Now, when we look at distributive
bargaining, what do we see? In
distributive bargaining, we see that you
have, basically, like a scale here. (Let me
show you here. Nope, not there. Here
may be, about here. Here we go. Let me go on
my monitor here. That's nice. Oops, turned off
my screen. okay there we go.) All right, so we
have a scale. So on this scale, I put a
little picture of a pizza. Now, why pizza?
Because remember Fred and Jane were
arguing about the pizza, right? Now why is
pizza good example of this? Well, on the
scale, you see, if one side goes up the
other side goes down. If one side goes
down, the other side goes up. That's
distributive bargaining. Anytime, this
side goes up, the other side goes down.
What one side wins, the other side loses.
What one side loses, the other side wins.
So you win, I lose. I win, you lose. So
that's what distributive bargaining is.
Both sides are in direct conflict, and
there's really not a lot you can do to
change that. The resources are fixed. What
does it mean to be fixed? Just like in
this picture, here. It's a pizza. It's a
round pizza. There's no more pizza. That's
it. We cannot go buy more. There's no more.
We gotta split up this pizza. If you get
one piece, I get one piece less. If I get
one piece, you get one piece less. So in
the case of Jane and Fred, that was
extreme. They had only one little tiny piece,
but same thing. If I cut it in half, one
person gets half, the other person gets
half. Would that be okay? Well, no.
Because Fred and Jane want to be full. They
want to eat enough, so that they are not
hungry.
And half is not enough, so they both want
to eat the whole piece. In any case, Fred
wants more, and Jane once more. They both
want more, so someone is going to have to
win, and somebody's going to have to lose.
And you say, "Well, Professor Warden, what
if they just cut the pizza in half and
their both are a little bit happy, isn't
that good? I mean, yeah, they still might
be hungry but at least Fred gets a
little bit, and Jane gets a little bit."
And the answer to that is, in that case,
yes, you're right. Fred will get a little
bit, and Jane will get a little bit, and
Fred will be a little bit less hungry,
and Jane will be a little bit less
hungry. But in this way, they're both
still hungry, so they both lose. So
thinking win-win, it's not so easy. Just
cutting something in half does not mean
win-win. That just means I get half
of what I want, which is the same as
losing, right? It's the same as losing, and
in distributive bargaining both sides do
not want to lose. And later, when we study
win-win, both sides don't want to lose
either. It's not just cutting something
in half. That is not the way it works. So
in this case, I use the scale to show one
side goes up, one side goes down. There's
just no way to stop it. Or the pizza, if
you get something, I get something less,
and in Fred an Jane's case, a very small
amount. So they're both going to end
up being hungry no matter what we do.
Okay. So I think I kind of made the point
there clear. For the buyer, a distributive
negotiation begins with what the best
deal is-- the target point. Now, let's begin
looking at this very, very carefully, step
by step, because I want you to remember
this, because it's a really key idea, right?
very, very important. So if you're the
buyer, a distributive negotiation begins
with the best deal, which means getting
the lowest price, right? I want to buy at
the lowest price. OK. So I want to buy
this cup,
and I want to get the lowest price. This
cup costs one hundred dollars, and I
would like to get less than 100, and
lower is better, right? if I am the buyer.
So the target point is the best deal, and
the worst deal is still acceptable.
That's called the resistance point. So
let's say this cup here, this cup, maybe
the retail price, the sticker price is
100, okay, whatever. It doesn't really
matter to me. I have my price. So for me,
what is my target price? Well, if i could
pay 50, that is what i would like to pay.
Of course, I'd like to pay zero, right? but
remember what we talked about in the
previous units? that i need to have what
is my target. So in this case, let's say
my target is 50. OK. Now, then I'm the
buyer, so I would like to go lower, so 50
is my target price. That's my target
point. Now, how much does the price go up
and I'm not going to buy? 50 is what I
what I'm targeting, target point. Ofcourse,
if it's lower than 50, I'm
happy. That's fine, right? But 50 is my
target. Now, how much higher does the
price go and I'm just not going to buy
it if it goes higher? In that case, let's
say that my upper price, my resistance
point, I will not go past the
resistance point. Let's say that my
resistance point is... let's say 80, OK.
The sticker price maybe 100. We
don't care. That sticker price is
not important, the retail price is not
important to us. If that retail price is
100, that is over my resistance point of
80. So if somebody tells me you must pay
the price that's on there, the sticker
price, the retail price, the list price
I'm going to say no. I don't want to
spend that because that is over my
resistance. So we have two things here:
target and resistance. I want you to
remember.
So the resistance point for the buyer is
the highest price i will pay. Higher than
that, I will not buy, right? Higher than
that, i will not buy. The target point is
the desired price for me, 50. Anything
beyond the resistance point cannot be
accepted. 80, if it's 81 dollars, I will
not accept. If it's 82 dollars, I will not
accept it. If it's ninety dollars, no. If 143 00:07:07,860 --> 00:07:15,569 it's one hundred dollars, no. If it's
$79, then yes. I can accept that. That
doesn't mean I will accept it, but I can
accept that. If it's eighty dollars, can I
accept that? Yes, that's my, that is my
actual resistance point, right? but 81?
no. Both the target point and the
resistance point are secret information
that you should not tell the seller. Now,
here, we get into the next important
point in negotiation. And that is this
idea of secret information. So this is
the cup Ii want to buy. This cup I want to
buy it for 50. That's my target, my target
point, the most i will pay is 80. So 50 to
80 in here, right? If you are going to
sell to me, and I told you, "Sir I would
like to buy that cup, and I would like to
buy that cup somewhere from 50 to 80.." And
what would you say to me? You would say,
"Oh, no problem, 80." And then what would I
say? "Well, 80 OK." 80 because 80 is still
within my resistance, right? Resistance
point, target point, resistance, it's
inside. Now, that was pretty stupid of me
to tell you that, right? I should just
tell you that 100 is way too much. I'm
not going to
spend that much, and then you say well
how much do you want? and then maybe I
begin by saying how much do I want. Maybe
I begin by saying 40, and then we can
work up like that, right? So we begin with
two ideas here, both of them are secret.
Resistance point and target point-- please
remember those. Those are so awesomely up
here, right? Resistance point and target
point. Okay. Secret information-- you never
want to tell the other side, in this case,
the seller. You never want to tell the
seller. Okay, now then let's change
perspective a little bit. Now the seller
is a little bit different, right? If the
seller is selling this cup, then the
seller must begin with a price, right?
Because he's selling it, I mean you
cannot go and ask, "I would like to buy
that cup. How much is it?" and the seller
says, "Hmm. I don't know. How much money do
you have?" Right? That doesn't work,
right? No, I don't think that works,
although there are some companies that
do that kind of thing. So if you come to
me you say, "Mr. warden, I'd like to buy
that cup." And I say, "Hmm.. the price of this
cup, let me tell you.. How much money is in
your pocket right now?" I don't think that
would be a good way to begin. What do we
normally begin with? Normally, you go to
the seller, and there's a price there, a
sticker price or a list price or retail
price, and that price is listed there. Or
you can ask me and I tell you 100. This
cup is 100. So the seller must always
begin. The seller must always begin with
some public information, and that public
information is going to be the price.
So we call this the seller's asking price,
the sellers asking price. OK. Now, after
the seller is asking price what comes
next? Let's take a look. "At the start of
the negotiation, one value is public
everyone can see it. While two values are
secret." So the asking price, the selling
price, the retail price, the list price
this in fact is public. Two other values
or secret, but we'll talk about that in a
second. So the first step is for the
buyer to decide how much to offer or the
initial starting offer, right? So if i go
to buy the cup, and the list price is 100,
I must decide what do I say to begin
with. Do I say 0? "You should give me that
cup for free, please." Well, I can't start
with zero. I guess I could start with 0, but no
one's going to take me serious, right? So
what do I begin with? That's going to be
the opening or first offer. The first
offer needs to be lower than the target.
Remember my target, right? Remember my
target? My target was 50. Since the seller
will try to raise the price, the seller
will always try to make the price go up.
So the buyer should begin under the
target. If my target is 50, I would like
to get 50. How do I get 50? I must begin
below 50. I say i'll give you 40. So here
we have this little chart. I like this a
lot. We can see, on this graph here, on
this line, we have three things so far. On
the right side, we have the buyers
resistance point, that is I will not
spend more than this. In my case, the
example was 80. I will not spend
more than 80. Then you have the buyer's
target point. In my case was 50 for the
cup, so I will spend more. I will
definitely spend less than this. I'm
happy to spend less. The question is
though, what do I want to get? I wanted to
get 80, and then we have the first offer.
So maybe I begin my offer down around 40.
And then in this chart, we have a
different example. So we have 12,000. It's
the buyers resistance point. More than
12,000, too much. He wants to get 9,000, so
where does he begin? He begins down
around 7,500. And the one more piece of
information there is what it's the
sellers asking price? That's public
information, isn't it? The seller's asking
price. OK. So I really like you to look
carefully at this. (Oops. There we go. My
screen again, very sensitive, the screen
is.) Now what? You look very careful in
your book at this, and begin to
understand the difference between the
buyer and the seller. I think it's easy
for you to understand. I think you do
it every day. You understand it, but the
problem is I want you to really see that
this information has to stay secret. You
really must think what is my target? We
talked about this last time, didn't we?
What is it that is my target? How do I
decide if I win or if I lose? How do I
decide if I do a good job or a bad job?
You have to have your target clear. Your
resistance, right? so your target to your
resistance. If the price keeps going up
to your resistance, well then that's not
so good for you. But after some point,
that resistance point, you will not buy
at all. So this range here must stay
secret.
If the buyers first offer is too low for
the seller, then the seller will not want
to sell. So now we begin to look at this.
How do you begin? You begin lower than
your target. How much lower? how much
lower? And my answer is well if you go
too low, the buyer will say, "Huh, that is
just so low. Forget it. I don't want to
talk to you." Right? So you don't want to
go that low ,but you don't want to go
over your target. This means the first
offer must be higher than the sellers
resistance point. Ah so now we bring in
the seller's resistance point. Remember
the buyers resistance point? That is the
highest price the buyer will pay. Higher
than that is too high. What about the
sellers resistance point? While the
seller is different, the seller would
like the price to go up and up and up.
The buyer would like the price to go
down and down and down. So for the seller,
if the price goes too low, the seller
will lose money. So the seller has a
resistance point also. What is that?
That's the lowest price the seller will
sell for. However, this lowest price the
seller will sell for, its secret. It's
secret. He's not going to tell you what
it is. I mean he may say that he knows. He
may tell you something, but it will not
necessarily be true. So this is the
sellers resistance point.
And for the sellers resistance point and
the buyers resistance point, they are
apart. They are not together. I mean
usually they would be a part. If they're
together, there's no negotiation.
Everything's already agreed upon, so they
are apart. Now, this area between the two
is what we call the negotiations zone, the
bargaining range. Let's take a look at
this slide here very quickly. So let's
take a look at the buyers view. If the
price is too low for the seller, he or
she will walk away from the negotiation.
If the price is too high for the buyer,
he or she will walk away from the
negotiation. Look at this picture. So if
you look at the very bottom, that's
called the bargaining range, the
bargaining range, the bargaining range,
meaning we can have the price go all the
way down, in this example, to 7000 or the
price go all the way up to 12,000. So
7000 to 12,000 is the bargaining range.
Lower than 7,000, if the price goes under
7,000, guess what? That price is too low
for the seller. That price is too low for
the seller. That means the buyer's offer
is too low. What does too low mean? It
means the seller just says, "Nope, I don't
want to talk to you. Negotiation over!" How
about the other end, 12,000? Can the price
go over 12,000? No! Why? because if the
price is over 12,000, that price is too
high for the buyer, too high for the
buyer. That means the sellers offer is
too high. The seller wants too much. The
seller wants the price too high. A buyer
cannot agree, so those are the two
resistance points, sellers resistance
point and the buyers resistance point. If
you go beyond these, there's no deal, so
we must stay within these.
The problem is the buyers resistance
point is secret information, and the
sellers resistance point is secret
information. So we need to guess where
they are. What do we have inside there? At
nine thousand, we have the buyers target,
right? That's what he would like to get.
And we also have the sellers asking
price. That's the price he would like to
get. That's not secret. That's the one
piece of information that's public, not
secret. "Each side must have their own
goals clear, and guess what the other
side secrets are." Now this is another
thing, but I want you to think about in
negotiation, remember today I'm
emphasizing you want to win. How do you
win? You win by winning or you win by
making the other side lose, same thing.
Another key point today which sounds
again, it sounds not nice. And that is you
want to keep your information secret. I
want to keep my information secret, but
you want to get the other side secret
information out. How do you get it? There
are many ways, and none of them are too
good. They're all kind of trick the other
side. Fool the other side. Make them say
something they don't mean to say. Get
them confused. Get that information. Of
course, they don't want to give it to you,
so you need to get it somehow. So that's
how you can win. How do you win? Keep your
information secret, and get the other
side's information out. Gget their secret
information to not be secret anymore. I
know you're saying, "Oh Professor Warden,
this is all so terrible! We should be nice to
each other." And I'm saying, "OK. You can
do that, and you will be the one who
loses in a negotiation."
"The buyers first offer must
not be below the sellers resistance
point..." So the buyer wants to begin low
price, right? How low? Well, I don't know,
but not too low. Because if it's too low,
then game over. Higher than the sellers
target point, the seller will agree to
the offer quickly. So if you go high, if you
go high, then the seller may say, "Yep no
problem." And that always happens, doesn't
it? That always happens when you go
somewhere and you say something like, "I'd
like to buy that cup. How much is it?" and
he says, "That's one hundred dollars." And I
say, "Well, I'll give you 90." "Nice, OK. 90." And
what do I say? "OH! 90, why did I agree so
fast? I could have got it for 80." Right? so
if you go high, high enough, right? then
you're going to be past that target,
past the target of the seller, and
the seller will be happy to give it to you because it's
over the target, no problem. So here we
have the chart, again. Look at this
closely with me. Stick with me. Try to
follow this, a little bit confusing, right?
but I think you can do it. So what we
have over here is the two ends. On the
left end, buyer's offer too low, buyer's
offer too low. That means the price is
too low. The seller will not sell. What's
on the right side? The right side, on the
right side is seller's offer too high,
sellers offer too high. So this is the
bargaining range, the bargaining range
right? We can't go outside this range,
otherwise nothing will work, right?
Nothing will happen. No one will agree.
Okay. You can see here some things are
secret. So the buyers resistance point is
secret. The buyers target point is secret.
That should be you if you're the buyer.
And what about the seller? Well, you need
to guess the sellers resistance point.
And you need to guess the sellers target.
He's not going to tell you what they are.
Now, here's an interesting one, right here
that we've kind of talked about but not
really focused on so far. So that's this
seller's target point. So this is what
the seller would like to get for the
price, but what about the list price?
Here's the list price. This is the
sticker price. That's the sticker price.
Well, guess what? The sticker price, the
asking price, the retail price is higher
than the target point, the target price.
Why does the seller make the price
higher than what he wants? Why does he do
that? Because he knows that the buyer is
going to push the price down, right? So
what does he do? He begins higher. He
begins further up. So what about this, the
buyer? same thing. He begins low. Why begin
low? Because he knows he's going to be
pushed up in price. OK. So let's take a
look at this carefully together to make
sure we really have a good grip of it.
OK. So we come back to look at this
picture one more time because I want to
really emphasize how important this idea
is, and to get you thinking in a way that
really understands what is this
bargaining range, what are the resistance
points. So let me go ahead and
jump back to our slide here a bit. Spend
a little bit of time trying to specify,
clarify, I guess I should say, a little
bit on this. Okay. Now, the key point to
begin with is what is the bargaining
range, right? So our bargaining range
begins at the sellers high end, which is
the resistance point for the...
......resistance point
for the buyer over on this side. And then
the resistance point for the seller over
on this end, over here. So with these two
ends in place, we need to remember that
the negotiation will not take place if
you're outside. So if you're way over
here or your way over here, not going to
happen, right? Why is it going to happen?
It's going to happen because we're
inside the bargaining range. So that's
the first point, and then what's another
important point. Let me change to my
highlighter here. I think the key point
here is what is your secret information?
Secret information, why is secret
information so important? because secret
information means if the other side
knows, well, then it's game over. You're
doomed. Because if I know the buyers
resistance point, and I'm the seller, I'm
going to go as close as I can to that
resistance point. On the other hand, the
reverse is also true. If I'm the buyer,
and I'm trying to buy from the seller
and I know the sellers resistance point,
I'm going to push as close as I can to
that resistance point. So the resistance
points must be secret. Also, the targets
must be secret, that is what is the goal?
what is the Goal package-- this all must
remain fairly secret. Now, you can say
what
you want. You can tell the buyer I want
to buy this product. You can tell the
buyer the price you want, but you don't
want that to be your real target. You
need to go outside, away from that
because they're going to push you back.
So the reason I like this picture so
much, the reason I like this chart so
much is that this chart really gives us
that, that clear feeling of here are the
points to begin with. Here are the points
to begin with. Here are the stages inside.
It's not as simple as just saying I get
as low as possible, like 0. I always ask
people how low do you want? They say well
lower is better, right? And I say, "Well,
that's true. Lower is better, but look if
you go too low, the negotiation will not
even happen. They won't take you serious.
They won't negotiate or withdraw." The
same... is true on the other side,
too high. So we've got these points at
the end. Then we have these points inside
the target points. So those target points
secret, very secret. If you let that out,
it's game over. You're going to lose, so
please take a look at this graphic very
carefully, and don't be intimidated by
it, thinking, "Wow! It's too complicated."
It's not really complicated, but on the
other hand, if you understand it, don't
just walk away and say, "Well, I got it. I
understand. I can draw a picture if i
take a test." No, it's not about taking a
test. It's about making your plan for
your negotiation so that you know what
are your beginning points what are your
resistance points, guessing what the
other side resistance point is, guessing
what the other side's target is, knowing
what your target is, and then beginning
your negotiation in this way, away from
your target, moving up towards your
target, being careful. Did you pass your
target? Now, you have to watch out. Don't
pass your resistance point and measuring
these things as you negotiate. This is
especially true when you have multiple
opportunities. You may have multiple
buyers that you're selling to or you may
have different
sellers that you can buy from. So you can
choose them. So you can go to each one of
them and negotiate. By having this very
clear picture, you can then decide who
gives you the better deal, who gives you
the better result. But how do you know
that? If you don't have your ideas very
clear, if you don't have your resistance
and target points, and before that, your
goal package, if you don't know any of
these things, if you don't know what is
my goal package, then you cannot possibly
make this. And if you don't make this,
then when you go to negotiate, all you're
thinking is what's my goal package?
That's what I want. That's kind of like
hit or miss. I get one hundred percent
or I get nothing. No. That's not the
way negotiation works. Probably, you want
to get some things you want. You're going
to lose some things you want, but how do
you get the most? How do you get more? In
distributive bargaining because you get
something other side loses something, you
need to have your goal package ready. You
need to be very clear. Then you need to
lay this out clearly. Know your
resistance point. Know your target point,
and guess. See if you can guess the other
side's resistance point, and the other
side's target point. If you do that, and
you keep your information secret, you'll
have a better chance to win more in the
distributive bargain. If you let your
secret out, you're going to lose in
distributive bargaining. All right. Good
luck with your negotiation!