Business Negotiation August 26, 2013

"What if"—A Good Probing and Win-Win Tactic

“What if” is a powerful negotiating technique for getting information that the other party ordinarily might not wish to reveal. Few would disagree that a buyer who knows more about the cost structure and needs of a seller is apt to make a better agreement.

Equally important, “what if” opens the way for both parties to find a better way to do business than either thought possible to start with. Few approaches to bargaining yield as much information and opportunity for win-win as “what if.” The following example applies to an industrial situation, but the ideas are directly applicable to personal buying or selling as well.

Suppose an American buyer of wrinkle-free cotton trousers from China wishes to purchase 20,000 for discount outlets in the United States. Instead of just asking for a quote on 20,000, she asks for a price on 5,000, 10,000, 20,000, 50,000 and 100,000. Once the Chinese bids are in, the buyer and her cost analysts are in a position to determine the seller’s material and labor costs, their setup costs, and to make estimates about their marginal pricing and efficiency.

The buyer is then in a good position to negotiate the price on 20,000 units. Knowing what the costs are on a 50,000 run, the buyer can drive the unit price for 20,000 down closer to the 50,000 level.

Is “what if” an ethical tactic? Was it right for the buyer to ask for so many bids when only a 20,000-unit purchase was contemplated? I believe it was. Her role was to make the most sensible decision she could based on the information available. “What if” is a good way to get price and cost information as well as learn something about the seller’s pressure to sell.

In dealing with the Chinese manufacturer, other “what ifs” like those below might have opened opportunities for both-win:

1. What if we give you a two- or three-year contract?
2. What if we supply the material?
3. What if we lend you money for the machinery? (or buy the machinery for you?)
4. What if we buy trousers and shirts?
5. What if we buy your total factory production?
6. What if we change the trouser design?
7. What if we give you advance payments or cash on delivery?
8. What if we pay you in German marks?

Any of these “what ifs” could have provided an insight into the seller’s motivations not otherwise available. They can, with some creativity, lead to win-win trade-offs and benefits. Trade-offs which neither party could have anticipated had “what if” not been considered.