Our starting point is to define negotiation and talk about why people need to negotiate in their life.
We can define negotiation as the voluntary and systematic exploration of both parties’ interests, with the objective of agreeing on a mutually acceptable compromise that resolves the conflict.
By resolution we mean that by the end of the negotiation we have achieved a satisfactory outcome on our part.
But we also mean that the other party also feels that they have obtained a satisfactory outcome. Both parties can see the resolution as a “win-win.”
When this fails to happen, it is often because the negotiators forget that part of the definition of negotiation is compromise.
Negotiation is not Haggling!
Many people who think about negotiation immediately focus on price. Good negotiators, while they have a handle on price, they are more likely to be thinking of value. In commercial negotiation, value is an expression of how much better the customer’s business goals can be met by the supplier’s product or service rather than by the competition’s. This definition is very important for value, I will repeat it later in case we need to remember. Experienced negotiators know that exploring relative values and the creation of value will give them a wider play area on the negotiation activity and more negotiable elements as part of the overall deal.
If you stick to price alone, you are simply haggling, not negotiating.
Ten Golden Rules for Successful Negotiation
Don't negotiate unless you need to.
Always evaluate your needs honestly and buy or sell hard. If at all possible, never negotiate because it requires compromise, which comes at a price. If there is no conflict, then there is no need to negotiate.
Never negotiate with yourself.
People frequently try to second-guess the other party and in doing so minimize their own expectations. For example, they may ideally want to be paid 10,000 euros but worry that the other party may not have that much, so they ask for 10,000 euros or the nearest offer, hoping this sounds less aggressive. This is the start of negotiating with yourself. If you reduce your expectations from your ideal before you even see the “whites of their eyes,” you will always end up with a lesser, over- compromised deal.
Never accept the first offer.
There is almost always a different and better offer behind the first, so don’t accept the first offer. The better offer doesn’t have to be a lower price because it may be that other elements of the deal can be improved. Don’t forget that the other party will be instinctively or professionally trying not to break rule 2, so they won’t want to negotiate with themselves.
Never make the first offer if you can help it.
If you are led to make the first offer, you are in danger of leaking your bottom line straight away. Always ask the other party what their ideal or target price is.
Listen more and talk less.
We have two ears, two eyes, and one mouth, so use them in those proportions! This is the 80/20 rule. Watch and listen 80 percent of the time and use your talking muscles for only the last 20 percent. Good negotiators lead by listening, not by talking. Let the other party ramble on even if it sounds like rubbish. You must bide your time and bite your tongue. Continued silence will provide you with the opportunity to pick off their position by their leaked signals of movement.
There are no gifts.
One of the basic principles of negotiation is mutual compromise, and our very human nature seems to place a high value on reciprocity. When we are given something, we often feel obliged to give something in return, or we feel embarrassed if we are caught unprepared and therefore have nothing in hand to exchange. This sense of obligation is ingrained and practically universal across cultures. We all seem to understand the saying “You scratch my back and I’ll scratch yours.” So, don’t be tempted to give away a free concession. Always ask for something in return. Free gifts are not always money but can be the disclosure of useful information or even giving up your time too easily, without anything in return. Nobody values a free gift for long. It immediately decreases in value once it has been offered and a free gift today becomes tomorrow’s starting point.
Always isolate cost, price and value.
At the end of a negotiation, most people—ranging from rookie to professional—will wonder if they could have achieved a better deal. A good professional should simply shrug off any lingering doubt or regret and move on to the next challenge. But to avoid the rookie regret, don’t forget the essential differences between cost, price, and value.
Cost is how much a concession will cost you
Price is how much you want to charge for it
Value is what it is worth to the other party
Watch out for the salami effect.
Don’t itemize every element of the deal and price them individually. Start with a complete value-oriented price, such as $1,000 in total for materials, labor, cleanup, and a five-year guarantee. Don’t offer the details of $300 on materials, $500 for labor, $100 to clean up, and $100 for a five-year guarantee. The other party may know where to buy cheaper materials and then query your labor rates, saying they’ll do the cleanup themselves and forego the guarantee— thank you very much! So, a $1,000 deal easily becomes a smaller job with $200 in materials and $400 in labor. That’s the salami effect.
Never make a quick deal.
If you are offered a quick deal, just say maybe. A quick deal usually ends up in regret. You may be dealing with an unscrupulous negotiator who knows that we tend to associate a progressively higher value with things that are more difficult for us to obtain or when we believe there is only a limited amount of time available for gaining access to the desired resource. Research has shown that scarcity in quantity or time seems to make us want something even more, and this may pressure you into a hasty decision. Therefore, slow down and check your understanding of their offer by repeating it back to them. Similarly, you may have just made a proposal to the other party and were then surprised with a sudden acceptance or counteroffer. It may be that the other party is trying to increase the tempo of the deal because they think they’ve spotted an advantage for them or a mistake by you that you’ve missed. They may not try to hold you to your mistake but are likely to want another concession from you to backtrack from your error. Give yourself time to check the proposed agreement thoroughly. Never be afraid to take a short break and review your position before concluding proceedings.
Never disclose your bottom line.
Don’t disclose or even discuss what your bottom line is or was. Don’t reveal it before you start the negotiation, not during the discussions, and never after a successful “win-win” conclusion. Beware of falling under the spell of an adrenaline rush at the end of the negotiation and allowing yourself to disclose what your bottom line may have been. Disclosure will always give the other party an undue advantage over you. People learn their negotiation skills from their interaction with you. They also learn your limitations and abilities by post-negotiation analysis. So, don’t let them know how you work under any circumstances. Keep them guessing about your no-deal positions, and they will have to move more toward you than you will toward them.
Thank you for reading my writing about Negotiation. See you at the next topics.
Ayberk Yavuz. February 2023.