I’ve been listening to Slate’s Negotiation Podcasts, which I think are excellent. There are currently 7 episodes (although more are on their way), each about 10-15 minutes in length. Below are my notes summarising what I’ve learned:
Before the negotiation
Firstly, try and build information profile about your counter-party. You are interested in working out what their utility function (or value profile) is. You want to try and determine their “walk-away” number – the price at which they will walk away from the negotiation. You want to try and work out what alternatives they have to an agreement. What pressures do they have to getting an agreement?
Also, determine what your walk-away price is. What is the point at which you will walk away from the agreement? Try and come up with alternatives, this will help take the pressure off you during the negotiation. Work out what your utility profile is – what are your priorities? What points won’t you compromise on?
During the negotiation
Firstly, you should set the initial price. This will help determine the expectation range that your counter-party has. The only time when you should allow the counter-party to determine the initial price is if they have a lot more information about what the item/service is worth than you do.
With your initial price, you take your estimation of the negotiating counter-party’s walk-away price and offer slightly lower. Don’t go too low. You want the counter-party to take your initial offer seriously.
Also, try and establish rapport before you begin the negotiation. You can reveal unimportant information about yourself to help the flow of information. Ask questions – try and determine what is important to them. Are there any pressures on them to get the deal done? Are there any time pressures involved? Do other people have any expectations on the results of the negotiations?
Sometimes some small things may give you an edge. Having the appearance of authority may help you during the negotiation. Helping to boost the attractiveness to the counter-party by making the object of the negotiation appear scarce. “Only one left, so you should get it now”. Social proof – all these other people have also bought this item and been completely satisfied.
It’s important during the negotiation to try and seek mutual benefit.
If someone is over-aggressive or too emotional during the negotiation, take a time-out. Don’t mirror negativity. If the counter-party starts with with an insultingly low offer try a technique called “Re-Anchoring”. The Re-anchoring technique involves making a counter-proposal, and then repeating it numerous times. You are trying to “anchor” your counter-proposal in their mind.
If you get stuck in a negotiation, try adding in embedded options. For example; if [some situation] happens, then you must do [this other thing].
Closing the negotiation
Create a solution “package”. This is a complete solution – listing all the negotiating points and your proposal. Don’t try and negotiate each point separately, seek agreement for a “package” of solutions.
Potentially try embedding options into the solution.
Also, once you have an agreement, think about shelving the agreement temporarily to try and “re-factor” it, i.e. to try get a better agreement. You can always come back to your original agreement if no better solution can be found.
Take your time during the negotiation.