1 Negotiation Strategies and Skills
Every negotiation is based on tools you can use appropriately. These skills will help you whether you are negotiating a used car deal, your kidsâ bedtime schedule, or your next salary increase. Hundreds of negotiation gambits are available, but the ones Iâm listing below are the thirteen most useful techniques you can use.
As I stressed in the introduction, itâs critical that you apply each of these techniques within twenty-four hours of learning them.
Rarely will you have the time to check your notes before delivering a response. All these skills should be memorized and pulled from your quiver when needed. Many of my clients will list these strategies on three-by-five cards and review these notes before every major negotiation.
Here are the thirteen strategies and skills you will use most often.
Strategy 1: Never Jump at the First Offer
The first technique we are going to talk about is, never jump at the first offer. Do you remember the last time you sold a car? Have you ever sold anything at a garage sale? Did you get the best price possible? How did you know? Letâs assume a buyer wanted to make an offer for your used 1956 Chevy. Itâs a classic, and you have loved it for thirty years, but now itâs time to sell. You really want $35,000. The buyer wants to pay $25,000, and you say OK. But a day after the deal, you have buyerâs remorse. You might have done better. You will never know, because you jumped at the first offer.
Letâs look at the situation from the other side. Suppose you offered $25,000 for a $35,000 Chevy. The seller immediately accepted it. Do you think you got a good deal? No, you probably thought there was something wrong with the car; otherwise they would not have said yes so quickly. So, you see, negotiation not only produces a good price but also creates confidence in the buyer and the seller that both got a good deal.
The other reason you should never say yes to the first offer is buyerâs remorse. In the Chevy example, your offer of $25,000 for the $35,000 car is immediately accepted. What is your first thought? What a great deal I got? I canât believe how lucky I am? No. You would probably think you could have gotten a better deal.
But thereâs also another side to this story. If the seller wonât negotiate at all, it might create annoyance and irritation. In a way, you can think of negotiation as the only fair way of reaching a deal. If someone simply walks away from your asking price without negotiating, you may feel rejected. On the other hand, if you engage and canât reach agreement, you both will know why and are unlikely to have hard feelings.
I bought my first house, in Irvine, California, for $256,000. (The joke is that in California, you can still buy a $300,000 house for $1.5 million.) But the seller wouldnât negotiate. I was at a disadvantage, since my Realtor walked the neighborhood asking homeowners to sell. This owner would only sell on the condition that they got full asking price. I was so irritated that they wouldnât engage that I threatened to walk away unless they threw in their new IBM personal computer. At least I got something, no matter how trivial. Just engaging in a negotiation makes both sides feel better.
You have worked for the same company for three years for the same low income. You are ready for a raise. You think any increase would be good. After all, a raise is really an indication of how much the company appreciates your work. The problem is, your boss has said no to your requests multiple times in the past. Is there really any point in asking again? After succeeding on a particularly tough project, you muster the courage. You walk in the office and once again ask for a raise. This time the boss agrees to a 5 percent increase. You are overjoyed, and, in the heat of the battle, you agree with gratitude. But was the boss willing to give you a 10 or even 20 percent increase? Would he have given you more vacation time off? Would he have included a car lease in the package? You will never know.
Why? Because you accepted the first offer. Often when we feel awkward and anxious about asking, we tend to accept any offer to release the anxiety of the negotiation. Your request does not have to be contentious. You can appeal for a raise by citing past successes and performance.
This is the way you need to approach any negotiation: You want a better deal. They offer something that seems reasonable. But you need to be confident for yourself that you deserve the best deal without burning any bridges in the process. This can be done with respect, humor, and even humility. In fact, these attributes will help you get the deal you want.
We will discuss the psychological makeup of a great negotiator later in the book. But look at any negotiation as one that will achieve a great deal for both you and the other party. Be confident that you deserve the best deal you can get.
My wife, Merita, is an American Airlines flight attendant. She and I can fly for free. This is called nonrevenue or nonrev. Although I pay for all my airline tickets to and from speaking events, leisure travel is a different story. All airline employees are fairly experienced travelers. We all know how to book a flight and check in twenty-four hours ahead of the departure. Most savvy nonrev flyers will check in with the departure gate agent and let them know we are here. But surprisingly, the gate agents will announce the name of the passenger and hand out a boarding pass without asking if the seat is acceptable. Most nonrevs are grateful to have a seat, or donât know how to negotiate. I fly nearly 8,000 miles a week and know the configuration of nearly every airplane American flies. My favorite seats are the exit rows in coach, since there is more legroom. Generally, when Iâm handed a boarding pass, I ask for an exit row seat. Then the negotiation starts. If there are no exit rows, I will ask whether any bulkhead or exit row passengers have yet to check in. I will even ask if any rows are empty. This is especially helpful on an international flight so that you can lie down and sleep.
You need to be able to ask. You need to risk rejection. You need to be able to deal with no. I have even been able to negotiate my way into a first-class seat, although rarely. On one flight from Shanghai, China, I was facing a fourteen-hour nonrev in a no legroom economy seat. I noticed that one of the first-class seats was not occupied. I asked the gate agent why and she said the seat was broken and couldnât put any revenue passengers in it. I then reminded her that I was a nonrev and wouldnât mind sitting in a broken first-class seat. Actually, the only problem with the seat was that it would not fully recline, but it was certainly better than a coach seat. I was able to get the deal I wanted to sit in first class. The gate agent was able to open up another seat on the airplane to accommodate one more passenger. It was truly a win-win negotiation.
KEY TAKEAWAYS
- Donât say yes to the first offer or counteroffer. You will be left feeling, âI could have done better,â or, âSomething must be wrong.â
- Create a negotiation mindset. Think about negotiating in any appropriate interaction. Whether it is business, family, or even organizing an event, think about how you can negotiate something better.
- As you avoid saying yes to the first offer, be prepared for the other sideâs better offer. Always have the end in mind during a negotiation. But always realize there is more room to negotiate until the other side walks away.
Strategy 2: Negotiation Isnât Only about Price
Negotiations are not always about money. Often it is about delivery speed, quality of the product or service, financing terms, warranty, follow-through, access to other services within a company, peace of mind, and reliability.
In fact, most high-level negotiations are only partly about price. They are more frequently about the whole package. In his book Selling to VITO the Very Important Top Officer, my friend Anthony Parinello discusses one negotiation at the University of California at San Diego (my alma mater). Tony responded to a request for proposal (RFP). He knew that all of his competitors would sell at a loss if it meant getting the business. Tony asked the provost if he was more concerned with price or cost, explaining that price is what you pay right now; cost is what you pay over the long run. The provost realized that service, follow-up, reliability, and company stability were more important than the immediate price. Tony was able to move from having to compete with those selling at a loss to negotiating a deal for a whole package of services.
Which nonprice benefits are you willing to give up? Would you give up reliability? Would you give up follow-up service in case your purchase has issues? Would you give up delivery because the price was attractive? I recently negotiated on eBay for a new Wilson Clash tennis racket. The seller wanted $180. I offered $140.The seller accepted $150. But would I have negotiated at all if there were no chance of returns, or if delivery would have taken months? I had the PayPal guarantee to fall back on in case of fraud. Even when youâre buying a tennis racket, there are many factors to consider besides the price.
Think of the negotiations youâve had in the past. Were they only about price? Were there assumptions about service, delivery, and warranties that made you feel comfortable enough to negotiate price in the end?
HOW GEORGE LUCAS BECAME A BILLIONAIRE
One of the most lucrative negotiations in history was conducted by one of the most unlikely negotiators. George Lucas, of Star Wars fame, was about to negotiate a deal that would eventually create billions of dollars in personal wealthâall because he realized that other aspects of a negotiation could create a lot more value than just price.
In 1974, George Lucas had recently finished producing and directing American Graffiti, a very popular movie. But when Lucas approached 20th Century Fox with his next project, the offer was insufficient. Fox wouldnât budge from paying Lucas $100,000 for directing and an additional $100,000 for producing the original Star Wars. But George Lucas had an idea. He wanted the merchandising rights to all the Star Wars characters. Like Walt Disney, he understood that merchandising from theme parks, dolls, keepsakes, and toys were more valuable than box office sales.
In 1977, Star Wars became an instant hit, and Lucas quickly became a millionaire. But his billionaire status was due to his negotiation skill. Today he is worth $5.3 billion, mostly from thesale of Lucas Films, his production company to Disney, which has produced additional series and extension movies based on the original Star Wars concept. Practically everyone on the face of the earth has seen a Star Wars brand product or film. Lucas would probably have been paid more money for the second installment of Star Wars. But if he had only negotiated fees and price, he may not have become a billionaire. Because of his creativity in negotiating for things other than price, Lucas struck gold.
When my friend sold his tree service for $30 million, he took some of the profit and created a mobile repair company servicing train locomotives. For railroad companies, the expense of repairing a locomotive is enormous. They have to take it out of service, transport it to a repair yard, then deliver the repaired locomotive back to the line. A repair service that makes house calls could save the company enormous amounts of money.
Yet when my friend tried to sell his service, he hit a brick wall. Engineers would be out of a job. Maintenance workers would be displaced. All of his would cause union issues, strikes, and downtime. My friend lost $2 million in the first year and hoped to break even by the second year. Price isnât everything. Sometimes price is the least important thing.
Many vendors are very willing to negotiate nonprice issues. For example, if you agree to pay the sticker price but asked for o...