Sinful negotiation behaviour – ways to avoid losing out
When negotiating a multi-million pound deal, or perhaps your pay or job role – you need to remain calm under pressure.
By understanding how your brain works and the impact stress has on your negotiation performance, you can avoid throwing away money or souring business relationships.
Let me tell you about three common mistakes made and how to stop doing them.
SIN 1: Mentioning figures too early
Don’t put your numbers on the table too soon.
Our brains have an inability to judge something as good or bad in absolute terms. The brain can only assess value relatively. To make an assessment, we need to make a comparison. This is why discounts are so compelling. If you were told a product is £50 – would you buy it? If you were told a product was originally £75, but now on offer for £50 – are you more likely to buy it? …it’s the same price but comparatively (and neurologically) the value for money has changed significantly. In the same way, any figures you mention initially, when negotiating, will be used as the point of reference during the negotiation.
Picture this … You tell a customer they can have a 15% discount if they purchase 30 units (of the product or service you are selling).
You’ve now created a reference point (or expectation) of 15%. From here on, anything they manage to negotiate in excess of 15% they’ll see as a win and anything less they’ll see as a loss.
Now, let’s imagine your customer comes back and says “thanks for the 15%, we’ll have 20 units”. This leaves you with a problem. You may want to explain that for 20 units, you can only give a 10% discount.
Had you not created the 15% reference point, this would not have been an issue. Now that your customer has an expectation of 15%, the risk is that they’ll fight to improve your 10% offer. An experienced negotiator would certainly exploit the fact that clearly 15% is available, and will push for it, regardless of the number of units. This is no recipe for creating good will. Instead, during the early stages of negotiation, say that bulk purchasing discounts are available without getting too specific about numbers.
TIP: Wait until you have a firm commitment from the other side before you commit to specifics.
SIN 2: Focussing on loss
Consider if you would accept the following gamble on the toss of a coin:
Heads you lose £100, tails you win £150? Most likely you wouldn’t accept, even though the odds are in your favour.
How about: Heads you lose £100, Tails you win £200? Probably, you still wouldn’t accept the gamble. For most people, it would take a win of about £300 to risk losing £100.
As Nobel prize-winner, Daniel Kahneman points out, this is because LOSSES loom larger than GAINS.
In our hunter-gatherer days, human survival depended on recognising threats (typically large, carnivorous predators). A part of our brain, called the amygdala, is our primary threat-detection centre – alerting us to danger via a super highway. We are highly sensitive to threats, whereas opportunities or gains don’t trigger the same level of intensity or immediacy in our brain.
Let’s revisit the negotiating situation where you’ve created a reference point (or expectation) of a 15% discount. Your offer of 10%, is not just a 5% loss for the other side, but as losses loom three times larger than gains, they actually experience 15 ‘units’ of pain! No wonder they fight so ferociously for that 15%!
TIP: Highlight the gains – what value can you add? How can you help your clients get what they want? This will create an entirely different context for negotiation.
We are highly sensitive to threats, whereas gains don’t trigger the same level of intensity in our brain
SIN 3 – Using round numbers
Using round numbers like 15% gives the impression that your figures have been chosen rather arbitrarily – rather than properly calculated.
If you offer a 15% discount, it also invites the other side to negotiate you up to 20% – rounding up to the next multiple of five.
At the right time in the negotiation process, offering a 13% discount, on the other hand, is less likely to be challenged as it suggests more precise calculation. And if those you are negotiating with do haggle, they’ll most likely ask for 15%.
TIP: Do your preparation – know your discount structures and avoid round numbers.
Black Belt Negotiation seminars and webinars
For more practical advice on negotiation, book one of my Black Belt Negotiation seminars for your team. Evidence shows that, following my training, companies draw in an extra £27,000 per month from improved negotiation techniques. They are available online and include advice on virtual negotiation vial video call and telephone.
To learn more, email: email@example.com