Image Credit: Miguel Tejada-Flores
When you are negotiating a sale, you’d like to be able to use your negotiation styles and negotiating techniques get the other side to agree to the offer that you are making to them. There are a number of different ways to make this happen. In sales negotiations, making the first offer is often a smart move. The reason that this is a good idea is because the first offer can anchor the discussion that follows and can have a powerful effect on the final outcome. However, if the other side moves faster than you and they make the first offer, you’ll need to be prepared to frame your counteroffer carefully. You are going to need some sales negotiation techniques to get what you want.
Take Time To Choose The Best Rationale
When we are negotiating with someone, it turns out that there are two different types of rational that we can use. The first is called a constraint rational and it focuses on what’s holding you back from accepting the other side’s offer. The second is called a disparagement rational and it critiques what the other party is offering—for example, by suggesting the quality is low. These two rationals have different effectiveness. Sellers were significantly more swayed by buyers’ constraint rationales than by their disparagement rationales. The big question is why. Sellers may view the criticism in a disparagement rationale as being both inaccurate and rude, and react by standing firm on their price. Secondly, when buyers describe their financial constraints, sellers may take them at their word when they say they can’t afford the deal that is on the table. What this means is that a buyer is likely to get a better deal if he accompanies his counteroffer with information about what his financial constraints are than if he tries to diminish the value of what’s being sold. Likewise, a seller facing a buyer’s first offer may get a better deal if she says she can’t afford to go lower than if she disparages the buyer’s BATNA (best alternative to a negotiated agreement).
Focus On Losses Rather Than Gains
Research has shown that the people that you will be negotiating with are more motivated to avoid losses than they are to achieve gains. In a series of experiments, people were pitched a product that would either save them money or would prevent them from losing money. It turns out that people were more willing to purchase the product that would prevent them from losing money. Since losses weigh heavily on our minds, if you frame the exact same price as a loss it will likely have a greater effect than framing it as a gain.
Divide Losses; But Combine Gains
You would think that how people acquire money or how they lose it would not matter all that much – it’s the final value that really counts. However, it turns out that this is not true. Research has shown that people prefer to gain money in installments but to lose money in one lump sum. As an example of this, people would enjoy finding a $50 bill for two days in a row rather than just finding $100. Likewise, if they had to lose it, they’d prefer to lost $100 all at once instead of losing $50 two days in a row. What all of this means for you is that in the process of business negotiation, when making a price concession, it can be smart to offer it as two or more smaller concessions. But when asking the other side for a concession on price, make one demand rather than two or more partial demands.
You’ll Want To Avoid Overjustifying Your Offers
It turns out that even a lame justification for a first offer can be more effective than not making any justification at all. Likewise, people tend to rebel against more significant requests with weak justifications. As negotiators what we need to understand is that when a justification for an offer is easy to counter, it can inspire a backlash. This means that if you are a salesperson who has already shown off the many attractive features of your product, you can let your first price offer stand on its own – no need to make more offers.
What All Of This Means For You
Our goal during a principled negotiation is to present an offer to the other side that they can agree to. Making the first offer is a good way to steer things in our direction. However, if the other side beats us to the punch and makes the first offer, we are going to have to get creative. By using the correct set of sales techniques, we can steer the negotiation back in the direction that we want it to go.
There are a couple of different rationals that you can use in a negotiation, constraint rational and disparagement rational. Make sure that you are using the correct one for your negotiating situation. During a negotiation we should focus on losses instead of gains because the people that you are negotiating with are more motivated to avoid losses than they are to achieve gains. How people gain and lose money matters to them. It turns out that people prefer to gain money in installments but to lose money in one lump sum. Justifications can be a powerful negotiating tool. Even a lame justification for a first offer can be more effective than not making any justification at all.
During a negotiation you are going to want to take the time to frame your offer to the other side in a way that will boost your chances of them accepting it. Using the techniques that we’ve discussed, you will have a chance to re-anchor your negotiations and find a way to get the deal that you are looking for. Take the time to craft your offer in order to boost its appeal to the other side.
– Dr. Jim Anderson
Blue Elephant Consulting –
Your Source For Real World Negotiating Skills™
Question For You: If the gains are greater than the losses for your offer, how should you present this to the other side?
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What We’ll Be Talking About Next Time
When we negotiate, it’s all about winning. Our goal is to use our negotiation styles and negotiating techniques to create a deal that the other side will agree with and which is a win for us. We can define a “win” in a lot of different ways: a lower price, a higher price, more time to deliver, delivery sooner then expected, etc. However, somewhat surprisingly, not all negotiations work out this way. Sometimes lose-lose is the way that you want to go.