How to Succeed in the Negotiation – And Fail Afterwards
Negotiation is the most complex form of communication. Getting a real win-win outcome needs more than just getting an agreement. Here are three suggestions to remember whenever you are negotiating:
Point 1: Never Accept their First Offer
This is a golden rule of negotiation first given to us by Gavin Kennedy in his book Everything Is Negotiable. If I accept your first offer, your initial thought will not be, “Great! I’ve done a fantastic deal.” It will more likely be, “I should have asked for more!” or “Does he know something that I don’t know?” Either way, by accepting your first offer I have compromised your satisfaction with the deal. So, if I am buying a car from you and you are asking $100,000 as your starting point; I can offer you $100,000 and send you away wondering. Or, I could make a counter offer of $90,000, then allow you to bargain me up to $98,000. You would think you’d negotiated a great deal (given my starting point of $90,000). I would have sent you away happier than in the first scenario – by giving you $2,000 less! If I accept your first offer, it is also making my life harder next time I negotiate with you. This is because you are likely to remember the same situation and make your starting-point higher.
Point 2: Never Show You Are Too Happy
My television had failed. It needed replacing… and quickly. I had less than an hour to spare; but this should be more than sufficient time to drive to my local electrical retailer, choose a replacement and bring it home. I knew exactly what size I needed and I have a couple of preferred brands. I expected to pay around $1000 for my new television. I liked the picture on one particular model – right brand, right size – and priced at $1150. I went to the man whose badge said he was the Department Manager and asked him the age-old question, “What’s your best price on this one?” He checked his computer screen and replied, “$1020.” I thought two things: (1) It’s very close to what I expected to spend (2) I’m in a hurry. So, I said, “Okay.” His eyebrows raised, a disbelieving smile spread across his face and he asked in a slightly high-pitched tone, “Really?” I immediately had a third thought: “There’s more to be had here!” I had to honour my agreed price, but my sense of fairness to myself would not let me leave until I gained some more – no matter how much of a rush I was in. Before I left he had also given me special ‘monster’ cable with gold-plated terminals, a screen cleaning kit and one year’s subscription to a movie streaming service. The message is that even if what they offer is better than you expect, don’t show you’re too happy. If he hadn’t shown me his surprise, I would have walked away happy and he would have given away less.
Point 3: Focus Beyond the Deal
The ‘assumed close’ is an old and proven tactic. Rather than focus on the difficult decision – getting the ‘yes’ that will confirm the deal – you focus on the step after the decision, assuming you will get the yes. You could use a line like “Assuming we can sort this out today, when do you think we could start putting it in place?’ This moves the discussion to the practical issues which they may be more willing to discuss. You can go one step further and look at the implementation of the deal. Danny Ertel and in their recent book The Point of the Deal focus on what happens after the deal is agreed. Their research has shown that 70% of business deals that are successfully negotiated fail in their implementation. That means that almost three-quarters of business deals start out with a negotiated agreement that brings no value to either side! You could say, “Just supposing we can reach agreement, what do you think will be the biggest problems with implementation?” This works because many people are more comfortable in the role of problem solvers rather than decision-makers. They will readily become involved in analysis of the implementation. And, once these problems are sorted in their minds, saying ‘yes’ becomes easier. It also paints you in a positive light – as someone interested in making sure they get full value for their investment – not just signing the deal.
A negotiated deal is no guarantee of success. Locking in an agreement that both sides will be happy with long-term takes real skill and considerable effort. Remember these three points to make sure you get the best out of your negotiations.