The Five Rules of Negotiation
by Vistage speaker Douglas Gilliss
Business people with a pending deal, sales call or settlement often find themselves in need of tangible negotiation skills. Becoming an expert negotiator takes years of study and practice, but learning some simple techniques will serve you well. Here are five effective practices that are easy to apply.
Don’t negotiate against yourself
When you offer something attractive such as a price reduction, free shipping, better financing or other deal sweeteners, you are negotiating against yourself. People offer these items without knowing if they are valuable to the other party. Usually you receive nothing in return for your good-faith concession.
Experienced negotiators know how to force the other party into negotiating against themselves. They use a pause of silence after the other party states a term of the deal. This tactic puts pressure on the other party, who tends to fill the silence with an attractive concession.
To avoid negotiating against yourself, learn to recognize other people’s attempts to pressure you into offering concessions. If someone pauses or remarks about your terms, stop and think. Don’t offer anything immediately. Remember that you will most likely receive nothing in return for your concession. Instead of offering anything, listen actively and intently. Remember the old Chinese saying, “He who talks first, loses.”
To force others into negotiating against themselves, use the pause technique at a critical moment when the other side expects a response. If the other side is quiet during your pause, then maintain your silence. Acknowledge an inquiry regarding the operation of the telephone line. (“Yes, I am here. . . I hear you.”) Soon thereafter you will most likely hear a concession: “I can give you. . . ” Graciously accept it.
Try the silence technique in baby steps. Use it where the negotiation is not critical to your business, such as in rental car, hotel, restaurant or store negotiations. Practice sufficiently so that it becomes second nature and effective. Then try the technique in a more critical negotiation situation.
I like using silence because it doesn’t produce contentious exchanges typical of many negotiations.
Offer a choice
One of the simplest techniques to controling a negotiation is to offer the other party a choice. Many people do not know precisely what they want. At the same time, they do not want to appear unknowledgeable or look as though they are giving in too easily. Offering a choice such as alternative financing, packaging, specifications, delivery options or order quantities represents several benefits to your side of the negotiation. First, it deflects attention away from critical aspects of the deal; second, it helps the other party avoid looking unknowledgeable; and finally, choice makes the other party feel more in control, as they are the ones who get to decide.
When offering a choice, limit it to two or three items. The decision process becomes overly complicated and difficult if you offer too many choices. Offering a choice also gives the party the chance to clarify what their needs are and what is important to them. It’s a no-lose technique: Either the other side selects one of your choices or they tell in more detail exactly what they want.
One caution: Do not replace all the tools in your negotiation toolbox with just this one. If you overuse it, you may become known as the person who asks frustrating questions and doesn’t have firm resolve, similar to the people who ask “Where do you want to eat—pizza or Chinese?” Limit your use of this effective technique, or risk losing credibility through overuse.
Never prove the other person wrong
As tempting as it may be - particularly when you have irrefutable evidence, data, specifications or expert opinion - do not tell another person that they are wrong. You may be right and they may be wrong. Nonetheless, try not to use facts alone to get agreement from the other side. No matter how convincing the data, we are dealing with people. People do not want to look bad, wrong or weak in any way. You may win the “data-battle” but it is likely that you will lose the war—the deal itself.
If you do nothing but avoid this tempting ploy, you will maintain a higher level of credibility and keep communications open with the other side. But, what do you do when they are completely wrong and you can prove it and need to modify the terms or deal?
It’s best to allow the other person to reach the conclusion you want them to, without mentioning facts and data. Ask a series of questions that will illuminate the other person’s assumptions about the facts they are using. Next, follow up with more questions that confirm the person’s goals and question whether the strategy they are using will produce the desired results.
Don’t suggest your product or service will meet their needs. Instead, ask relevant questions that identify the other side’s desired outcomes to encourage them to conclude that they need you and/or your company to reach those outcomes.
The never, never, never rule
Simply put, the never, never, never rule states that you should not give a concession away without receiving one in return. Giving unilateral concessions encourages the other party to think that the original terms were more favorable to you. Additionally, it prompts the other party to negotiate for more concessions.
Any concessions you give should be offered to you by the other party in equal terms of dollars or value. If your long-term customer needs a favor or special treatment, that customer’s years of loyalty and past record of business can certainly serve as a concession. If the deal is a favor, don’t be too mechanical in asking for concessions. Sometimes, I advise asking for a company jacket or company pen (something clearly token), just to reinforce standard negotiation practices. “OK, I can do that; throw in a lunch,” may be the just the right response.
Giving a concession without getting one in return establishes a precedent that can soon become a pattern. Later if you decide your concession are costing you too much, when you attempt to refuse future requests you’ll look like the “bad guy” in the negotiation.
Granting a unilateral concession makes future discussions of concessions and benefits difficult and more favored toward the other party.
The business you turn down, more than the business you accept, determines your bottom line profits
When the deal changes to a less-favorable situation, you should reject any terms that fall outside your limits. Of course, that decision implies you have pre-determined limits. Limits don’t have to be set in stone. They can change with new information as the negotiation progresses, but you need to have limits.
Defined limits include terms, prices, conditions and behavior. Despite satisfactory margins or an excellent opportunity, negotiating with someone whom you do not trust or who is exceedingly difficult to work with can be a regrettable experience. That doesn’t mean you should turn down deals with rude or challenging people. It just means you should define your limits with people. When someone crosses your line, then it’s time to look for profit elsewhere. Your gut reaction can be a valid indicator of when to walk away.
Think also about turning down deals that seems “too good to be true.” Any bonanza deal, which look too good to be true or looks like something that no one else has yet discovered should raise a red warning flag. The deals should be investigated with due diligence before making any agreements. They are often not what they appear to be.
Discussing and practicing these techniques will make them automatic and intuitive for your future negotiations. Keep your credibility by always being genuine in negotiations.
Vistage speaker Douglas Gilliss, MBA, JD, is founder of Negotiation Services Internationala training and consulting firm specializing in helping executives prepares for selling their company, negotiating major supplier and customer contracts and for increasing the effectiveness of their sales and marketing people.