My daughter is currently learning about how to add fractions in school. The trick to doing this right is that you have to make sure that the denominator (the number on the bottom of the fraction) is the same for both numbers before you add them. She’s struggling with this concept and it reminds me of a key sales negotiating point – never try to do a deal using funny money.
Just What Is Funny Money?
We all have heard the phrase “apples to apples” right? Well funny money is something that can either sneak into a sales negotiation or be slid into it by one side of the table. When this happens, all of a sudden you aren’t comparing two equal things such as how much a product costs and how much you are willing to pay for it. Instead, all of a sudden you’ve got apples, oranges, and bananas on the table in front of you.
A great example of funny money in real life is what happens when you gamble in a casino: you don’t use real money, you use chips instead. There are a number of reasons for this, but a key one is that chips don’t “seem” like real money. That allows us to gamble more and not feel as bad when they all go away (although it still hurts when we get the bill later on!)
Examples Of Funny Money In Sales Negotiations
Whether intentionally or not, funny money can slip into just about any sales negotiation. It’s the careful negotiator who keeps his / her eyes open and spots it when it shows up. Here are a few examples of what funny money can look like:
Price Per Unit: If I’m asking you to lower your blue widget price by two cents per unit, that seems like a small matter, right? It is until you realize that I’m trying to buy two million blue widgets and so what I’m really asking for is a $40,000 discount. Now that’s real money!
Price Per Lot: This is the flip side of the previous tactic. If I’m laying mulch in my yard and you tell me that you’ll sell me 10 bags of mulch for $20, that sounds like a fair deal. Until I realize that since I need 200 bags of mulch, we’re really talking about me paying you $400 for mulch. The total quantity needed and its price is what we need to negotiate.
Interest Rates: This is exactly what built those credit card companies into the powerhouses that they are today. If I borrow $60,000 at 10% on a 5-year loan to start my business, then I’ve just agreed to pay the bank $16,489.20 for the privilege of using their money. Sure seems like I should try to negotiate a lower interest rate.
It is the job of every sales negotiator to train yourself to always be asking the question: what is that worth. Just like my daughter is trying to learn to remember that she always needs to convert the denominator of two fractions to the same value, so too do sales negotiators need to learn to always “map” funny money to real values.
No matter what the other side of the table says, always take the time to translate funny money into real dollars and cents (or whatever currency you are using). If you don’t take the time to do this, you run the risk of making a bigger concession than you intended to. Learn to deal with funny money correctly and this will allow you to close better deals and close them quicker.