Hi Victoria,
I recently came across your negotiation column, and would like to ask you about a situation I’ve faced in my line of work.
I’m an event planner who often works with vendors and clients to get each of them the best pricing and make both sides happy. However, I’m often faced with a dilemma when I directly introduce my clients to my vendors.
Here’s an example: A recent client asked me to recommend venues to hold an event. I brought her to several places, all of which I’ve worked with many times, so she could see the location, the décor, and the event spaces. Then, after meeting the event managers, my client asked them to give her a quote directly! The restaurants then sent her their proposals, not offering me any benefits for introducing them to the client (which is typically the industry standard).
How am I able to negotiate for something, when I'm not even presented with the opportunity?
Event Planner
Dear Event Planner,
This is a great question, and it’s particularly important to businesswomen, many of whom hate to ask for a benefit for themselves. But, let me suggest that every time you engage in a business transaction with anyone—from your local retailer to your cell phone provider—you are presented with the opportunity to negotiate.
I do think you’re correctly diagnosing the problem of negotiating at the moment you put your client together with a venue. It would be awkward (and tasteless) to interrupt the flow of information between the manager and your client to seek a benefit for yourself at that time.
The opportunity you have to initiate a conversation with the venue about your compensation is before you introduce your people to one another.
First, make an appointment with the venue manager to meet in person to talk about a “mutually beneficial” proposal. Preferably, do so over coffee or a meal—eating and drinking actually releases the body’s natural bonding and trust-building hormone, oxytocin.
Touch also releases this hormone, so, if no one has time for coffee or food, the second best option is to meet in person. A warm handshake is enough touch to get the oxytocin doing its job of creating a warm tie between people. And face-to-face communication tends to promote small talk, creating opportunities to establish personal ties that make people more inclined to do favors for one another (“You grew up in San Diego? So did I!”).
After you’ve exhausted the small talk and are in a friendly state of mind, it’s time to turn toward business. I always recommend that women lead the conversation with the benefit they’re providing. In a nutshell: You frame your “ask” as a benefit to your bargaining partner and anchor the value of your services at a point that’s high enough to give you room to make concessions and ask for reciprocity.
I’ll explain more about framing, anchoring, concessions, and reciprocity below, but first let me give you a suggested script for your “ask.”
You: I love your restaurant! I’d like to include it in the few first class venues I recommend to my event planning customers.
Venue Manager: We do a lot of large parties and get referrals from other event planners. We’d be happy to add you to our list.
You: Great! Let me tell you a little bit about my clientele. (Then pitch the number of events you plan every year, the amount of money your clients typically spend on venue, food, décor, and the number of people you believe you’d be able to send to the venue every year.)
Venue Manager: Sounds great. We’d be happy to be on your list.
You: I have a couple of pricing options for steering my clients to your restaurant. Some venues I work with pay an annual fee; some pay a flat “per referral” fee; and others pay a percentage of their profit.
(There’s an ethical question here about charging referral fees that I assume, based on your question, that you have a way of dealing with. But if not, write back and I’ll talk about that potential barrier.)
The type of responses to this opening proposal tends to range from, “we never pay for referrals” to “we’d never pay a flat annual fee but are open to the idea of profit sharing.”
Venue Manager: What is your referral pricing structure?
This is where the real negotiation begins. I often tell people to frame their pricing as a range—offer distinct options, from bargain basement to standard service to first class.
You could, for instance, characterize your “first class” referrals as the “elite” option you offer to your best and most desirable clients, i.e., those who are likely to choose the top line of venue options. Standard referrals would tend to be your clients who are seeking a mid-range event, and the “bargain basement” ones will be those you know will nickel and dime the place.
Steering your best clients to any particular venue will obviously cost a little more than steering your mid-range to bargain basement clients there.
When you open the negotiation with a number of choices, you tend to rule out getting "no" as a response, because you haven’t presented “no” as an option. When people are offered choices, they tend to focus on the choice that is best for them, rather than rejecting the idea of naming a price altogether.
Rarely do people take the “bargain basement” route, because it suggests they’re not as successful as most businesses want to appear. People tend to take the middle road, though some do wish to be in the “first class” cabin and have the resources to pay for it.
You’ll want to start your pricing (this is the anchor) at the high end for each price point so that your bargaining partner can ask for a better deal (called concessions) from you. I typically advise my clients to start with a price at least three concessions away from their bottom line—so the negotiation process can go from offer to counter-offer, to counter to the counter, and, finally, counter to that counter. Often, you will get more than you want at the “counter to counter” stage of the negotiation—and your bargaining partner will think he’s getting a great deal. (Research has shown that negotiators’ satisfaction with the outcome is more correlated with the number of concessions their negotiation partner has made than with getting the deal they wanted to begin with.)
Once you’ve had this conversation, you no longer need to worry about asking for a referral fee at the time you introduce your clients to the venue. You will have an arrangement with the venue upfront, and can then step into or stay out of the event details as appropriate to each particular client.
Bottom line: The opportunity to negotiate won’t always present itself to you—you have to create it. But by doing so, and by learning how to position the conversation from beginning to end, you can get what you deserve without putting anyone in an awkward position.
Definitions
Framing: Positioning things in a way that focuses the viewer’s attention on what’s inside the frame and excludes anything outside of it. For example, if a photographer snaps a shot of all the medium height students in a fifth grade class, you’re unlikely to think about how tall or short they are. If he includes the shortest or the tallest, your attention focuses on height. If he includes one girl, you focus on gender.
Anchoring: An anchor is any number (or idea) that enters the negotiation environment early in the bargaining session. High anchors selectively direct a person’s attention toward an item’s positive attributes, whereas low anchors direct attention to its flaws. By making an aggressive first offer or demand, you’re able to “extract” more concessions from your bargaining partner.
Concessions: Whenever you accept a suggestion from another, you are conceding the point to them. In a bargaining session, concessions take the form of increases or decreases in price or the addition or subtraction of non-monetary benefits. One of the best predictors of party satisfaction with any deal is the number and size of the concessions extracted from an opponent.
Reciprocity: When one person freely gives another something of value—time, information, goods, or, in negotiations, concessions—the recipient inevitably feels an obligation to reciprocate or, more commonly, over-reciprocate. Studies show that restaurant waiters who bring candy with the check receive dramatically larger tips, the difference being far greater than the candy’s worth. When you make a concession, e.g., including extra services, stress how difficult it is to make, signaling to your bargaining partner that you expect them to reciprocate by making a similarly difficult concession, e.g., accepting the price you named.