Do in this case, I am pretending that someone are also offering a price and wanting to buy the aircraft. To get a deal done, he must be sincere enough to at least offer a comparable price. This is not exactly Monkey See Monkey Do though.
How do I create a sense of urgency in this case? I pretend that I am not in a hurry. The buyer saw my advertisement and then straight away came for test flying. He must be keeping an eye on sales of aircraft for sometime already and he called back means that he thinks this is a good deal for him. He likes the plane therefore he called back. Buying a plane is like choosing a wife. Besides its look and performance, it must be reliable and trust worthy. It must be so nice and smooth that you will not be freaked out by it, not even once. When you are up in the sky, the only thing you have to rely on is the plane. So if he likes the plane and he is looking for one, he wants to get the deal done. If I show him I also want to get the deal done, he may sense that I am urgent. So instead, I must be calm and put him into the more urgent side. When you are tall and someone standing besides is not tall, you feel that you are taller.
I am not going to open the offer. But I want him to know the price range suggested by Price Digest and what price other people are offering me (which is fake) to let him know what kind of price I am looking for. But I want to pass a strong message to him that price is not all I care about. His offer is an indicator of how much he respects the deal. So in that case, I have stronger support on bargaining over price not appearing to be very meticulous about money. To show his respect, he will not dare to anyhow bargain for a cheaper price. There is a bench mark he must set. Besides, I will have a reason to crap about if I need to lower the price. Say If I told him someone else is offering 140,000 and realized that he cannot afford it. I have to lower down. And then it will be very obvious that I was lying. Normally, if I have an offer of 140,000, I will never sell to another one who can only pay less. So looking for a quality buyer is an excuse I can use. Haha.
Progress
The opening speech of the deal talking is very important. I did not prepare too much but it is something I must pay attention to next time.
Expected, Jordan is a tough guy to negotiate with. He used what I call BOW (“Bang on the Weakness) method and try to shoot down and demerit the aircraft. However, it seems that I have better knowledge in aircraft than him and I was able to counter his story. I took the position over by asking whether he is really a pilot. Then I start to ask those questions I drafted and slowly dig out more information about him. Three things I found important. Firstly, he lied too and more than me. I stared into his eyes and I know he is lying sometimes. So I did not feel that bad for my lies. Secondly, he likes the aircraft and Cessna has the most important feature he is looking for and that is safety. Cessna is an aircraft my father used to teach and of course it is safest aircraft he can find. So I keep go back to the point. To drill the message through, my plane has what you want and it is reasonable for you to pay a higher price for it.
So after the quality negotiation, we came to the price negotiation. I must put the price high to maintain my position. So I insisted at least 130,000. Then say I will give a symbolic discount to 129,000. He insisted 123,000. Suddenly, he played a classis strategy “Walk Out”. He left his phone number to me and asked me to think about it. Very nice “Walk Out” and I knew he planned it. So he planned it. If he did not plan it and just did it on the spot, I might be stunned but since he planned it, he expected me to go back to him to compromise and if I do not, he will be the one who panics.
I did not reply him that night. On the way back I formularized a strategy in my mind. I would wait until 30 mins before the deadline (when the next lesson starts) and I am going to make an offer. I sent him a message on 9:40 a.m. in the morning.
“Jordan, I make an offer to you. $128200. If you are sincere enough and reply me as early as possible, I give you a discount of $50 for every minute you reply earlier than 10:00, after that, I will increase the price $10 for every minute.” Immediately I received his reply “done!” It was 9:49 and the deal price was $127,650. I was fine with it. The mechanism of the my offer is, my bottom line of the offer is $127,500 which is the middle point of 120,000 and 135,000 indicated in the price digest. And my surplus comes from his lateness in replying. I was very confident he would take my deal.
This case is interesting especially it was spiced by the Walk Out and Handpone Message Timing Deal. Both of us have read the Henris Kravis Deal on RJR and we were trying to replay it. My conclusion is that negotiation is an exciting high intelligent game.
A few lessons I learned in this case.
1. Jordan tried to play "Walk Out" but he did not play it well. I could sense his "Walk Out" was planned and that was the worst mistake. If i were to play "Walk Out", i must have 100% confidence. "Walk Out" is harmful and risky. It also spoinls relationship and hard to bring back the negotiation to the table. However, in real life we do a lot of "Walk Out". My mum often does that. "Walk Out" has different types which I also want to discuss out that.
2. I must prepare an opening speech for my next negotiation. A opening speech can tune the whole negotiation into the way i want it to be. If i want it to be a violent fight, I can be violent since the beginning and infuriate the oppponent; If i want to make it as a calm and problem-solving approach negotiation, then I must demostrate it too.
3. Guy Kawasaki was right. No fear of losing makes me very comfortable and calm througout the whole process.