3 negotiation tricks that professionals use

Minion Negotiation

Negotiation is one of those things people actively avoid. They fear confrontation so they plow through them as quickly as possible, accepting the worst possible deals to just get it over with.

But it doesn’t have to be that way.

Simply by understanding the tactics actual professional negotiators use, you can enter a negotiation with a little more confidence and get a better deal.

Know your best alternative

The “best alternative to a negotiated agreement”, or BATNA is a term coined by Roger Fisher and William Ury in their 1981 bestseller, “Getting to Yes: Negotiating Without Giving In.” Quite simply, it’s the best option that you can accept if negotiation breaks down. You can’t enter a negotiation without knowing what you want out of it, otherwise it’ll go on forever.

The BATNA helps you to quickly decide when to walk away:
1) If you feel you’re not going to get a deal better than your BATNA, walk away.
2) If you can get something better than your BATNA, take it.

Here’s an example
You’re selling the best durians in Malaysia and you can wholesale your durians to NTUC for $20. Or you can market durians as effective body armor to the military for $50. Your BATNA is $20. If you can’t get more than $20, you can walk away from discussions and take the deal with NTUC.

It’s not easy to tell what your BATNA Is in every situation.

Say you had an interview with Google today, what will you do if you don’t recieve a job offer in the next month. Do you take a different offer? Consider moving overseas? You’ll probably want to keep interviewing with other similar companies. With another job offer on the table, you’re in a better position to judge the offer from Google. Lastly, you should choose your best alternative option if you cannot reach an agreement with Google. What are the options you really want to pursue.

In summary, this is a simple three step process to determine your BATNA.
1) Develop a list of actions to take if no agreement is reached
2) Convert the more promising ideas into options
3) Select the option that seems best

Throw out the first number

Everyone says never to reveal your salary first. And that’s true… until you know they want you.

In “Negotiation”, Roderick I. Swaab of INSEAD in France wrotes: “In our studies, we found that the final outcome of a negotiation is affected by whether the buyer or the seller makes the first offer. Specifically, when a seller makes the first offer, the final settlement price tends to be higher than when the buyer makes the first offer.”

Quite simply, you should throw out the first price in a negotiation. This creates a well-documented psychological effect known as “anchoring”. Human brains rely too much on the first piece of information (the “anchor”) it’s presented.

This is an old sales trick I learnt from the best real estate agents. They always show an overpriced house first. Let’s say this first house you see is asking for $2 mil, I will then show you a series of houses in much better condition asking between 1.6 mil and 1.8 mil. These houses will seem far more reasonable after that first house you saw even if the owners are asking for a price higher than the market rate of similar houses.

Once an anchor is set, subsequent numbers are adjusted around the anchor. That’s why there’s an advantage to throwing out a higher number first so you set the tone of the discussion.

If you suspect the other party is trying to apply the “anchoring” effect by low-balling you, your best counter is to call out what they’re doing.  Tell them that they’re giving you an insulting number that isn’t even worth considering.

Increase Negotiation Fatigue

Negotiation Fatigue Syndrome is a real thing. It happens when one person has invested so much time and effort negotiating that they can’t even think about walking away. This is the point when they become open to accepting a worst deal than they wanted just to get the whole thing over with.

There are lots of tactics employed by sales people to increase negotiation fatigue.

1) The sudden subject change

Have you ever negotiated with a sales person on the purchase price of say, a house and the conversation suddenly jumps around to the size of the monthly payments or the different financing options you can pursue?

By the time you come back to the purchase price, you may find you’re far more open to compromise. This tactic involves a bunch of different human biases. By breaking up a large number into smaller, maneagble numbers, the purchase price becomes more reasonable. And if you’ve already agreed on smaller decisions like the size of the downpayment, your commitment level has increased.

You’ll notice that the purchase price has not changed at any point in this negotiation. But the deeper into any negotiation you get, the more likely you are to want to finish it.

Don’t allow the other person to shift the conversation away from what you’re after. Using the example above, bring the conversation back to the purchase price until you get a price you’re comfortable with.

2) The higher authority

This is a tactic where the sales-person suddenly gets up and says that they don’t have the authority to make a deal at the price level you want. They have to check with someone with more authority. There’s two things that’s going on here. First, the negotiator remains the good guy, and we’re more likely to do business with someone we think is all right. Second, it slows the negotiation down to increase negotiation fatigure.

If someone tries this, stop negotiating with the person and ask to deal with the person in charge.

Both the sudden subject change and higher authority are delaying tactics designed to increase negotiation fatigue. So you have to develop your negotiation endurance to counter it. In any important negotiation, ensure that you’ve scheduled enough time to deal with it, stay hydrated and remember that negotiation is a matter of practice.

Ideally, you’ll want to make the other guy the one that just wants to get the deal done 😀

PS: If you like to know more about negotiation…

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Comments

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