I have a friend who is a man of principle. He doesn’t play games. He’s the ultimate straight shooter.
Not long ago he and his wife decided to buy a new car. For several years they had owned a car made by a major automaker. Because they had had such a nice experience with this car, they decided to replace it with another from this same automaker.
They drove to the dealership and chose a new replacement car. They then sat down with the salesman to talk about price. They told the salesman they’d like to trade in their existing car and apply its value to the cost of their new car. Their existing car worked perfectly but it was a bit older.
The salesman ran some numbers. He presented my friend and his wife with the price of the new car. The price quoted by the salesman was higher than the automaker’s Manufacturer’s Suggested Retail Price (MSRP) even with my friend trading in his current car.
My friend and his wife were flabbergasted. Then they became offended. How could the price of a new car be more than the Manufacturer’s Suggested Retail Price – especially when my friend was trading in his current car? They stood up. They walked out and drove straight over to a dealership for a different automaker where they bought a new car. No muss. No fuss.
What happened here? The first dealership wanted to maximize the selling price. They didn’t want to leave any money on the table. Would that dealership have sold my friend a new car for less than their original quoted price? Of course. Did my friend see it that way? Not at all. He took the dealership at their word, and decided he didn’t want to do business with someone whom he thought was trying to gouge him.
I see these same dynamics at work in many of the mediations I conduct. The Plaintiff doesn’t want to leave money on the table. The defendant doesn’t want to give away the store. The Plaintiff often makes an opening demand far higher than what they would be willing to accept. Plaintiff sometimes makes an extremely high opening demand so that they have room to negotiate and still end up at a number acceptable to them. Further, plaintiffs sometimes believe an extremely high opening demand can help the defendant feel like the plaintiff is giving up something too as negotiations progress. But making a opening demand that’s too high can have a chilling effect on negotiations. In a car purchase setting an overly aggressive price can result in a buyer who walks away, such as with my friend. In real estate transactions real estate agents sometimes tell their clients that if a property is priced too high, “The people who would buy their home won’t see it and the people who do see their home won’t buy it.” In mediation settings I sometimes say to counsel “If you hang the meat too high, the dog won’t jump.”
From its inception to its conclusion, negotiation is an art. One of the most important parts in the tapestry of negotiation is the opening demand, which can set the tone for the negotiations that follow. To be most effective, negotiations must be tailored to the situation to the extent possible. In my friend’s situation, the problem wasn’t that the opening new car price was too high but rather that it was too high for my friend. The dealership didn’t know my friend. Prior to opening the negotiations the dealership had no way of knowing that my friend would take offense at a high opening offer and would terminate the negotiations. But mediation is different. A mediator can get a sense of where parties are and who they are. A mediator can often perceive how high demands or low offers are likely to be received. Mediator insight can provide parties with a key negotiating tool that they would never have in a car dealership setting – and can help them avoid hanging the meat so high that nobody is likely to jump.
Robert Jacobs is a mediator and arbitrator with more than 35 years of legal experience. He mediates and arbitrates real estate, business, construction, employment, personal injury, medical malpractice and trust litigation cases. Reach him at wwww. attorney-mediator.law