David Lim shares the fine art of negotiating at the table without giving in to arm-twisting.
Picture this situation: having worked hard at getting a key decision-maker to the bargaining table, you think you have sewn up. They like your service or product, the conversation has been pretty cheerful and upbeat. And then the other party leans over and says, “Can you do a better price?”. Or if the price is almost finalised, someone on the other side leans over and says, “This looks almost right, but do you have some flexibility in your payment terms/deliverables/requests for add-on work?”
So what we are dealing with here is the art of NOT dropping your pants; especially when the other party looks to squeeze some concessions from our situation. So what really happens in the head of the typically untrained seller is this:
They may have some doubts about the perceived value of their own solution or product. That means, they haven’t experienced it enough, or have received appropriate training to be fully convinced of all its
strengths. At this point, focused pressure from the other side to give a price concession or something similar may have a significant impact.
They are too eager to close the sale, making them vulnerable to making a quick decision to finalise the deal instead of assessing other, less costly options.
They fear the buyer will, if rebuffed, choose a more flexible seller immediately, and make a decision to agree to the requests for concessions for FOMO – Fear of Missing Out.
All the three mindframes are completely understandable. For a more fruitful outcome, counter such feelings and fears by considering the following. Your service and product must have been good enough to lead to an actual discussion or series of discussion leading to this point. In fact, the complexity of a negotiation aids the process. This is because when there are more areas where tradeoffs exist, its possible to trade something of high perceived value to the other side but of low actual cost to you. The term used for this is remembering ‘relative value’.
Next, in more complex transactions, where a number of components make up the deal, no party to a negotiation will simply abandon it rapidly if the concessions being negotiated aren’t, strictly speaking, deal breakers. And the FOMO – fear of missing out – don’t forget, may also work both ways. Someone vested in a lengthy series of meeting and discussions will be impacted by loss aversion theory. If you look at Kahneman’s and Tversky’s study on behavioural economics, when someone is vested in something, they are often loathe to give it all up and start afresh. Loss aversion also explains other behaviours like why we cling on to some stock market shares which have been tanking for years, and will never regain their value in the long run. We are best selling those, taking the losses, and reinvest what is left in something more profitable. But yet, we still keep them.
In addition to these counters to negative mindsets affecting us as negotiators, a key factor that will help include, but is not limited, is to giving yourself room to negotiate. So, returning to the opening metaphor. Allow yourself some room to loosen your belt without dropping your pant!
Another approach is to remember a key skill in this area: the best time to ask for a concession is when you get asked for one. Perhaps there is something you want the other side to give you, e.g., longer payment terms, free warehousing or hosting of data. Then look at their request and see if that can be met, at low actual cost to you. The more variable your control in the cost chain, the easier it is for you to do this.
Last but not least, the original request or requests my appear to be demeaning, aggressive or scary; but ultimately, two professional parties negotiating don’t really want the other side to drop their pants. Both realise, or should realise that this is a game of getting a near-win/near- win scenario. Enjoy the game and hang on to your belt!
About the author:
David Lim is Asia’s Motivational Mentor, and best known for leading the 1st Singapore Mt Everest Expedition. Since 1999, he has given over 700 motivational and leadership presentations. Engage him with questions at firstname.lastname@example.org.