negotiation skills Tag

How to reduce the fear factor at the negotiating table

Stress and aggression trigger the brain’s threat system

So many negotiations are unsatisfactory because we dive into money and numbers before uncovering the needs or hot buttons of the other side. Negotiation then becomes a battle of wills to see who can squeeze the most from the other side. This makes negotiation a stressful, negative experience, triggering the brain’s threat system. This can undermine long-term trusting business relationships, creating a win-lose mentality rather than win-win.

What’s important to the other party?

Before negotiations begin in earnest, it is essential to find out what is important to the other side. It is also the time for you to demonstrate real listening and ask questions to show that you fully understand their needs. This will help maintain rapport and activate the brain’s reward circuitry, getting negotiations off to a healthy start. Think for a moment about the last time you chose a builder to work on your house. You may have told them that price was critical, but in actual fact, there would have been many other factors that influenced your choice, for example, their reputation, trustworthiness, guarantees, quality of workmanship, personal recommendations etc. Similarly when you choose a web designer or marketing expert, price is in the mix, but probably not at the top.

Before negotiations begin in earnest, it is essential to find out what is important to the other side.

This is backed up by research by Neil Rackham showing that business-to-business purchasing decisions are based firstly on the vendor relationship, then vendor stability, followed by responsiveness. Price is only fourth on the list. However when we are the seller, and the other side tells us that price is the key driver of the purchasing decision, it is all too easy for us to accept the statement at face value and offer concessions out of fear of losing the deal.

Find out their interest vs position

Asking questions and listening provides a much gentler and less hostile start to the negotiation. It helps to reduce the fear factor on both sides. It gives both parties a clear understanding of each other’s needs and helps to uncover the interests behind the position as demonstrated by the following story:

Two sisters were fighting over an orange. After a lot of arguing, they took half each. One sister ate her half and threw away the peel. The other grated her half of the peel to make marmalade and threw away the flesh.

How many opportunities for a win-win deal are you throwing away through insufficient or too narrow discussion? Next time you negotiate, make sure you spend a significant proportion of the time discussing the interests at play, rather than haggling over your position.

No more price concessions! Tradeables are your secret weapon!

So what are tradeables?

Let’s take an airline as an example. In years gone by you bought a ticket and that was that. Today, we have to consider how much hold luggage, hand baggage, meals, how flexible the ticket is, penalties for changes, speedy boarding, allocated seats, airmiles payment and redemption, loyalty points and the list goes on.  Airlines were forced to change their pricing strategy because of market pressures introduced by the low-cost flyers.  Yet many businesses I talk to today stick to inflexible pricing strategies and then moan that their customers think they are too expensive.

Relationships matter

In the case of a one-off purchase, for example buying a car, the relationship element is less important than when we are dealing with a customer, supplier or third party over time.   In this case the relationship is just as important as the negotiation outcome itself. What’s at stake is future business, reputation and of course the ease of working together after the negotiation. The key error that most of us make is not spending enough time identifying our tradeables. As a result the relationship can suffer.

What neuroscience says…

Imagine you’re selling website design services, your tradeables might be licence fee, training, maintenance, guarantees, hosting, periodic upgrades, support etc.

Being clear about exactly what you’re selling puts you in a much stronger position if the customer demands a discount. Without tradeables you will either have to agree to a discount which will directly impact your bottom line, or you will have to say no, which risks spoiling the relationship and could even blow the deal.

Tradeables allow you to provide options for the other party. And neuroscience demonstrates that options create a sense of control which triggers the brain’s reward system. Whereas being told sorry, that’s our bottom line triggers our threat system and impacts the relationship negatively. In essence what you’re trying to achieve in any negotiation is to find something that will cost you little but is of significant value to them, and vice versa. Thus win-win!

All too often people believe they have no option other than to yield to price concessions - with a certain amount of resentment or resignation. However, careful consideration of your tradeables and pricing options provides a route to better outcomes and better relationships.

Give them options

We were recently negotiating with a large corporate to roll-out a global training programme. Their procurement department was trying to squeeze us on price. We knew if we started yielding, that would be the thin end of the wedge! So instead, we offered them a series of pre-prepared tradeables – online follow-up, certification, refresher webinars. So rather than saying no to a discount (which would have triggered a threat response), tradeables enabled us to demonstrate flexibility and a willingness to work with them to arrive at a mutually beneficial agreement.

All too often people believe they have no option other than to yield to price concessions – with a certain amount of resentment or resignation.  However, careful consideration of your tradeables and pricing options provides a route to better outcomes and better relationships.

MASTER THE ART OF NEGOTIATION

The danger of false expectations in negotiation

Could you be losing out by creating false expectations in your negotiations?

The brain is not capable of judging a deal as good or bad in absolute terms. The brain can only evaluate good or bad in relative terms.

The lesson here for negotiators is of supreme importance. By mentioning specific figures too early in negotiations, you are in danger of creating reference points that can work against you.

Imagine that you tell a customer they can have a 20% volume discount if they purchase 300 items.

You’ve now created a reference point (or expectation) by which they will judge the deal. Any discount they manage to negotiate above 20%, they’ll see as a gain and anything less they’ll see as a loss.

Imagine they come back and say “thanks for the 20%, we’ll have 150 items”. This leaves you with a problem – you’ll need to explain that for 150 items the discount is less – only 10%.

Avoid getting too specific about what you are prepared to offer until you have a firm commitment and understanding of the other side’s needs.

Had you not previously created the 20% reference point, this would not have been an issue and they may have accepted 10% as the discount without complaint. However, with that initial expectation of a 20% discount, the risk is that they’ll fight to improve your offer of 10%. Even though they have changed the goalposts and only want 150 items, in their mind they’re losing out against your original reference point of 20%.

An experienced negotiator would certainly push for the 20% that is clearly available. So your job is to avoid getting too specific about what you are prepared to offer until you have a firm commitment and understanding of the other side’s needs.

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