I absolutely love a good negotiation. It’s one of the building blocks for basic economics! In order for an exchange to happen between two parties, they must first agree on a price. If a proposed price is unacceptable for one party, the exchange will not happen. With this in mind, you can still feel good when you talk down a price somewhere because they wouldn’t sell it unless they’re going to benefit from it in some way.
I was in a local hamburger ‘hole-in-the-wall’ earlier this year and had the chance to negotiate for my lunch. Now, usually I don’t make a fuss and offer someone a lower price than what’s on the menu, but they had just duplicated a two-cheeseburger order, which would normally cost a little over $4.00. I could hear the manager talking and she looked a little frustrated. These two cheeseburgers were about to go to waste. Knowing I should probably act fast, I said, “Would you take $2.00 for the cheeseburgers.” A little surprised, she thought for a second and said, “sure, it’s better than me eating them.”
I saved 50% on something because of a simple negotiating tactic – ask for a lower price. You really never know unless you ask, which is key to a good negotiation.
That was a pretty unique situation that probably won’t happen again for a while. But for more common negotiation, there are skills that you can and should be familiar with so that you can get the very best deal possible.
Set your anchor.
What’s an anchor? Think about it like this: I have a pen for sale at a price of $2.00. I can go lower, but you’re not sure how much. If you offer me $1.50, you’ve set your anchor and cannot go any lower. It’s important to set your anchor at a price that makes me pull it upward. I might have taken $1.30 for it, but now I’ll probably counter with $1.75 – a good price for both of us, but you could have done a little better with a good anchor.
In most negotiations, you are your only advocate. One of the best pieces of advice is to not negotiate against yourself! Wait until the other party offers a concession before making another offer that cheapens your end of the deal. Keep quiet and really let the offer sink in. Make it awkwardly silent and let the other person be the one to say something after the silence. This will help you to find your absolute best deal.
Know your backup plan.
The worst time to go into a negotiation is when you are stuck between a rock and a hard place. If you have even one alternative, you can create a better negotiating environment. For example, if you want to buy my pen for $1.00, but I won’t sell it, your alternative might be to use the pencil that you already have. It sounds simple, but it’s crucial for a good outcome. Academics call this your BATNA – Best Alternative To a Negotiated Agreement. It’s your fallback, and you need to make sure you know what it is before you jump into a negotiation.
Create a package deal.
Do you know why stores always seem to have special package deals that catch your attention? It’s because you think you’re getting a better deal – and sometimes you actually are. Don’t let the manufacturers be the only one to win with this strategy. You can do just as well with it. Try it at the next garage sale you go to. When you see a few things that you really want, try to first talk down the price of one item. When you have an idea of what they’ll discount something for, try to bundle them together and apply the same discount. It’s easier to negotiate for a bunch of items than to stand and talk down multiple things.
Let them ‘win.’
This can be the most challenging because it involves the most psychology. You both might be getting a great deal, but if your approach to the negotiation is ‘all about me,’ the other person might feel slighted and refuse to do business with you again.
Always try to create a WIN-win situation. I made the first WIN large because you want to be on the side with the bigger win :). When the other person feel that they’re getting a good deal, they’re more likely to work with you again in the future – which means a greater chance of even more good deals for you. You don’t want to burn the bridge you spent so much time building!
Negotiating is really an art form and takes patience. If you can incorporate some of these suggestions to your approach, you will start to see some improvement. Don’t expect them to work for every situation. You’ll just need to practice and try your best until you feel more comfortable with a negotiation.
During my MBA, we actually had an entire class dedicated to negotiations. A lot of these principles are the same that you’d learn if you wanted to get an online negotiations degree. Learn these tips and you’ll become a better negotiator guaranteed!
Have you ever negotiated for anything? Did you use any of these strategies? What worked, or didn’t work?