This blog post gets straight to the point, no BS, no waffle. Negotiation strategies 101.
Before getting stuck into it, I must point out that my long-term goal, philosophy and stance on negotiation is to build for the relationship, to aim for the win-win and the attribute negotiation to the creation of maximum value for both parties delivered by the existence of a quality trusted and valued quality relationship. This is really key. But in the instances, where quick fire negotiation is required here are some strategies to have up your sleeve.
1. Cash Speaks Volumes
The sight of cash makes people do irrational silly things. It changes the mood and can if used in the right context and with the right momentum, change the outcome of a negotiation.
To give you an example, I am using this post from a guy named Louis on Quora.
“My step dad taught me this trick when I was about 12 and now at nearly 40, I’ve used it with incredible success over the years.
The lesson? People make stupid choices when they see cash. Especially 100s. And they get even dumber when the cash is close to them or in their hands.
My favorite story using this technique was in 2008 I was moving into a loft and I had no furniture. I sifted through Craigslist and found a brand new Ikea sectional that was worth about $1200 brand new. I called and set up a showing with the guy.
While I was on the phone, I sensed a bit of desperation, so on my trip to see the couch, I went to the bank and got $300 in hundreds and handed my brother the $60 I already had in my wallet.
Sure enough, when we arrived, he was trying to sell us everything he had in his house. I looked over the couch and pretended not to be impressed, even though it was brand new and pretty much exactly what I wanted.
At that point I told the seller I wasn’t that interested, but that I’d take it right now if he’d accept $300 dollars because that’s all the cash I had on me.
So I pulled out the $300 and dropped it on the end table and said I wasn’t kidding, then I asked my brother if he had any cash. And he “conveniently” had the $60 I gave him earlier. So I told the seller I could bump it to $360 if he’d throw in the end tables too.
And these end tables were steel-legged and rock-top so they weren’t cheap.
I walked away from the money and let it sit there as I could tell he was thinking he wanted it.
Sure enough, he blurts out “fine!” and swipes the money up off the table while my brother and I start loading up the couch and tables”.
Louis — Quora
The element of this deal that make is particularly interesting are:
1) A sense of urgency on the seller’s part, there is no doubt that the seller needed to make a quick sale which played into the strategy.
2) Cold, hard cash, make visibly available and the strategic additional top up as a show of good faith to make the negotiation look unplanned.
3) The delivery of the negotiation and timing. Louis held off, despite wanting the table, the deflection to other items for sale, other opportunities made the negotiation all the more robust. By changing focus, ignoring the scoffing and moving the negotiation forward Louis was able to craft an even more lucrative deal.
4) Believing it will work, the confidence in the strategy will begin to work as a self-fulfilling prophecy the more you see it end in a successful outcome.
5) Putting your cash on the table, this very act is as close to closing the deal as you get, it creates the sense that the deal might disappear and gets the seller thinking about the possibility of closing the deal and what that would mean to them.
2. Go Extreme — I call this ‘The Trump Effect’
What I mean by this is right off the bat, present the most extreme option for what it is you want, that way when you ask for what you really want it slides through unnoticed because it looks like a concession on your part.
The key to this strategy is to make them believe that the first thing you suggest is your goal. You will need to be bold for this one, I’m talking Donald Trump bold for this to work. You will need to whether the storm and stand your ground. Then after some time, this could be hours, it could be days, it could even be weeks, you make the move. The move is your opportunity to show a concession, the other party will think that they have broken your resolve and you can articulate an appropriate request.
Anticipate a success rate of 65% for this particular strategy, the downside is you look like a bit of a tool, as well as the initial request being completely inauthentic to your actual desired outcome. This in itself could inhibit trust building as people don’t know how to receive you. On top of this, if overused people will read you like a book, it will be easy to spot and the other side will adjust their negotiation strategy accordingly e.g. wait it out until you propose the real deal and then drive you down even further because they know in a sense that you were bluffing all along. The art of a true master in this strategy is to weave so that the other side never sees what it is you truly want.
3. Don’t Negotiate
The no negotiation policy is an old one, as taught widely, its effective because routinely in negotiations, variables such as inexperience, the situation, the timing all play a part. That’s why it’s suggested, playing hardball, not even entertaining a negotiation will get you somewhere. The lazy will concede and you will be victorious, the persistent will go elsewhere, taking their business with them.
I would estimate this strategy to be 50% successful depending on the variables at play in the negotiation, there are of course times when the variables are ideal for a non-negotiating type of strategy to work wonders, this is usually when you have an uber strong BATNA or some form of privileged information. The positive is that if you want to get in there and get the job done, it makes it a clean and clear case without going around in circles or waiting for different layers of management sign off.
The downside of holding firm is it means you convert only the low hanging fruit, and by low hanging fruit I mean those that don’t have the liberty of choice (either who are time poor or situation poor e.g. must get from A to B by C). In addition to this, the strategy is unsupportive to long term relationship building from the very fact that we are humans and it is human nature to enjoy receiving something and reciprocating. When we feel like we aren’t getting anything in return, it leads us to look elsewhere. This strategy is also damaging to likability, as humans like other people, we want to like other people and being likeable is one of the most important skills you can develop in business and personally. Secondly, the savvy negotiators will go elsewhere and therefore there is a possibility that you miss out on the smart and creative deal because you only ever get exposed to poor negotiations.
4. Cold Feet
The way this one works is you negotiate almost to the point of signing and then pull out last minute and add in caveats. This works very well when negotiating for things like gym memberships. I do not condone this, but if you want to get a superior deal when signing up to the likes of a gym or any other membership that involves a human interaction, go down there, meet with them, do the tour, fill out your details, and then say you’ll think about it overnight and tell them in the morning whether or not to submit. Then the next day, say you have changed your mind and that you won’t be proceeding, 9 times out of 10, they’ll come back with more, rather than see you walk away to a competitor. This could be a months’ free entry or a discounted rate. In any event what you have done here is switched the power in the relationship.
This strategy plays on emotion, in fact it exploits emotion. Again, this is not my style, but I want to explain how these methods work so you are aware of how deals are created that once seem impossible.
Right when you pull out of the deal you have a choice, you can let them come back to with options (the hook to get you back in) or you can state the reasons why (caveats) as to why you won’t be moving forward. The leverage you have in this situation is that you are playing on the other sides desire to get the deal done, it was so close that they can almost taste it, maybe they even told their boss and chalked it up on the sales board. The time they have invested and the fact that you have come this far will almost guarantee that they come back with a significantly more flexible option or package for you.
The cases when this strategy won’t work are monopoly’s, when a company or service has an monopoly in a market, they have the upper hand and you pulling out of the deal is not going to hurt them. In this case, they are able to use the ‘Don’t Negotiate’ strategy on you.
5. Strong BATNA
If you are into your negotiation theory you’ll have heard of the phrase BATNA, it stands for Best Alternative to a Negotiated Agreement and was coined by Roger Fisher and William Ury, in 1981.
What I suggest as a strategy to dealing with a quick-fire negotiation is going out an creating yourself a strong BATNA. If you don’t have one go out and get one, put yourself in the best possible position to negotiate. Don’t limit your options to one, or two, if possible you should have a BATNA before negotiating.
For example, your goal is to get a pay increase. Go get yourself an exciting job offer. Either way you enjoy the adventure and taking the new job could be the most rewarding and growth inducing experience you have ever had.
Having a strong BATNA allows you to negotiate with more freedom, BATNA doesn’t always have to be a tangible offer, it could be landing a huge client, you then become invaluable to the company and can therefore put forward a case for review. The company may not want to lose you because they don’t want to the client to walk out the door.
BATNA gives you the space to act unimpressed, to act bold, and just like the fear of missing out and dating for that matter, you want something more when it appears you can’t have it.
Put it all Together and Create a Sense of Urgency
A top negotiator knows when to create a sense of urgency. It takes a combination of courage and skill to leverage this tactic. By doing this you are ultimately aiming to close the negotiation, however this tactic doesn’t necessarily need to feature only in the closing phase. The skill to this tactic is knowing what the negotiation needs, whether it needs pushing along and therefore a healthy sense of competition early on creates the momentum or if a more tactile approach is needed only revealing the need for action at the final stages.
Realtors do this all the time, for example by co-ordinating property showings so that they coincide at the same time as another leaving the building, it creates an environment of increased demand and plants the seeds of desire.
In Australia, all property viewings are conducted within a 15-minute window, strategically this causes potential tenants to act on emotion, drive up bids and act on fear of missing out impulses.
You can leverage these tactics for your own business or needs, by displaying an active market to the other side, whether staged, or real, you tap into human emotions.
For example, you could have you work colleague call you to say you are low on stock, when you are with a potential client, thereby creating the need to make a decision if they would like to get in on the action.
Another way would be by pulling the deal or alluding to the fact that the deal will be off the table due to other interested parties who have made an offer.
For example, in a job interview, you may find that if you reject a second-round interview on the grounds of low remuneration (discussed when you conducted your first sense checking) that the company review the offer and the role in order to get you back into the process. Or alternatively, if you have made it through to the final round and it’s been a few days (3 or more) and you haven’t heard from them when they said they would call, it’s absolutely ok to give them a call, stating you have other offers that need you to make a decision so you need to know where you stand.
It might sound odd to reject something that you want, but again, it’s like dating, people want what they can’t have. By creating the option that you may be going elsewhere, it will cause the company to make a decision and this is a great position to be in because if they do indeed want you then they will chase you.
Whereas when you are waiting and waiting and waiting for them to come back to you, they are all the time interviewing other candidates making it less likely that they will offer you the position and damaging your chances and negotiating power. By taking yourself off the table, the company is almost compelled to want you more due to the fact that they can’t have you.
Other ways of creating a sense of urgency:
- One-time deals — Take it or leave it
- Low on stock
- Other offers or alternatives
- Competition offers, price, quotes, time
- Retracting the offer
To create a sense of urgency, you need to think outside the box and get creative.
For example, when selling your car, you can have a friend run into you and say they want heard so and so wants to buy your car at the exact time you when you are showing it to another potential buyer.
After this event has occurred, you quickly summarise the benefits of the car and push hard to close deal.
It’s a one, two, approach, event + benefits + request (e.g. do you want to take the car?) = deal closed.
It should hit the other side as if by magic, at speed, first they are witnessing the car potentially vanishing in front of their eyes and next you are presenting them with an ultimatum and a possible route to secure it.
It should make the other side understand what it would feel like not to have the car and then just as quickly bam, you resurrect the opportunity, with one caveat, they have to ACT NOW!
When you create a sense of urgency you need to hold firm. When the other side tries to negotiate with you, hold steady, do not entertain their offer unless it’s a remarkably favourable deal that makes sound business sense.
If however, it’s just their first offer do not entertain it. If you do, it will make a mockery of your negotiation process and they will likely understand that they have got all the power in the negotiation and walk push way more than just this.
Instead, you should hold firm, e.g. say that you’re not sure you even want to sell it any more. Tell them point blank you can’t sell it for that price (Cold Feet). The negotiation will go round and round and ultimately if you hold firm, stating the price for sale and instead get them to state the price they are willing to pay, they’ll come up and either meet your needs or get pretty damn close (Don’t Negotiate). Once you state a lower price you’ll be on a land slide, only state the lower price when its one you are willing to accept, and you are closing the deal.
This might sound harsh, but the reality is unless you are willing to hold firm and stand your ground, you’ll have trouble getting the value you deserve. By creating an active market, you give yourself more options and more comparison points. It’s a clever way of ensuring a BATNA and some healthy competition at the same time.
You will see all of these strategies and more used against you when you negotiate. Don’t be put off or afraid of them, just go with the flow and recognise the different levers that are being pulled to manipulate the situation. Remember that these levers can be emotional, silent, hard hitting and confronting. When you get blindsided in a negotiation, my advice is to just take a second to figure out what is actually going behind the scenes. What don’t you know? What options do you have? What have you not discussed?