Everyone loves having more choices

Posted By JoAnne Jennings, Dec 1, 2011

The complexity of real world negotiations can be overwhelming.  Even on the iconic used car lot, both the salesperson and the buyer are likely to be interested in more than mere price.  The salesman also wants to sell an extended warranty, make a sale today instead of tomorrow, and receive a substantial down payment.  The buyer wants favorable financing, the chance to have her own mechanic check the car’s engine, and a new set of tires.

When faced with such complexity, one might be tempted to try to simplify the conversation by making a single, bundled offer.  A car salesman who uses this approach might offer to sell the car for $25,500 if the buyer will also buy the extended warranty, put at least 20% down, and sign all the paperwork this afternoon.

While this seems like a reasonable approach, some negotiation experts suggest the car salesman would do better if he embraced rather than resisted the complexity of the negotiation.  In their article Putting More on the Table:  How Making Multiple Offers Can Increase the Final Value of the Deal, Negotiation (Harv. Bus. Sch. Pub. Corp., Boston, M.A.), April 2005 at 3., Victoria Husted Medvec and Adam D. Galinsky describe how negotiators can use multiple equivalent simultaneous offers (“MESOs”) to “achieve better outcomes . . . without sacrificing relationships or losing credibility.” Ibid.

A MESO is a package of alternative offers, each of which has approximately the same value to the offeror.  Using this strategy, our car salesman might offer the buyer a choice between three packages:

Package #1:  $25,500 for the car if the buyer also buys the extended warranty, puts 20% down, and signs all the paperwork this afternoon; or

Package #2:  $27,500 for the car if the buyer also buys the extended warranty, puts 10% down, and signs all the paperwork this afternoon; or

Package #3:  $28,000 for the car if the buyer does not buy the extended warranty, puts 10% down, and signs all the paperwork this afternoon.

Although each of these packages holds the same approximate value for the salesman, offering this suite of options gives the salesman several advantages in the negotiation.  First, MESOs signal flexibility on the part of the offeror.  The buyer to whom the salesman presents MESOs may perceive the salesman as more flexible than a salesperson who makes only a single initial offer.  This may bolster both the salesman’s long-term reputation and the buyer’s short-term willingness to deal.

Second, the MESOs can convey information to the offeree.   For example, the packages above may help the buyer understand the value to the salesman of extended warranties and down payments.  This understanding may lead to greater flexibility on the part of the buyer.

Finally, and perhaps most importantly, offering MESOs helps to structure the conversation in ways that promote information sharing.  For example, the salesman can ask the buyer to choose which of the packages comes closest to meeting her needs.  If the buyer does not like any of the packages, he can ask her to explain her objections.  By carefully listening to the buyer’s responses and reasoning, the salesman can discern the buyer’s relative interests and adjust his offers accordingly.

While MESOs can be an effective way to approach a multi-issue negotiation, note that both preparing the initial MESOs and readying yourself to deftly parley the subsequent conversation require substantial advance preparation.  You must clearly identify and become familiar with the value of each issue and option to you (or your client) before the negotiation begins.

Medvac and Galinsky suggest using a weighted scoring system that reduces each possible issue to a discrete number, and it is possible this rigorous methodology – which requires making some hard choices with respect to priorities between issues – might discourage some readers from trying the MESOs approach.  But, as a skilled negotiator and advocate for your client, you were going to do this before entering into a multi-issue negotiation anyway, weren’t you?  So why not leverage your work and offer MESOs to improve the outcome of your next negotiation?