In my seminars, I often bombard attendees with dozens of negotiation tactics and strategies to begin implementing with procurement. However, I always preface the bombardment by advising everyone to choose 3 or 4 tactics and techniques to start slowly integrating with buyers in their day-to-day life once the seminar ends. You see, people often get overzealous when it comes to effective negotiation skill because they see a golden opportunity to improve margins (and their commissions). What winds up happening, however, is that this overzealousness causes salespeople to go a little overboard with their newfound skill that ultimately leads to prospects and customers running for the hills. So, for those of you looking to improve your “game,” please start off slowly practicing these 4 effective negotiation techniques and strategies that I have chosen for you.
Drop the Anchor: Negotiation’s most influential strategy and technique
There was an excellent ANCHORING experiment done a few years ago conducted by a brilliant doctor named Dan Ariely. In front of a large crowd of participants, he set up a table with some retail-friendly products. I forget exactly what the items were, but they were all within the same approximate price range. For the sake of this article, let’s say that these products were:
- bottle of wine
- wireless mouse
- wireless keyboard
- box of chocolates
One by one, Dr. Ariely picked up each product and pitched it to the room. “Here’s a bottle of wine from the Napa region, it rated 92/100 on the wine spectator score, it’s a pinot noir, etc.” “Here’s a box of chocolates, handmade in Brussels, containing organic hazelnuts, etc.” He pitched an elaborate description for each product and then asked everybody to pull out their social security cards. People were slightly confused as you can imagine, but they followed the doctor’s orders. He then asked everybody to write the last two digits of their SSN on a scrap piece of paper. Again, everyone complied. He then instructed them to draw a price symbol ($) in front of the numbers that they had just written on the scrap piece of paper. Everyone followed along. So now, all the participants had a price showing on their scrap piece of paper. He then proceeded to ask everyone the following question:
Would you be willing to pay the price that’s written on your scrap piece of paper for each one of the items that I elaborately pitched?
The participants went ahead and contemplated each product and wrote either ‘YES’ or ‘NO’ on whether they would pay the SSN “price” for the bottle of wine, wireless mouse, chocolates, etc. Dr. Ariely then had everyone pass their scraps of paper to the front of the class for tallying. Dr. Ariely then surprised everyone by asking them to respond to a new question on a scrap piece of paper.
What is the HIGHEST price you’d pay for each one of the items that I elaborately pitched?
Again, everyone went through each item and wrote down a dollar value for the highest amount they’d pay for the wine, keyboard, mouse, etc. The doctor had everyone then pass up that new piece of paper for tallying, and after about an hour of analysis, they found something remarkable. What do you think that was?
The people with the highest social security numbers were also the ones who bid the highest amounts of money for each one of the products
In fact, people with high social security numbers paid up to 346 percent more than those with low numbers. Why did this happen? Well, the first number that their brain contemplated (SSN) became the number that they based all their decisions. They essentially became unconsciously anchored into that number.
How can I drop the anchor in my negotiations?
Well, the critical thing to understand when it comes to negotiating is that YOU want to be the first one out of the gate with a price or position. You want to SET THE TONE of the negotiation with the ANCHOR. Don’t let the other party drop the anchor on you.
I always laugh when I hear people say “what kind of salary are you looking to make?” or “how much are you willing to pay?” or “how much time do you need?” These types of questions happen all the time, giving negotiators the golden opportunity to majorly SHAPE EXPECTATIONS. But guess what happens most of the time when someone serves up a question like “What kind of salary are you looking to make?” What do you think the most popular response is? You guessed it, “well, what are you offering?” Even writing those words make me cringe
Examples of Buyer Anchors:
- Your competition is selling a similar item for X amount
- We can manufacture these in China at X amount per unit
- All we have in our budget is X amount
- I’ve been given authority to spend X amount today
Examples of Seller Anchors:
- Your price list is an ANCHOR by the way. A lot of salespeople apologize for the price on their list when they should be treating it as an expectation shaper.
- This product/service usually sells for X amount
- The price of this product/service including all value-adds is X amount, but for you the price is Y
- I’m concerned you won’t be able to afford my services (this is a non-numerical anchor, but it lowers expectations like an ANCHOR would)
- I usually get paid X amount per day for my services
Please make sure you’ve done your homework before dropping the anchor. Be prepared and have a firm understanding of your product and marketplace before you even attempt to set the tone in any negotiation. Shooting too high of an anchor can lead to conflict, distrust, and resentment. Shooting too low of an anchor can result in setting a precedent in which digging yourself out of might be an impossibility
In part 2 of this article, I will be explaining the BEING STINGY strategy and technique. Being generous with concessions is one of the most common mistakes that people make when negotiating.
What 4 negotiation strategies and techniques do you find the most effective?
Tony Perzow is a former negotiation trainer at the Karrass Organization and Vice President of negotiation training at Strategic Pricing Associates, his mission is to help others be insanely successful. His highly engaging workshops shatter the myths and misconceptions that prevent most companies and individuals from negotiating effectively. A polished and engaging presenter, Tony has trained top executives from many of the leading Fortune 500 companies. His upcoming book, You Suck at Negotiating – But You Don’t Have to with a Mindful Negotiation Practice goes beyond the theory of negotiating by providing practical, action-oriented information. Before his career as a negotiation trainer, Tony was a top sales performer, procurement specialist, and entrepreneur. He’s been a buyer and seller of some of the world’s largest closeouts, negotiating with such companies as Walmart, Amazon, and Costco. He’s also been a successful restaurateur, real-estate developer, and award-winning film producer. Tony has trained top executives from such companies as Apple, Red Bull, Samsung, PNC bank, MGM, Starz, Boeing, Rolls Royce, Pepsi, and Waterpik.