The art of negotiation is both a skill and a game. The person sitting across the table from you is your opponent. Like most games, the more you practice and prepare, the better chance you’ll have of being a better negotiator. Let’s prepare.
Before you start negotiating, first realize that there are two types of negotiations: Distributive and Integrative.
A distributive negotiation involves a set prize. Think of it as $100,000 in the middle of the table that must be divided between you and them – anything that goes to them comes out of your share. These types of negotiations (think of buying a car) can be more stressful, as both parties are trying to “win” by getting a bigger piece of the pie – and neither side necessarily cares if a relationship survives the negotiation.
Conversely, with an integrative negotiation some interests are aligned. If the parties work together they can increase the size of the prize. Think of a company partnering with another – combining their resources effectively could result in greater profits for both. Each party should be sensitive that the surviving relationship may be more valuable than the results of a negotiation. For example, why beat up your employer for that extra $1000 if they’re just going to be resentful and fire you a week later?
Don’t approach an integrative negotiation with the goals of a distributive. Identify your long-term goals for the negotiation. Also keep in mind that both parties can win under each type. Also, it can never hurt to trick your opponent into liking you.
Now onto the actual negotiation. An efficient negotiation is comprised of four stages: Preparation, Information Exchange, Bargaining and Closing. Follow these 12 steps and you’ll be will on the way to kicking crap out of someone in a negotiation:
PREPARATION STAGE – Size up your competition.
- Assess the situation. Ask yourself how much is at stake? How important is a future relationship to you and your opponent? If a future relationship is important to both parties, each should compromise for the sake of the relationship. If the parties are not going to continue doing business together, the more aggressively the negotiation may be pursued. Know what your walking into and if you should error on the side of compromise or not.
- Identify which type of negotiator your opponent is. Chances are your opponent will fit into one of the following five categories: Avoider, Compromiser, Accommodator, Competitor or Problem Solver. Identifying the strategy your competitor is going to take will help you foresee any obstacles the negotiation will face. For example, you may be able to get a better deal when negotiating with an avoider if you can appeal to their desire for a lower stress and a more casual negotiation.
- Finalize the goal or purpose of your negotiation. Prior to going into the negotiation you need to get organized. Write down your (and the other side’s) three most important issues. Identify areas of conflict which will need to be resolved. Set realistic goals. You shouldn’t go into the negotiation to get “the lowest price”, identify a number that you’ll be happy with. Setting goals will allow you to be able to walk out of the negotiation knowing if you succeeded or not.
INFORMATION EXCHANGE STAGE – Fill in the blanks.
- Question Effectively. Begin your negotiation by opening an effective line of communication with your opponent. Avoid yes and no questions. The goal is to flush out any information you don’t already have – expose a need or weakness which can be played on later. Don’t get down to the terms of the deal without getting as much information as possible. For example, does the car dealer have excess supply this month. Take your time with this process.
- Conceal your weaknesses. Don’t fall into a trap of letting your opponent know if you’re desperate. Downplay any urgency or needs they may think you have.
BARGAINING STAGE – Not as important if you’ve performed an efficient exchange of information.
- Anchoring. Look for opportunities to set favorable numbers or reference points to work off of. Conversely, avoid being anchored to an opening offer or arbitrary point. The less distance you have to go up or down, the more successful your negotiation will be.
- Make your gains by exploiting differences in interests. You’ve identified what’s important to both parties, now make your gains by exploiting differences in interest. Maybe price is important to you (not to them), but they prefer a longer commitment (not important to you). This goes back to the preparation stage and identifying what each party is looking for. Furthering gains is one of the 8 Things Executives and Entrepreneurs Do Differently.
- Use your leverage. Power and leverage are more important in negotiating than any other trait. Threaten the use of business muscle, exploit a need or make the other side aware that you have other options. Is your opponent urgent to close and you’re not? Do you own a product that is in high demand but low supply? Remind your opponent of these facts and use this to your advantage!
- Play to basic human needs. Your opponent is looking for something, and it’s not always a favorable negotiation. Appeal to their pride, sense of security, ego or other basic human needs to shift the negotiation in your favor. For example, letting your opponent think they’re “winning” the negotiation by appealing to their ego can be a great strategy.
- Don’t have the most to lose if you don’t reach a deal. Sometimes it unavoidable, but try to avoid entering a negotiation based on an urgent need – you’re at your most vulnerable when your opponent knows you can’t walk away from the table.
- Keep things moving. Hit a barrier? Try to shift your strategy. Showing you’re vulnerable could continue negotiations. This is very risky, but appealing to the other side’s sense of compassion can be successful. For example, let them know you need the extra sales proceeds to pay off a loan or outstanding lien – they may empathize.
THE FINAL STATE – Close the deal!
- Commit & Implement! Perhaps the most important secret, get the party to commit! A handshake and verbal agreement is great, but without a written contract the negotiation is not finalized.
Now you’re well on your way to becoming an efficient and successful negotiator. Looking to learn more? Try this NY Times Bestseller: Getting to Yes: Negotiating Agreement Without Giving In.
What tricks do you have to a successful negotiation? Leave a comment with what works for you.
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