Thursday, March 1, 2012

Why Did You Buy That Car?

“Thanks for meeting me for lunch, Mr. Gitou,” said Verdi. “I have been working on this bid for a new procurement system for one of my clients for six months. Yesterday the director of procurement said his company values the quality of the solution we have offered, but our price is ten percent too high. He said we have to ‘sharpen our pencils.’ I don’t have ten percent; I could move some things around and give him five percent.”

“So tell him ‘No,’” Tyler said.

“I can’t do that,” Verdi said. “He’ll walk away and give the deal to my competition!”

“So tell him ‘Yes,’” Tyler said.

“I can’t do that either. If I cut the price by ten percent I have to reduce a whole bunch of operational costs that we built in to ensure the success of the implementation. We have a whole change management program that’s required to train everyone on the new system. If they’re not trained they won’t use it and the client doesn’t realize the savings.”

“So give him five percent,” Tyler said.

“Really?” Verdi said. “Just like that? I can’t believe you, the Deal Whisperer, would make such a concession so easily!”

“Why not?” Tyler said waving away Verdi’s concerns. “That’s what the client wants, right? So give them what they want.” Tyler paused, a smile creeping onto his face. “What will happen next?”

“If I offer him the five percent? Well I hope he takes it and we sign the deal.”

“OK,” Tyler said. “What if he takes it and then says, ‘Thanks, now give me the OTHER five percent or I am going to walk away and go to your competition?’”

“I guess I’d have to say no,” Verdi said. “I can’t do ten percent.”

“So let me ask you this: if you are ready to say ‘no’ to ten percent and see if he will exercise his BATNA to go to the competition, why would you say ‘yes’ to five percent and ‘no’ later? In other words, why not say ‘no’ now? Isn’t the outcome potentially the same?”

Verdi thought for a moment. “I am getting the feeling that you’re trying to show me that the answer is not ‘yes’ or ‘no’ because neither one produces the ideal outcome for both parties.”

Tyler clapped his hands. “Exactly! The answer to a demand for a price reduction is rarely ‘yes’ or ‘no.’ The challenge for a Deal Whisperer is to figure out what the right answer is.”

“So how do we find the right answer?”

“We ask questions,” Tyler said. “First, why is the procurement director asking for a price cut?”

“He said our price is higher than the competition’s price.”

“Are you ever selected because you have the lowest price?” Tyler asked.

“Not often,” Verdi said. “We really focus on quality. We are typically selected because when looking at the risks of these projects, the scope of the work, and the time to get the system running we provide the greatest value on overall price.”

“So we are struggling because we are trying to answer a demand for a low-cost solution which we cannot provide.”

“Yes,” Verdi said. “So I guess that’s the end of the deal. I can’t be the low-cost provider.”

“Hang on, Verdi,” Tyler said. “Don’t give up so easily. A potential solution is right in front of you!”

“It is?” Verdi asked. “Where?”

“The problem is you don’t have an answer to the question being posed, correct?”


“But you do have an answer to another question which has not yet been posed, correct?” Tyler asked.

“I guess.”

“So if two parties are trying to reach agreement on a shared goal, namely, getting the best, most reliable solution in place, and one party doesn’t have the right answer to a question, maybe the parties need to change the question to get to the right answer.”

“I feel like I am following you… but not really.”

Tyler laughed. “It’s all about how you sell, Verdi. What kind of car do you drive?”

“I just bought a new Dodge Charger. Have you seen it, by the way? It’s awesome…”

“WHY did you buy that car?” Tyler asked.

“Why? Because I need a car to get to work…”

“Why did YOU buy that car?” Tyler asked.

“Me? Who else would drive it?"

“Why did you BUY that car?” Tyler asked.

“I am getting really confused.”

“Why did you buy THAT car?” Tyler asked.

“Now you’re starting to scare me.”

“Why did you buy that CAR?” Tyler asked.

“What am I supposed to do, ride a bike?”

Tyler looked at his watch. “When you have the answer to all of those questions, you’ll have the answer to your problem. Let’s get together for breakfast tomorrow and see what you come up with.”