I admit that negotiating a better deal for my own self is not my strong-point. I do understand the power of good negotiation and how you can leverage that skill to build solid business cases.
Some of my friends are quite good at garnering great deals. I have observed them quite closely for some time now and marvel at the highly effective negotiation techniques that they deploy.
One of my friends religiously sets aside one week in January every year to negotiate better insurance rates on his auto and home. Another swaps between Comcast and Verizon for his cable TV driving his subscription rates lower every time or getting more for the same amount. A third spends considerable time in getting the best deal – both interest rate and monthly payment – on his refinance. Yet another friend at work was able to drive down the vendor’s offer by 30% by proposing a creative offshore/onsite model for our project. This was even more impressive, considering that my purchasing department had already completed their negotiation and settled on a “low” price for the contract.
I spoke to another close friend last week who got an offer from a top strategy consulting company. While he is already in a good job, he did not need to look around for a better opening. Not stopping at getting the offer, he also pushed them to consider additional offer with three creatively packaged proposals – one was for an earlier assessment (six months or second completed assignment, instead of a year), the second one was a higher upfront bonus to compensate for the loss of his existing remuneration and the third proposal was for acceptance to a higher grade.
Not afraid of losing the existing offer, his objective was to gain time until his selection process with another top company came through.
I would have given in much sooner and not been able to stretch the job offer on hand this long.
As I kept thinking about how these smart negotiators operate, I compiled the following list of effective negotiation techniques that I have seen them deploy to great effect:
1. Know the value of what you are offering, or buying. You should also know what motivates the other party. For cable companies, they are looking to retain customers by locking them into a contract. They have made huge investments in infrastructure and the pie is fixed. Any customer they lose to the competition is revenue that they cannot make up.
For mortgages, banks have to put their money to work. With full collateral, i.e. coverage in the form of your home, they are guaranteed interest payment. A mortgage is possibly the last payment that someone would risk defaulting on. So if you do not get refinance from bank A, the bank has money that they have to put to riskier use or for lower returns. They are not doing you a favor. You don’t have to feel like you are begging, when you are demanding lower closing costs, or interest rate.
This requires some effort on your part and also active listening during the negotiation process.
2. Try to present a case – what is in it for the other person. Know their business, or what they are interested in. Identify problems if any and then find creative solutions. Identify any obstacles or barriers to the negotiation and work on removing those.
3. Don’t be afraid to ask, and to ask for more. Don’t settle for less. Be prepared to walk away. For this you need to understand the other party’s motivation.Where you want to build or preserve the relationship with the other party, it is advisable not to nickel-and-dime the transaction. But when you, as an individual, are transacting with a corporation and its representative is the decision-maker, then you should go ahead and get the best deal for yourself.
4. Always consider negotiating from a position of strength. Recognize that if you are desperate you will settle for a lot less. Avoid “distress sales”.
5. Do your homework. Know what is acceptable to you – the lowest limit where a transaction is possible. Then you have the high limit, beyond which the transaction will not take place. The area between these two limits is the zone of negotiation. You want to move as much as possible towards the higher limit.
6. Know that it will take time and patience and that this is an exercise in persuasion. Keep calm and make it about each party’s interests. Do not make it personal. A sense of humor during these negotiations always helps keep the discussion alive.
7. Ask for more than what you are willing accept. Where you have the power to set a price or make the first move, set the bar far higher in your favor, than what you are willing to accept. This way you “anchor” the other party to the number that you have set.
Anchoring is a powerful concept in negotiation and I will cover this in a subsequent post.
If you make a very aggressive offer, the other party could walk away. But it will be less often than you think.
8. Don’t let the process breakdown, whether due to frustration, anger or disappointment. Instead be patient, allow it time and keep the progress going. Also do not get defensive with a “no”. Accept that “no’s” are part of the negotiation exercise and that you have the power to go past a “no”.
9. Try to split the whole negotiation into three categories: the first one would be those things that you must have but the other party may not care about; the second one would be those that you don’t care about and the remaining portion would be those things that are important for both parties.
For the first, stand your ground and extract as much as possible on the things that are very important for you. Make it very clear that this is very important to you and that you could walk away. (hint: if the other party also gives such an indication for the same component, then this probably belongs to the third category).
Do exactly the opposite for the things you really don’t care about, i.e. second category items. This will actually make it feel as if you are ceding ground to the other party and make them open to hearing your demands.
Lastly, only those items will remain for which both you and the other party deeply care about. The goal should be to find middle ground on these.
So next time you have an opportunity to negotiate, put one or more of these concepts to work and assess the results.As with most things, you only get better at negotiation by practicing.
Therefore look for every opportunity to practice this skill. Enjoy the process to become better at it.
Image (c): commons.wikipedia.org