In part 1 of this article, I explained an essential negotiation technique and strategy called Anchoring. Part 2 (this article your reading) will explore another critical tactic called Being Stingy. Before tackling this tactic, let me give you the 101 on one of the most vital words in negotiating, EXPECTATIONS.
You Get What You Expect In Negotiating
A few years ago, I experimented on my niece, Rachel. It was the end of August, and she was about to commence her college semester. So, I asked her “Rachel, what is the best grade you think you’ll get in your econ101 class this term?” She said, “Uncle Tony, I hope to get an A.” I then asked her what the worst grade possible might be and she said, “Tony, if things go south, perhaps a C.” I then asked her a 3rd question, the most important question of them all when it comes to negotiating (and perhaps even life.) I asked, “Rachel, what grade do you EXPECT to get?” She said a B and what grade do you think she ended up with once the semester was over? Yup, you guessed it, a B!
We get what we expect in negotiation. A skilled negotiator knows this thoroughly and will often try to shape your expectations before ever mentioning a number. We all go into negotiations with three positions.
- Our hopes and desires
- Our worst-case scenarios
- Our expectations
Our expectations are like a pendulum bouncing back and forth between our hopes and worst-case scenarios. When negotiating, it is best practice to have your counterpart’s expectations gravitating closer to their worst-case scenario. We do this by using negotiation tactics and strategies like the one about to be explained in this article.
I Will Need A Little Help Explaining This Tactic
At the very bottom of this article, you’ll find the results to an actual practice negotiation from one of my workshops (If only we were lucky enough to get something like this after every negotiation!) I use these boards to display everyone’s results, so my attendees can follow along as I give in-depth critiques (CLICK HERE for a video of a critique.) You see, there’s a lot of valuable information we can learn from the numbers below because they represent the choices my attendees made. Often, the choices people make in my practice negotiations are the same choices they’re making in the real world. It’s my job to put a figurative spotlight on these choices, so they finally see the mistakes they’ve been making unknowingly for years (probably costing them obscene amounts of money.) Numbers tell a very accurate story, and I’ve become very good at extracting stories from people’s negotiations (I’ve critiqued boards like the one below thousands of times.)
Generosity Is For Chumps When Negotiating
We want to be STINGY with our concessions, but very often we make the mistake of being GENEROUS. I usually call negotiations, conversations on steroids. Things don’t work the same way in a conversation on steroids as they do in a leisurely chat. Generosity is a fantastic idea in a leisurely discussion but a terrible one in a negotiation. For example, look at team 14 on the board below. We had a buyer who was willing to pay $69K, our seller in that negotiation had a chance to come out decently but what happened? Well, our seller made a very GENEROUS concession, he/she went from $79K to $65K in one massive jump. A few things to point out regarding this concession:
- Our seller lost all hope of figuring out that the buyer would have paid 69 when he/she caved to 65 as their first concession.
- Do you think buyer 14 had high or low expectations after that $14K concession? Sky high is my guess!
- Also, how do you think buyer 14 perceived the seller after that significant concession? Do you consider the buyer was all fuzzy inside thinking “aww, what a sweet person that seller is for being so generous with me!” No, of course not, the buyer was probably thinking “hey, why is there so much elasticity in the price? Why were you overcharging me in the first place?” The buyer most likely lost trust in that seller, the seller lost all credibility.
There’s nothing theoretically wrong with going from 79 to 65; there’s only something wrong when you do it one big jump. If seller 14 had gone from 79 to 77 (STINGY concession) as their first concession, it would have completely changed the course of their entire negotiation. A STINGY concession would have lent credibility to the seller’s opening position thereby lowering the buyer’s expectations. Such a simple choice could have potentially pocketed the seller an additional $10K. I can’t stress this enough, STINGY concessions over time…work! When I say over time, that means being patient in between concessions. Going from 79…78…77…76…75 (all very stingy) in a matter of a minute, hour, or day shows desperation and will wind up hurting you in the end.
In part 3 of this article, I will be explaining two of the most used tactics on salespeople. If you are not prepared to defend yourself against these tactics, you will leave money on the table…guaranteed!
What 4 negotiation strategies and techniques do you find the most effective?
- TEAMS: Every negotiating pair (buyer vs. seller) in my workshops get a team number.
- BUYER BEST: This is the best (lowest) price that the buyer believed they could buy the commodity for before the negotiation started.
- 1ST OFFER: The buyer’s first offer for the product/service
- SELLERS WORST: The lowest price the seller would have sold the product/service for under pressure.
- MOT (BLACK): Money left on the table by the buyer
- OUTCOME: The final settlement price for the product/service
- MOT (RED): Money left on the table by the seller
- BUYERS WORST: The highest price the buyer would have paid for the product/service under pressure
- 1ST CONCESSION: The first price the seller conceded to from their opening position
- SELLERS BEST: The seller’s opening position/price
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.