Negotiation Strategies are crucial elements in the arsenal of any business.
Whether a business is retail or service, B2B or B2C, or large or small, negotiation will, in some manner, influence its operations, deal making, and ultimately, its profitability. Negotiation strategies are vital to business growth, and maximize a seller’s business sale proceeds.
Negotiation is not something a business owner chooses to do. Negotiation happens, whether or not he thinks it happens. When two or more people come together to make a decision on an issue which effects them differently…negotiation will occur. But having a designed approach to communication with others in the course of business will have a profoundly positive affect on the outcomes. This is why learned negotiation tactics are so important – they influence the results.
Negotiation could be called a science, perhaps even an art. But whatever one chooses to brand it, negotiation is a talent which must be learned. There are specific steps to take and specific issues to be aware of and we will cover some of those here.
Positive Relationships
First off, let me say that the attitude and posture of a negotiator has a massive, overarching affect on his or her negotiations. There may not be a single characteristic of greater importance. How one approaches any deal, no matter what the subject, will have drastic influences on the way it proceeds.
In order to achieve the highest and best outcome, a negotiator must always, and I repeat – ALWAYS, view the deal from a positive perspective. A positive approach to negotiation does several things:
- It helps the opposing party to not feel like they are “opposing”
- It keeps the discussion on benefits, not pitfalls, of the deal
- It ensures the other side they are important
- It leads by example, to assist the other party to also engage positively
Your attitude, positive or negative, flavors the other side’s view of you. If you are hoping for a beneficial outcome, then positive words, positive body language, and positive suggestions will help bring that about. If you want a negative outcome…then don’t negotiate at all. Just go to war.
There are multiple facets to this positive approach.
- Your mental condition
- Your face and hands
- Your words
- Your speed of approach
- Your assumptions
There is no denying it: a positive approach to negotiation is the most important tool in the bag of negotiation strategies, and will have a substantial affect on every part of it.
Timing
How a negotiator views the timing of an encounter will influence the result. Patience is a virtue – surely its a prime trait of a successful negotiator. The old saying of “time is money” really rings true in negotiation. The timing of varying phases, which can include when an offer is made, what the deadline is, and how long the party takes to accept it, all play a role in how the negotiation plays out.
Deadlines
If a buyer must have an item, and have it now, she has to be willing to pay top dollar. Because time and money are so intimately related, the “having” of the thing and the “paying” for that thing are linked. In other words, the “now factor” is expensive. By the same token, if you can walk away from a purchase without a second thought, even perhaps risk losing it to another buyer, you have a position of strength in a negotiation.
Good negotiators always guard their deadlines. They try not to reveal them under any circumstances, because they know revealing a deadline gives the opposition an advantage. You work from a place of strength when you reveal only what you must to the other party.
Your deadline is top secret.
Extending a Negotiation
When a negotiation drags on and on, it very well could be part of the strategy of a buyer or seller. Sometimes a party to a negotiation will intentionally extend, asking for small concessions, deliberating on offers and counter offers of the other side, and taking lots of time to get to the next step. Whatever the stated reason may be, the motivation could be otherwise. Strategic negotiators will sometimes attempt to wear down the patience of the other side. This is because they know when people become impatient, they tend to drop their defenses and reveal information.
Learning the tactics used by other negotiators is helpful in arming you with proper responses. If you know what they are doing, you can respond accordingly. It may involve pointing them back to the contract and its time contingencies. It may involve stating a condition: “If you do this, I’ll do that”.
To be effective as a negotiator, you have to deal properly with extensions, whether they come from you or the other party.
Offers and Counter Offers
Offers and counteroffers are the core of any negotiation. There are negotiation tactics which dramatically influence how and when offers are made.
The opening offer is the offer no one really wants to make. Once an offer is made, immediately the opposing party knows the buyer or seller’s perceived value, and negotiations begin from that point. However sometimes a seller or buyer has no other option, such as when a product is for sale – the sticker price is the opening offer. But for all the other situations, an opening offer is a disadvantage to the offeror. Here’s some reasons why:
- The opposing side is alerted to what you think the value might be
- The opposing side can react to your offer any way she likes, giving her a position of strength
- An opening offer can lock you into a position you can’t recover from
Opening offers are usually made without much thought. Two frequent ones which have damaging affects are:
- informal or “off the record” offers – Know this: THERE ARE NO INFORMAL OFFERS. If it is spoken, it is an offer. Once a party makes a casual, informal offer and state it doesn’t really count, they have committed themselves (albeit informally) and they will have to defend it from that point on. Informal offers may be informal, but it doesn’t make them unofficial.
- range offers – when giving a range of possibilities of a yet future offer, the other party will hear only the lowest number. Its a fact. If given a range of 7-10, they hear “7”. If given a range of 20-30, they hear “20”. A party who makes this mistake will be fighting from the lowest number in the range, and have a tough time bringing it back up.
So if opening offers are bad, should they be avoided at all costs? Well, no. There are times an offer has to be made before things will get moving in the negotiation. In such cases, there are strategies to apply.
Here are some opening offers that are commonly made:
The Lowball Offer
This is an attempt by a party to shock the other party into a reaction. If effect, it says “I don’t think much of your product/service, and here’s to prove it.” The mentality of it is, if the offer is way low, perhaps the counter to the offer will be well under the asking price.
The problem with this kind of offer is simply this: it generally creates a hostile reaction in the other party, which is exactly what you don’t want. People who are shocked with an offer will normally dig in and stand their ground, and negotiations from that point will be strained.
Lowball offers generate more negative than positive results.
The Target Offer
A target offer is negotiating against your target. If you have a good idea about what you would “like” to pay, and you want to arrive near that number, you make a target offer. This means you offer less than asking price, and low enough so that if the seller agrees, he has to concede more than you. For example, if the product asking is $100,000 and your target is $90,000 you offer $85,000. He has to concede $10,000 to agree and you have to concede $5000.
The problem with this type of offer is can make the seller feel taken because he is giving up more than you, or at least more often. And this can lead to deadlock.
The Anchoring Offer
A better approach is called the anchoring offer. With this offer you actually “hint” to the seller that you are offering in the middle of the range. So if he wants $100,000 and your goal is $90,000, you offer $80,000. This way, he guesses you are shooting for a sale price of $90,000. And you both make the same number of concessions and the same amount ($10,000) to arrive at an agreement.
This is a good offer to make, but there is even a better one.
The Tipped Anchor
In this version, the offeror makes an offer of not $80,ooo, but $78,000. Why? Because the seller has already guessed that you are shooting for an agreement at $80,000, which is equal concessions for you both, but if you actually arrive at that price, YOU have made more concessions than he, and in effect, he has “won”…though not really, You don’t pay more, you just appear to give up more. Oftentimes, approaches like this will give an opposing party just enough goodwill to get the deal done, and everyone wins.
And everyone winning is the chief end of a successful negotiation.
Rhett Kniep is trained and experienced in winning Negotiation Strategies. For a consultation with Rhett that will supercharge your business, contact us here.