How to Negotiate in Sales and in Life
This has caused department heads to absorb traditionally sales specific tactics into their business models. In other words, no matter what sector you operate in, buying and selling will make up a natural part of its dynamics. That’s why stepping into a negotiation, whether big or small, armed with the skills that have kept sales departments at the front lines of business—in spite of social backlash—is indispensable.
The fundamental of sales negotiation have not changed much, despite cultural and social oscillation. People are people, and we’ve been dealing with money and goods for quite some time now. And so, to understand the art of sales negotiation is to grasp the interplay of psychology, economics, decision-making, and market trends.
Throughout my time as an executive and business-person I have learned invaluable lessons about sales negotiation. These lessons have helped me grow my businesses and other people’s businesses. Now, I will share some of them with you.
Step into the Buyer’s Mind
Buyers are always intent on improving their bottom lines. That won’t stop anytime in the foreseeable future. There are three primary ways that buyers go about doing this, and it’s often at your expense as a seller.
The first is to sell competitively. That usually results in price-point matching or beating a competitor’s price. This can happen in a number of ways, but more often than not it is through innovation. It’s risky and expensive, however.
The second is cutbacks. In a simple and unsympathetic sense that implies the reduction of operating expenses.
The third is better negotiation. This is by far the easiest path to improve profits. Buyers want to negotiate lower prices with their suppliers because it directly affects their bottom line. This is the alternative that directly applies to you, as a seller.
The Art of Negotiation
This section of the article will read much like a step-by-step interspersed with tested advice based on experience. I will start with the three types of gambits: Beginning, middle, and end. They denote the three phases of a typical negotiation.
Broadly, gambits are the lifeblood of negotiation. When you first initiate a sales negotiation, you establish the bedrock of your buyer/seller relationship. Early preparation and the demands you make, including how you propose them, will set the tone for subsequent transactions, even within that same conversation.
Preparation. To establish a solid foundation, your initial offering must reflect an accurate and studied assessment of the buyer, the market, the buyer’s organization, and any other relevant and crucial conditions. This preparation is vital.
Wiggle Room. There are a few rules of conduct that apply universally for beginning gambits, aside from preparation. Henry Kissinger once wrote, “Effectiveness at the conference table depends upon overstating one’s demand.”
In other words, anticipate haggling and compromise. Start high. This gives you room to negotiate without the compounding fear that your bottom line might suffer because you started where you’d like to be in terms of profit.
This strategy is called, Maximum Plausible Position. It’s a fine balance that requires you identify what the highest amount you can ask for is without forsaking reasonability. In laymen’s terms, create wiggle room.
Initial Proposal. The best starting point for price negotiation is to have your buyer state their position before you do. Once you have that expectation, you have immense power.
Saying “Yes”. An affirmation to an initial offer from a client or counteroffer instantly—painfully—raises two regrets. One is, “I could have done better.” This one is self-explanatory. The second, “Something must be wrong,” is a bit more complex. In that instance our intuition about the buyer will be undermined because whatever our mental picture was of the buyer, it seems to be misaligned with reality. This is a seller’s existential crisis, if you will.
This experience can be very frustrating because getting past an initial offer or counteroffer is a central step in good sales negotiation.
Tips & Tricks
In the beginning gambit, a few strategies can help you gain an advantage and advance your position. Here are three such strategies.
Body Language. Pay attention to body language, always. It can belie your buyer’s words. The flinch is a telling bodily cue. It singles surprise, simulates pain, and tells your interlocutor that they’ve reached a maximum point.
Reluctance. Whether you are dealing with a reluctant buyer or playing one, remember that the strategy here is to disarm the interlocutor. This is an iteration of good cop/bad cop. Chances are they are trying to get you to divulge your maximum plausibility point. Don’t succumb.
Detachment. Detachment is absolutely essential when tensions rise and anger flares. Don’t lose your cool and remember that this is not personal. You don’t know what the buyer has at stake in this negotiation; so bring it back to the issue at hand. One method for re-centering yourself is to keep a running tab of where you’ve gotten in the negotiation.
Middle gambits are based in your initial conversation and the bedrock you’ve established—whatever that may be. This phase depends on you successfully responding to the pressures that arise in the conversation. There are some that can help move you in the direction you want while others derail you and force you to salvage lost ground.
Higher Authority. “I’ll have to speak to my boss about this.” It signals all sorts of things. What it does best, however, is displace responsibility from you to the shoulders of some nebulous “boss” figure that we can all relate to. It’s precarious because it can signal—among other things—that you aren’t the decision-maker.
On the other hand, if someone deploys this tactic against you, be prepared with counterarguments, such as: ingratiate their ego; secure a commitment to you; ask for a commitment that you can refer to at a later date.
Concessions. Reciprocity is the norm in the world at large. When babies are just about newborns, studies have shown that they possess primitive intuitions about fairness and punishment. Adults are no different. When you make a concession, or vice verse, there must be give-and-take. It places greater value of your concession and indicates that you aren’t being pushed around, but rather making a carefully considered decision about value exchange. Never expect or trust that the other side will compensate you for your concessions later. Negotiations are in the moment. They are here in the present, in the now.
Non-confrontation. Some people tend to argue over anything. They are reactionary and tend to suck you into their whirlwind of anger. Don’t let them. Don’t argue with someone who attacks what you say. In a negotiation there must be a level of trust, however leery. Arguing back perpetuates a vicious cycle. The more you respond or retaliate, they more they’ll argue their point so you won’t be able to get them past whatever is impelling them to argue in the first place. Regain composure, lend perspective, and move on.
Split the Difference. It’s quite simple, yet effective. When you are at odds with someone on a price, ask them to split the difference. It’s fair, balanced, and easy to say. The boons are plentiful. What will happen here sometimes is that your buyer will try to get more out of you to compensate for their concession. Generally that means taking their problem and making it yours. There is no quick fix for this. Each problem is unique. What you could do is propose alternative solutions that don’t involve spent time or energy on your part.
In short, the ending gambit prepares you to solidify the buyer’s commitment to a negotiation.
Good Guy/Bad Guy. Believe it or not, negotiators use this ploy more often than I’d like to admit. It’s time-old and surprisingly effective. It takes at least two negotiators to pull this off. You can already imagine what it looks like. When you see it, call it out. People are usually embarrassed and move-on.
Nibbling. Small wins amount to big gains. I say it often and I can never overstate it. Some people call it upselling. Whatever you term it, the point is that after you’ve established a commitment, you can create an additional buying opportunity that is only available to the person once they’ve made that commitment. This is treacherous, however, so be vigilant.
Halt. Stop yourself when you conceded too much or too often. It can create the expectation that you always give in, especially at the end. This is easy when you have secured a deal. The fear of losing it can lead you down the road to perdition. Halt, and turn around.
Concessions are where negotiation gets sticky. In a sense it is the spirit of negotiation. Be warned that buyers will always try to grind away at your offers. It happens. Don’t be alarmed.
Habit. I mentioned this above, and I’ll say it again. Don’t create the expectations of concession. Also, be careful how much you conceded because it establishes latent benchmarks. For example, if you make a $500 concession the first time, your buyer may expect you to do the same the second time.
Accrual. It’s called sunk-cost effect. Basically, when you’ve lost a lot already, you are willing to lose more, but in smaller increments. It’s surprisingly efficacious.
For example, let’s say you concede $500 in the middle of negotiations. Chances are that you will concede $100 more easily later on, because you don’t want to lose the business. Plus, you’ve already conceded $500, so what’s another $100? The antidote is to bear in mind the total rather than the discrete amounts.
Big Reveal. Buyers will try to force your hand through dismissal or apathy. They’ll say things like, “I don’t negotiate,” or, “This is a waste of my time.” Don’t let yourself be intimidated. Chances are they are just trying to shake you up so you reveal your price-points, make concessions, and feel uncertain.
Modesty. The guiding principle with concessions is the opposite of the Maximum Plausibility Point (reference in Gambit: Beginning, above). Rather than starting high, start low, very low. If your buyer rejects a small concession, you can comfortably raise it without fear of losing too much. Remember Habit, also mentioned above. You don’t want to create an expectation. So, keep track of your concessions. If you make a concession here, then increase the amount elsewhere. This raises the stakes and dissuades your buyer from asking for further concessions.
Peak-End Rule. When you make a small, last minute concession it can make the buyer feel good about their wins, at little cost to you. The ideal negotiation is when both parties walk away feeling that they got what they wanted, or best when they feel that they outdid the other person. You can concoct this emotion.
Peak-End Rule refers to the psychology heuristic in which people retrospectively perceive a situation in relation to the last perceived emotion. In this hypothetical, if the emotion is good, then the person will recall the whole situation positively. A last minute concession can accomplish this.
Power & Personalities
What is a conversation about sales negotiation if we don’t discuss power dynamics and personality types? Incomplete, that’s what. I saved this section for last because it is speculative at heart. People are complex and often elude our best efforts to generalize accurately. That doesn’t mean, however, that the entire effort is fraught.
In my experience there are a few power dynamics and personality types that I’ve identified time and again.
Titular Power. This is power derived from a title. Titles, whether people care to admit it or not, confer influence. Just as you would not treat the President of the United States the same as your mother, you would not treat the CEO of a company like you would their sales rep. If you have the title, leverage it. On the same token, do not fear someone else’s title.
Compensation Power. This is power derived from promises. To gain ground and shake out concessions, buyers will promise future rewards. They’ll say they have a big job coming up, or that they can guarantee you an in to some business. Don’t fall for it.
Deferent Power. This is power derived from adherence to set standards and values. If you establish that certain values are important to you and that you cannot flout them, it builds trust and respect. Your buyer might be frustrated but they’ll acknowledge your character, and that can secure long-term relationships.
Personability Power. This is power derived from personality. There is no easy way to subsume this or delimit it. The goal is to get your buyer to like and trust you. Finding common ground is a good place to start. Ultimately, this is a matter of intuition and would take several books and trial-and-error to master.
Knowledge Power. This is power derived from insider information. I am not referring to illegality here. I am referring to expertise. If you can demonstrate expertise, or knowledge, on a topic, the buyer will be less likely to contradict you and more likely to acquiesce to your demands.
If you are on the receiving end, however, and someone is wielding expertise against you, make reference to another expert with a similar or opposing view to diffuse the situation. In any case, the goal isn’t to contradict. The goal is to subvert the power that knowledge grants.
Sharing Power. This is power derived from sharing information. This is a tactic more than a power relationship. It easily fits underneath any one of the abovementioned categories. When you share information, you share power, and that creates the urge to reciprocate. It bridges the gap between you and your buyer.
Well, that just about covers the power dynamics that I’ve identified in my time in sales.
Here are the personality types I’ve encountered.
Practical. Practical buyers tend to be domineering. They veer on hostility and imply that things will not bode well for you if they don’t get what they want. These people are bottom line oriented and tend to know what they want stepping into the conversation. Don’t waste your time with small talk. Zero in on the negotiation point and do not show hesitancy. Don’t overload the buyer with information or show over enthusiasm. You’ll come off as farcical. Be quick, factual, and steadfast.
Extrovert. Extroverted buyers tend to be friendly, open, and decisive. Their strategy tends toward the affective. They will influence you with charisma. They are usually not savvy enough to unveil your ploys and tactics, but they won’t shy away from saying, “No,” nor will they shy away from saying what’s on their mind. Talk about their interests and about their excitement. If they feel you are enthusiastic and excited, they are far more likely to go along with what you are putting down.
Amiable Personality. Amiable buyers tend to avoid things that make them uncomfortable. Trust is central to an amiable buyer. If they cannot trust you, they will not do business with you, no matter how competitive your offer. They are innately skeptical. You can easily sway an amiable buyer but building on emotional cues and taking care not to offend them. Tread lightly and check in constantly. Ask about doubts, hesitancies and the like.
Analytic Personality. Analytical buyers tend to need and provide lots of information. They appreciate accuracy and concision. They are flawless organizers and require it for all their negotiations. They tend to eschew relationship building. To sway such a person, lead with the facts, with benefits and losses, and support your conclusions with reliable information.
This covers most of what I have gleaned of the art of negotiation from my years as a businessman. I don’t see the art of negotiation as a smoke-and-mirrors practice. Not even a little. I see it as a delicate balancing act: As a practice in receptivity, in active listening, and in purposeful communication.
If you take away anything away from this article, let it be these four points.
1. Do not limit yourself to one negotiation point. Negotiations are multi-layered.
2. Realize that not all negotiations are personal. It’s healthy to acknowledge that you and your buyer have diametrically opposed goals, but that does not mean you can’t reach an acceptable compromise.
3. Greed is disdainful and impractical—every time.
4. Reciprocity and equity are central tenets of the art of negotiation. Give-and-take.
Other articles on marketing & sales by the author
- Creating Brands that Stand the Test of Time – Discussion with Antonio Lucio, Global Chief Marketing Officer at HP
- Sales Commissions Are Useless in Motivating the Modern Workforce. Should We Retire Them?
- Money Can't Buy You Love, Not Even a Like: Reimagining Sales & Marketing
- A Customer's Mind: How to Really Influence Customers
- Why Do Consumers Purchase?
- The Key to Earning Your Customer's Loyalty