DAVID LIM
speaker and leadership coach
You never get the deal you deserve but the deal you negotiate.
When leading two Mount Everest expeditions, I learnt very quickly that the ability to negotiate – the hire of yaks, critical oxygen supplies or even Sherpa porter wages – can count towards success or failure.
After studying this process in many negotiations, I’m convinced that there are certain principles or guidelines that can help anyone to be more effective in this art of both getting and giving concessions. One of the key initial things to consider is whether or not you have issues about asking for a concession.
Many people are reluctant to do so because they don’t want to give the appearance of being cheap or grasping. Many people give concessions because they don’t want to seem unreasonable and they want to be liked. So here are the basic guidelines:
1. Don’t make the first concession on a major item
Hold fast to those important items, making no offer to compromise. This presumes, of course, that you may make concessions on other less important items. You may use those concessions as reasons you cannot compromise on the more important (to you) items. Know the relative importance of each item to each party so you can develop a strategy for concession making. Use questions like:
“Issac, what really is most important to you here?”
“Of these three things, Isaac, what is the least important?”
Give as little as possible, but what you do concede should be things that are of high value to the other party (and hopefully of less value to you).
2. Don’t make a counter-offer to an unrealistic offer
Most experienced negotiators simply refuse to negotiate until the negotiating range falls within a reasonable level. The philosophy here is that there is no reason to make a concession of any kind when you are so far from agreement. Refusal to move forward with the negotiation in this way is risky, but often very powerful. It saves time. Either the other party concedes, moving the negotiation forward, or it is terminated.
EXAMPLE: You run a hotel. A major events company approaches you to ask if you are interested to sell a block of nights for some specific dates in the future. You are asked what you want. Let’s explore a typical conversation:
“I can check,” you say, “We’ve had similar requests recently.”
They quickly make you an offer.
“Oh, no,” you say, “I know that is considerably below what we could consider.”
They relatively quickly come back to you with a significantly higher offer. Your response is the same.
To make a long story short, the event planner came back a few times. When they get within a reasonable price range, you begin serious negotiations. You are in a much stronger position because you had simply, but kindly, backed away from the unrealistic offers.
REMEMBER: Better to kindly back away or ignore an unrealistic offer until it reaches a reasonable negotiating range.
3. One of the best times to get a concession is when you are asked for one
Don’t give a concession without getting one in return, even if the concession is just a ‘small one’. The law of reciprocity comes into play here: People expect value for value. Capitalise on basic human nature and remember: one of the best times to get a concession is when one is asked of you.
When asked for a concession (even a small one you know you can give) ask –
“If I do that for you, is there anything you could do for me?” Listen to the careful and soft wording of that question. Actually, there are two reasons for asking that question:
- You are likely to get something of value that you hadn’t bargained for. Most good negotiators have some concession they can throw in, if simply asked for it.
- It will discourage the other party for asking for additional concessions. They realize every time they ask for a concession, you will ask for one in return.
I’m truly amazed at how people think they can ask for a concession without giving up anything, and how many people actually do that. When you phrase something
like this:
“When you say cost reduction, is your expectation, that I reduce the cost to you without any other benefit accrued to me by your side?”
You will be surprised at the response. When put in this light, many people often step back, and not want to appear unreasonable, and often offer some benefit in exchange for the concession.
4. Make people work for their concessions
Let’s assume you want to buy my boat.
You ask, “What do you want for the boat, David?”
“$500,000.”
After a quick inspection and brief test run by the sea, you say, “OK. I’ll have a cashier’s cheque here at noon. You get the title ready and we’ll complete the deal then.”
I just got exactly what I asked for the boat in less than an hour from the very first person that approached me to buy it. Put yourself in my position. I’m happy, right?
WRONG!
Why do I feel that way? It’s because you didn’t make me work hard enough to get the price.
5. remember relative value
The skilled negotiator remembers the concept of ‘relative value’. Very simply, that means, what can I concede that costs me little in time, money, or effort, that has high value to the other party? Conversely, what can I ask for that has a high value to me, that costs the other party very little?
EXAMPLES: The retailer who provides a one-year warranty for an appliance is an example of a high value to me that costs the retailer very little. The customer sees this as a big selling point, and yet the retailer knows from experience that his out-of-pocket cost on providing the warranty is minimal. Another example would be the hotelier who concedes several months’ of free storage because he has a large storage facility that is vacant. The examples are endless.
Remember these guidelines for profitable negotiations.