Knowing how to negotiate is a key part of successfully executing strategy in pretty much every aspect of your life. The truth is that resources are limited. With limited resources, you’ll find that if you give out more than you take in, you’ll end up with less than when you started. In relationships, business, career, salary, sales, purchases, real estate, good deals and pretty much every other aspect of life, knowing how to negotiate well will help you thrive.
Planning is Critical: I have fought many battles in my life and most of them didn’t take place on a battle field. The act of negotiation itself is a form of battle. The battle takes place between wills of the parties involved and preparation is critical to the success of any victor. The entire text above is written to help you prepare yourself for negotiation; there are several things you may do to prepare each time you negotiate.
- Make a list of potential negotiation points.
- List the obvious issues that will come up.
- Create a mind-map of obvious & related outlying/less obvious issues.
- Know how others have fared in the same/similar negotiations.
- Know your BATNA and Bottom Line (reference paragraphs 6 & 7 below)
- Determine your overall approach (include starting position and desired outcome).
Understand Expectations: People ask for more than they expect to get. They also expect you to do the same. Learn to resist the urge to automatically respond to a lowball offer with a reduction in price.
Knowledge is Power: The person with a greater situational awareness will gain the upper hand if they can correlate that information into an understanding of the needs at play and apply it to their tactics. Develop a habit of asking other people questions about themselves that reveal the fundamental needs that drive them to action. If you understand those needs you can explain your position meets those needs. The following are just a few examples.
- What brought you here?
- How long have you been in the market?
- What is the time frame you are working in?
- Who else has a say in the final decision?
Beware the Flinch: The flinch is one of the oldest and most effective entry tactics of negotiation. It works like this.
- Person A makes an offer that seems like a reasonable starting point.
- Person B reacts with either outright shock at the unreasonable nature of the offer; and waits for a reaction.
- Unless they are familiar with the flinch, Person A is most likely to react with in one of the following ways. Person A will: either (feel the discomfort of their starting position and try to justify it), or (concede their offer was unrealistic and hand you the opportunity to anchor to a different starting point).
Confidence Comes from Success: It also ensures success. Unfortunately, a lack of confidence can be the first nail in your coffin. Don’t wait until you face important negotiations to find out you need to practice. Practice often and in all sorts of situations. Small boutique stores and yard sales are great places to practice with minimal risk. You’ll learn much through low cost negotiations in both of these venues. Learn to be seen as pleasant and persistent. Figure out how not to appear demanding during negotiation. Develop a short list of skills you want to improve and go in hoping for a chance to work on them. Use the following to start working on your own “Flinch” technique.
- “That is too expensive.” .” …wait for their response
- “That is unrealistic.” …wait for their response
- “What sort of discounts are you offering today?”…again wait for response
Know Your BATNA: Your Best Alternative to a Negotiated Agreement is your (BATNA). Don’t be desperate. Don’t act desperate. Don’t appear desperate. Desperate is week. You can avoid desperate by having a Plan B (aka BATNA). It is better to walk away from a sale or negotiation than to make a concession so large it doesn’t meet either party’s needs. When that happens, the deal usually falls through afterwards.
Having a BATNA increases your own value and strengthens your negotiation position. If you’re job hunting, go to job interviews with other offers in hand. If you’re single, go to the dance when a number of willing dance partners will be available. If you’re buying something, know where you can get a better deal on the same product or a similar product for less.
Never disclose you BATNA, unless it is better than the deal on the table. Even then be careful of full disclosure. The more information the other party has the stronger their position gets. If your BATNA is better and you’re at an impasse, disclosing its existence is to your advantage.
Do the following to develop your BATNA.
- Brainstorm a long list of actions you might take if no agreement is reached.
- Work out the details of the most realistic ideas on that list.
- Select the detailed alternative that works as a BATNA for the deal you’re negotiating.
Know Your Bottom Line: This is the price/cost at which you walk away and engage your BATNA (Plan B). Having a bottom line and a BATNA beforehand are critical parts of maintaining a confident bargaining position and ultimately succeeding at negotiation.
Priorities & Tradeoffs: In negotiations that span large or multiple issues (like contract negotiations), I have found it useful to clearly define what my priorities are ahead of time. Often, I realize everything I planned to bring to the table is a priority. This isn’t because I want everything I think of. Instead it is a byproduct of effective project planning. After all, why include things you don’t need in your project plan? Well…negotiation isn’t project planning. There is much benefit in having something in the request/offer/proposal that you can “trade-off” when the time comes. It is uncommon for either party to get everything the start out looking for in large negotiations. Knowing this and preparing accordingly is a good thing.
Understand Anchor Points: Anchor points are the references that people use in judging progress and outcomes of negotiations. They have a huge impact on how both sides feel about negotiations. Imagine yourself to be an avid cyclist out shopping for a new bike. You’re at your local & favorite store and you find what you’ve been looking for. The bike is marked at $2,900. You make a counter offer of $2,300 and the dealer says you’ll have to do better than that. So you offer $2,500. The dealer thinks it over and says he’ll accept. Now, how do you feel? With your anchor point as the dealer’s initial offer of $2900, it was a great deal! You saved $300 and can buy the accessories you thought you’d have to wait for.
Now imagine – The next day, you stop for coffee near work and you see a bike shop with the same bike in their window for $1,900. How do you feel? Not so good now. Accepting your local dealer’s initial offer as your anchor point wasn’t such a good idea after all.
The best anchor point (and only one you should use) is you BATNA. In this scenario your BATNA may have been the price a competitive shop some distance away was offering the same bike for. If you’re the bike dealer, it may be the minimum markup that makes the sale worthwhile.
This has been a fun post to write and I surely could keep writing. There is so much good stuff to know about negotiation. If you’re interested, here are few good links to help you further your own research on negotiation.
- Harvard’s Law School’s Program on Negotiation – Daily Blog
- The Negotiation Experts (good post on BATNAs)
- The Seven Deadly Sins to Negotiation
- Mike Hofman’s Inc.com Post (5 Things Never to Say While Negotiating)
- Warning…he has a potty mouth/pen & you can skip the pop-up add
As always, I welcome any comments that will help me or other visitors grow personally and professionally. I also encourage you to share this article with anyone you think may benefit. You never know where giving someone a little hand up will end up.
Until next time, be well!
Written by Seth Haigh