Negotiation is a skill I only recently learned about. As some of you might know, I am a Product and Content manager at Greator. And for our Business Coach program, I recently shot with Jack Nasher, THE Negotiation expert in Germany. Since I did not think about negotiation a lot before, I want to share with you, what I have learned, and what really surprised me about the topic.
The Just World Phenomenon / Theory
Melvin Lerner (I love his name), a social psychologist, created the Just Word Phenomenon.
According to his hypothesis, people have a strong desire or need to believe that the world is an orderly, predictable, and just place, where people get what they deserve. So we think ‘If I do good, it will pay off in the end’ or ‘The bad guy will be punished in the end’ or we simply talk about Karma. This type of thinking is super important in raising children, to give them an ethical guideline.
When we grow up the belief still plays an important function in our lives, because we still believe that our actions will have predictable consequences. It often makes sense, but when we talk about negotiation it does not. If we want to have something, we have to ask for it. You do not get, what you deserve, but what you negotiate.
And by that I do not mean, that you should settle on a compromise.
The misconception of compromises
The definition of compromise is, that 100% of the participants, get x% of the win. No one gets a 100%. It is a Loose-Loose situation.
Negotiation is about creating a Win-Win Situation.
Something that Jack Nasher talked about, that was still true for me at that point, is that we follow ‘The fixed pie myth’. We think there is a pie, that we can divide into pieces. And we fight to get the biggest piece. But actually it is not about dividing the pie, but about making it bigger.
If you ever find yourself in a situation, in which you need to go for a compromise, because there really is no other way, use the Texas Shoot out Method. One person divides the parts and the other person chooses, which share he/she wants. Not optimal, but sometimes good enough.
However, if you are in a negotiation, how do you approach that? You ask yourself which need, interest or desire is the primary motivating factor for you and for the other person. Which interest is driving them? Maybe there is something that you can give, that is ‘cheap’ for you, but has a lot of value for them. And it really is about value.
Focussing on value
The economy at its core is about creating value. Whenever we negotiate, it is about getting the most value out of the deal. So if you talk to your customers about a price, do not focus on cost, but more on the value that you bring. Do you generate a saving for them? Can he/she earn more as a result of your deal? Is there a major change in well-being? Quantify the value you bring and formulate a plausible line of arguments.
Same if you are looking for a good deal. Do your research.
Ask yourself, ‘what is the major interest or desire that I want to fulfill with this deal? What are the important factors?’. Always look for offers that bring the most value to you. Focussing on value, it will be easier for you to see if it is a good deal or not.
Let’s continue with a few strategies, that will help you during your negotiation.
This should be, what you are spending most of your time on. Before you enter your negotiation, you want to have your homework done. Check the best alternatives to negotiated agreement (batna). That means, check the best alternative to your preferred option. You need to have a plan B, C and D, so you know, when plan A is not creating the best value anymore. And that would be the point to leave the negotiation.
Also: go to choice B & C before you go to choice A, so you have an As up your sleeve when you talk to your preferred partner. And you only have an As up your sleeve, if you put it there. So do your research! Bring proof of your objective criteria with you and think about which questions could come up. An if you already talked to option B & C, you can be really honest and say: ‘I already talked to them. I would much rather work with you, but it is also important to me, to get the best value out of this.’.
Anchoring is a really smart way of setting the scene in a negotiation. Whichever number is on the table first, will give orientation for the rest of the negotiation.
So after you did your homework, you thought about value, and you know your price, you set a number for yourself. This number represents the best offer you can think of. And I mean the offer you dream of, because most times, we do not ask for enough. We rarely get more, than we asked for. We usually get less. So put a bit of buffer in there.
Also: set the minimum requirements, that would need to be fulfilled for you to still say yes to the deal. This way you have a clear exit point.
In the negotiation, you present your value and the reasoning for your price, and then you name your dream offer. And then, be quiet. Be confident about your offer and do not justify it.
This first number, that is in the room, is the anchor. It has power, so let it sink in.
The contrast effect
Sometimes it is also a good strategy to use others people’s numbers as an anchor, because their number helps you way more and sets the anchor even higher than yours would, because it is comparatively higher than yours. That is the comparison effect.
Let’s say you offer consulting. In the negotiation, after you presented your value, you could say something like ‘For this kind of project, a company like McKinsey would charge you about 150,000. We do not have the same overhead they do, so we can offer you 100,000”.
Always be ready to get up and leave.
Another factor, and probably the most important one yet, is: Always be ready to get up and leave. Especially if the negotiation already took some time. Why? Because we hate it, when we put a lot of work in, and then it does not pay off. We already invested so much time and effort, that we do not want it to be for nothing. To really have lost the time and money. But here is the point: That is not only true for you, but also for the opposite side. So play with it. The other side also invested a lot of time and energy, use that to your advantage.
Mirroring is actually something that I have known from coaching for a while. When I watched Chris Voss course on Masterclass about negotiation, it was one of the key elements for a successful negotiation. And it is fairly simple: Repeat what the other person has said, to make them say more. This way you get a lot of useful information. Whenever you ask questions, use the other person’s choice of words. And then really listen to what they have to say. Be honestly interested in whatever it is they are talking about. This kind of communication creates trust and makes you more likeable in the other person’s view.
Labeling is also something, that makes you more likeable. But even better: It guides the emotions of the person you are talking to.
So what is Labeling? It is naming, what you hear between the lines from when the other person is talking. So if someone seems upset, you could say something like ‘This sounds, like xy is really upsetting you.’. With labeling negative emotions, we weaken them, because we feel more in control. So if you label the other person’s emotion, he/she reflects upon what it is, they are actually feeling. And this calms them down. So even if your label is incorrect, it will work. The other person will just correct you and thus give you more information about them.
Another amazing thing is, that this also works for positive emotions, but the other way. Whenever we label positive emotions, we enhance them. This is a really nice strategy to get people more excited within your conversation and about the deal.
Negotiation in everyday life
What really surprised me about negotiation to start with is, that it is not about one person ‘fighting’ against the other, but rather about finding a deal that is beneficial for both parties. I still held the belief, that a negotiation is always kind of uncomfortable.
Now, having thought about negotiation a bit more, the topic really fascinates me from a psychological perspective. And negotiation really is everywhere. Mastering the skill of ‘Negotiation’ does not only concern getting paid more or getting the best deal, but also affects your every day life. Think about it: We negotiate every day. With ourselves and with others. No matter if we decide if we deserve that next piece of clothing or if we negotiate, with friends, which restaurant we want to go to. It is a game that is quite fun to play.