31 Jul Best Practices In Negotiation: Barter!
When most of us prepare to negotiate, we’re presuming that money will be involved in the transaction.
For instance, if you want to buy a house, you’ll fork over some cash, and not get away with asking, “Would you accept one red paperclip for it?”
Yet, this is exactly what a fellow did, not in one step but a sequence. He bartered a single, red paperclip for a house!
Kyle MacDonald is a Canadian blogger who pulled this off, and you can read all about his exploits at Wikipedia by searching “one red paperclip” or his name.
It’s a fascinating story, but my purpose here is to use it to illustrate a much larger principle. Bartering is one of several “Best Practices In Negotiation,” a deal-making device that is not used often enough.
Who barters, and why?
My Dad was a radio station executive and he also produced a little TV. Typically, the companies he worked with arranged what he called, “Trade-outs.”
They would trade unsold radio and TV commercial time for whatever they could use, for which otherwise they’d have to fork over cash. My Dad drove a hot black-on-black Mustang GT that was part of one of those exchanges.
Early in my consulting practice, I was engaged by a cell phone company. The contract I negotiated provided cash, two cell phones, and thousands of dollars worth of air time.
They “owned” the air time, had an excess capacity of it, just as the radio and TV stations had too much time on their hands, literally.
Trade-outs with airlines, hotels, and cruise lines are especially attractive-to them-for the same reason. Unsold seats and accommodations are a total loss.
You cannot sell yesterday’s unsold airline seat. If unoccupied, it was a 100% revenue loss.
So, carriers and others that have “perishable” inventory have a keen interest in getting SOMETHING in exchange for what they are unlikely to sell for cash
True, you might have to stand-by to enjoy some of your bartered tickets, unless you bargain for “positive space,” but it is an inconvenience worth the bother. If you don’t get on the 2 o’clock flight, you’ll probably get on the 5 o’clock.
I prefer “Half-cash, Half-trade”deals, where I’m earning at least some cash money along with perks. From the cash portion, I retire my direct costs and make at least a slight profit.
The bartered bit provides a sweetener, an enhancement.
Sometimes, using the lure of a partial trade-out, you can close deals that you would miss, otherwise. Plus, if you don’t want to cut your prices, by using a partial trade you can effectively deliver your goods and services “for less,” without earning less.
There are various ratios that you can establish, which are themselves subject to negotiation.
For instance I traded some seats in a seminar I was conducting to an airline company that gave me a five-to-one payback on the retail value of the seats. For $1,500 worth of tuition, I received $7,500 worth of positive-space airline tickets.
A good deal for everyone!
For those that advocate making win + win bargains, I can think of no other type that does it as well as bartering, again, which makes this a “Best Practice In Negotiation.”
By Dr. Gary S. Goodman