In a commercial negotiation, your objective is to reach agreement without sacrificing margin. The overriding secret is to negotiate in a way that leaves both parties satisfied with the final agreement.
What follows are six techniques from our negotiation training to help you. Weave them into your everyday transactions and you’ll make yourself a better, more profitable negotiator.
One of the techniques buyers learn early in their careers is the ‘flinch’. On learning the price, they react with a sharp intake of breath and say:
‘What!’ or
‘You must be joking’ or
‘I had no idea you were talking about that kind of money’ or
‘We’ve had a very good quotation from one of your competitors and some of my colleagues are leaning in that direction’
These are all negotiating ploys, designed to lower your aspirations and set you up for a discount. Some buyers are so skilled in this area that they deserve an Oscar nomination. They may be bursting to buy from you, they may be completely ‘sold’ on your solution, but they still have a go at your price. Why? It’s their job. They are paid to do that.
If you ask people to define negotiation they usually reply ‘giving just enough away to buy agreement’. However, giving things away doesn’t buy agreement. It usually only convinces the other party how easily we can be taken for a ride. They begin to think about what else they can get from you.
If you concede when I press you, what’s my best bet? …to press again. That type of behaviour is not negotiating. Negotiation means we both move. The core of negotiation is what I offer you, balanced by what you offer me.
Negotiation means mutual movement. If you have to move towards the other party, you must insist that they move towards you as well. Nothing, absolutely nothing, is given away for free.
There is an old negotiating maxim: aim high and you’ll get more.
Consider Mary, a senior sales executive with a software development company, who is preparing for a key presentation. She says to herself, ‘This is an extremely important sale for me. I must get this business. I really believe we have a superb solution for the customer. I’ll get the quoted price with standard terms and conditions. If they really push me I might possibly concede up to 2 per cent, though they’ll have to push really hard.’ Mary understands that some small movement is part of the commercial process.
Contrast that with George, who is preparing for a similar presentation and says to himself, ‘This is an extremely important piece of business. I really must do everything to get it. If I have to, I’ll concede 20 per cent on the price.’
Who will negotiate the best deal?
Mary’s mindset, her aspiration level, is way ahead of George’s. She understands that the person who aims high gets more.
When you offer a concession, obey the golden rule: Make the buyer work harder for it. Trade concessions reluctantly and one by one. Call a concession a concession. People put greater value on things that are hard to get.
Being stingy is an excellent tactic because it helps the other party to believe that they’ve reached the bottom line. That’s good for their self-respect.
Negotiating training relates to almost everything we do. For example, let’s suppose you decide to sell your flat or house. You put it on the market for £275,000. After several weeks you receive an offer of £265,000, which is the figure you had in mind when you agreed the asking price with the agent.
What’s your reaction to the offer? More than likely you say, ‘Great, I’ll take it.’ You are delighted you’ve sold the house at the price you wanted. You have a celebratory drink with your partner and retire to bed. But for some reason you don’t sleep very well. Over and over you have the thought, ‘I agreed too quickly, I should have asked for more. I’m a lousy negotiator.’
Do you see what’s wrong here? When we say ‘yes’ too quickly, we think we’re a lousy negotiator because we may have left some money on the table.
Let’s now consider the same sale from the buyer’s viewpoint. She has been looking for a house in your area. She sees yours and makes an offer £10,000 less than the asking price. You agree. The buyer is pleased, returns home and, like you, doesn’t sleep very well. Over and over she is thinking, ‘He said yes too quickly. I should have offered less. Oh, I’m a lousy negotiator.’
This is a crucial point — when we agree too quickly, both sides later think they are lousy negotiators.
As we have seen, the core of negotiation is: what I offer you balanced by what you offer me. What we offer each other when trading concessions are referred to as our negotiable variables. They are the ammunition of our bargaining skills. And this brings up another key point: it doesn’t matter how good we are at negotiation, we need lots of these variables to trade effectively.
The challenge here is to stop seeing price as the issue. Price is an issue, it shouldn’t be the issue.
All the variables in and around the agreement can be used to improve it. Once you start looking beyond haggling over the price, you can begin to put some excellent agreements together.
If you are deadlocked with the buyer, point out the time invested by both sides before admitting defeat: ‘John, we’ve both invested a great deal of time in this, let’s go through it one more time before we admit defeat.’ It’s not just your time, but the buyer’s as well.
Recognise that no one likes to admit defeat. So when deadlock seems imminent, debate, verbalise, explore and discuss the situation and just maybe some other hook will emerge. You then grab it and away you go.
To learn more, why not attend our Professional Negotiation Skills training course. At LDL we also have a specialist Fee Negotiation workshop for lawyers and accountants.