Easy Negotiation Techniques

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The word negotiations often conjures up visions of

opposing teams of professionals, countering tactic with tactic

to reach an agreement acceptable to both sides. In reality,

every businessperson uses effective negotiation skills on a

daily basis.

For example, when I visited Rome many years ago, I

found that the smallest of operations can practice good negotiating

skills. I had just toured St. Peter’s Basilica and, having

been raised Roman Catholic, wanted to purchase a souvenir

for my mother.

On the street, I met a vendor who held up a

lovely cut-glass rosary. “How much?” I asked.

“It’s my last one,” he said. “When I sell this, I can go

home. So - special for you - 12,000 lira.” (About $20 at the

time.) It was my third day in Rome and I had found that

everything was negotiable to a much greater degree than

Americans assume.

By then, I understood the “game.” The first mention of

any price in Rome, no matter how reasonable, is met with a

flinch. So, I flinched. The vendor, having seen this many

times before, responded with, “How much you wanna pay?”

I started by low-balling my offer. “I’ll give you 1,000

lira,” I said. He looked at me, opened his eyes wide in

apparent disbelief, rattled off a litany of facts detailing the

quality of the rosary and said, “How ’bout 11,000?” I had

learned that to meet a street vendor half-way is to lose. I stuck

to my position. “1,000 lira.”

He then told me about the large family he had and how he

wanted to buy his children new shoes. “I’ll take 10,000,” he

countered. My self-talk said, “You’re on a roll!” I made my

offer again, “1,000 lira.”

He next bemoaned the price of food and the cost of

feeding his family. “But, you look like a nice guy,” he said

sincerely, “I’ll give you a deal - 8,000 lira.”

This point-counterpoint lasted a good 10 minutes. Each

time, the price was lowered. Finally, he said, feigned desperation

on his face, “Okay, 2,000 lira and it’s yours, and I’ll even

throw in this plastic rosary case.”

“Fine,” I said. “I’m a fair man.” I gave him 2,000 lira and

put the rosary in my pocket. About a block down the street, I

encountered another street vendor selling rosaries which were

identical to the one I had just purchased.

To verify my negotiating prowess, I asked, “How much?”

“2,000 lira,” he said. My self-image shattered, I turned to

walk away. As I did, he grabbed my arm and whispered

softly, “But for you, 1,750.”

This true story illustrates seven points that are as appropriate

to the businessperson as they are to the professional

negotiator. Whether it’s pricing a project or determining a

package deal, these principles apply to your negotiations.

1 - State an opening position that is perceived to be reasonable and that will

achieve the greatest advantage for you:

The perception of being reasonable is key. Our

realities are not based upon how things really are, but on how

we believe them to be. Try to objectively determine if your

position is fair when compared to previous negotiating

opportunities.

If you were the other party, would you feel

that you had a basis for continuing the negotiations?

The first rosary vendor took a calculated risk. Because I

had just come from St. Peter’s, he viewed me as a prospective

rosary buyer. Running through the situation in his mind, he

reasoned that I may already have bought one.

If I had, he would move on. If I hadn’t, I might not know

the normal asking price of the merchandise. He decided to

start much higher than he realistically should have. Because I

was not familiar with the price, I truly felt the merchandise

was worth 12,000 lira.

I took the opportunity seriously. Had I known that others

were selling the same merchandise for a much lower price, the

opening position would have been considered unreasonable. I

would have refused to bargain and walked away.

This tactic may be all right for a Roman street vendor, but

it will, in most cases, meet with failure for the businessperson.

Prospective clients today are shoppers. They talk with several

suppliers before arriving at a buying decision. Opening positions

which are unreasonable are quickly found out and disregarded,

along with the organizations that made them.

2 - Expect a counteroffer that will detail the other side’s most favorable position.

Your perception of that offer will help you

determine whether or not the other side is approaching

the negotiations in good faith. If you feel

that too big a gap exists between the two positions,

it could be worthwhile to walk away and determine the

advisability of continuing.

Had the rosary vendor’s opening position not been so

inflated, he might have viewed my counteroffer as being way

too low. He expressed his surprise, then waited for a response.

When I didn’t budge, he knew that the final sale price would

be closer to my number than to his. However, that was okay

with him, so he continued.

3 - Develop a firm picture of the type and value of concessions you are considering.

When he met me, the Roman street vendor knew how low he was willing to price the

merchandise. That’s why my intransigence didn’t

dampen his enthusiasm for the potential deal. As long as his

asking price remained higher than the lowest price he was

willing to accept, he continued to negotiate. He had a number

in his head that satisfied him. Any amount in excess of that

number was an additional benefit to him, a sort of windfall

profit.

By clearly defining your anticipated concessions before

beginning the negotiations, you keep yourself on-track with

what is happening and with how much further you are willing

to go to reach an acceptable compromise position.

4 - Pace concessions and make them only after an explanation is given for each one.

Even though you have allowed yourself room

to make them, you will want to explain why a

particular concession is being made. The reason could be as

simple as, “I really want your business and I’m willing to go

further than I normally would if you can assure me that you’ll

give me a chance to bid on future projects.”

This type of statement implies that you are also getting something of value

from the concession - the potential for future business.

The rosary vendor explained his price reductions, hoping

that I would make my own concessions. But because his

initial position was so high, he didn’t ask me to raise my offer

each time. This is not the best tactic as the next principle indicates.

5 - Make a concession only if a concession is given in return by the other side.

This give-and-take adds value to each move

because, in effect, each concession is being paid

for. As both sides move closer to a mutually

agreed-upon position, each feels that specific conceded items have intrinsic value because of what was given

in return.

This brings to light a basic caveat: If an opening

position is set too high and concessions are made without

receiving something from the other party, the value of the

concessions is lessened.

After the first few unanswered concessions from the

vendor, I expected the concessions to continue. I wasn’t

certain how low the final price would be, but I felt he would

continue to lower his price because it was relatively easy to get

the price reductions and he asked for nothing in return.

However, in his mind, I had made a concession - I stayed

to bargain further. By not walking away, I was giving him

something in return for his price adjustments. The vendor felt

that if he kept me interested long enough, I would buy.

6 - A small, unexpected concession will often prompt the other party to act.

Frequently, the bargaining on a particular point

becomes routine and static. Both parties develop

mindsets regarding the validity and scope of the

final position.

When one party introduces an unexpected, unrequested

concession, the other may see this as a bonus and be willing to

make more of a concession than has initially been anticipated

or thought possible. In my situation, the street vendor offered to include a

small plastic case. Its value was little, but its impact caused

me to finally increase my offer.

A businessperson must also adhere to a final principle that

was unimportant to the street vendor.

7 - If it can be shown that a significantly

better deal is available elsewhere, the

value of the final agreement is

diminished.

The lifeline of any business is repeat and

referral customers. All negotiations must be

approached as win/win situations. If the other party loses the

battle, you could lose the war.

Once again, it is the perception

that takes forefront. If the other party’s initial “win” begins to

look like a “loss,” it is the loss that will be retold to others who

may have been your prospects.

The Roman street vendor exited my life as soon as the

rosary went into my pocket. He wasn’t concerned about how I

would feel later. Your reputation, though, depends on others

perceiving they have been part of a fair and equitable

agreement.

If so, they will return to you and tell others of your flexibility

and willingness to meet their needs. If not, word will

quickly spread that you deal only when you can outdo the

other party, a negative categorization that will affect your

business.

As with any skill, negotiations must be practiced and

refined. Remember the lessons I learned on a street corner in

Rome, then use the strategies discussed in the next chapter to

make you even more professional in your negotiations.

_________________________________________________________________

Copyright, 2008 Management Strategies, Inc.

For over two-and-a-half decades, Jack Pachuta assisted people in becoming better communicators, negotiators and team players. In addition to working in radio and cable television, Jack was the vice president of training and communications for a company named one of Forbes Magazine’s “200 Best Small Companies.” Currently, he is the owner of Management Strategies, Inc. in Cedarburg, Wisconsin, a training and professional speaking company.

Holding masters degrees from both the University of Southern California and Michigan State University, Jack’s clients have included ShopKo Stores, Jockey International, Maytag, Kaytee Products, Simplicity Manufacturing, The Asia Pacific Institute for Management Development in Singapore, Thomson Audio Products Hong Kong, Multi-Finance of Athens, Greece, and Connex of Romania.

He is an adjunct faculty member of Cardinal Stritch University, and a senior faculty member of the Keller Graduate School of Management and a professional faculty member of the University of Phoenix.

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