yes, we are negotiating

http://www.youtube.com/watch?v=7ZrChwV_TU0

This is a scene from “Jobs”, a 2013 American biographical drama film based on the life of Steve Jobs. Here, Steve Jobs negotiates a bulk computer sale to a local merchant.

Steve: “So what kind of investment are we talking about?”

Merchant: “I said I wasn’t interested, not buying”

Steve: “I know, but you’re also not the only interested party”

Merchant: “Hmm, that’s interesting, because it doesn’t seem that way the other night”

Steve: “Well, you think that was the first stop we made, we have been all over the valley”

Merchant: “Then, you already have a retailer”

Steve: “I’ve got a lot of offers...We’re both businessman and we both operate from our gut, and my gut tells me to give you this opportunity”

Silence.

Merchant: “I’m taking 400 per machine for 50 units paid at the time of delivery”

Steve: “400 for a 100 units, paid 1/3 up front”

Merchant: “We’re not negotiating”

Steve: “Yes, we are”

Steve enters the shop of a local merchant who has expressed interest in his computers in a previous meeting. He cleverly uses “The Scarcity Rule” where an item becomes decidedly more attractive if it is becoming less available. Steve first mentions the existence of other interested party, and gradually creates the impression of a huge number of buyers waiting in line. As the demand for the item increases, the value of the item increases. In this case, scarcity imposes the idea of ‘time limit’ to the merchant, whereby there is a deadline to the sale of the computers. Furthermore, this deadline is dependent on an uncontrollable factor – other buyers’ decision making time. In other words, if the merchant does not strike a deal now, the deal may become unavailable. This time pressure further prevents the merchant from thinking of this alternatives available. Taken together, the merchant feel as though his freedom is reduced, resulting in a reactance to accept the offer Steve is making. As seen from Brehm & Weintraub (1977), toddlers were placed in a room with attractive toys. Some were separated from the toys by a 2 feet high glass (barrier), while others by a 1 foot high glass (no-barrier). Toddlers who could freely reach over for the toys did not show any preference or interest for them. Those who were restricted were 3X faster to get to the toy.

Next, Steve creates ‘Value’ – “We’re both businessman and we both operate from our gut, and my gut tells me to give you this opportunity”. He identifies the interests of, and frames his offer from the perspective of the merchant. The merchant now sees the possibilities and benefits of making this deal, and increases his value for the computers. Within this, Steve also establishes ‘Similarity’ of being businessman. Evans (1963) has found that customers were more likely to buy insurance if the salesperson were similar in age, religion, politics and even smoking habits.

A short silence occurs, and the merchant finally makes the first offer. Subsequently, we observe the classic ‘Foot in the Door’ (FITD) technique. Now that the merchant has agreed to the first request and has now made a commitment to purchase the computers. Steve leverage on this, and asks for a second request – to negotiate the price. Burger (1999) conducted an analysis of FITD and concluded that it invokes a number of psychological processes such as commitment and desire for consistency which increases the magnitude of compliance.

References

Burger, J. M. (1999). The foot-in-the-door compliance procedure: A multiple process analysis and review. Personality and Social Psychology Review, 3, 303 – 325.

Brehm, S. S. & Weintraub, M. (1977). Physical barriers and psychological reactance: Two-year-olds' responses to threats to freedom."  Journal of Personality and Social Psychology, 35, 830 – 836.

Evans, F. B. (1963). Selling as a dyadic relationship--A new approach, The American Behavioral Scientist, 76 –79.

Li Ying Fong