The Critical But Forgotten Step

Negotiation

The Critical But Forgotten Step
by Bernard Zick



Negotiation, like most activities, is a process, not just a few techniques. The negotiation process we use and teach in our seminars (Target Negotiation) involves three easy, but important, steps. First you must plan, then ask for what you want, then tradeoff concessions.

Plan First

Most sales persons and executives are eager to wheel and deal, so they hastily begin describing product or service features, and ask for the order. If your goal is to maximize business opportunities long-term, some planning and information gathering is necessary to find your customers' true needs and wants. Better-prepared negotiators complete this step before meeting with customers.

The Forgotten Step

Planning pays, but the step most often forgotten is the final step, trading off concessions. Let's call it Step 3, or trade off. This critical step contains two key ingredients for any negotiation. First, there are economic benefits that would be given up needlessly. Second, and even more important, you would leave out the psychological process that most people are comfortable with, if you skip Step 3. The following simple, but common, example illustrates this process.

Let's say you had your house for sale and you were asking $200,000. What would you expect the final sales price would be: $195,000 or $197,500? Depending upon the strength of the market when you offered the property, you would expect 5-10% less than your asking price.

High Price or High Satisfaction?

If a couple saw your home for just a few minutes and said, "We'll take it-- Here is a cashier's check--Send the documents to XYZ title company," how would you feel? You would do what most couples would do: go in the kitchen and say to each other, "We didn't ask enough!"

As a seller, you are left feeling something wasn't right-you could have sold the property for more. That empty feeling occurs because there was no exchange. The process of negotiation was missing. The key point here is that even though you "got your price," you don't feel good about it.

Less Is More

Let's try another scenario for the same sale. Potential buyers, after seeing the house, offered $192,000--you then counter-offered $195,000. They conditionally accepted, asking you to pay for title insurance. Finally, you agreed. Later, you feel it was challenging, but you received a fair price. You feel better than in the prior situation, though you settled for less money. It is important to recognize that people negotiate to feel good about the results, not just to maximize or minimize the dollars received or spent. In our second example (the $195,000 sale), less money resulted in more satisfaction. Do not omit the process of negotiation if you want to assure the other party's long-term satisfaction with the outcome.

Never, Never...

If there is a single rule to improve the success of your negotiations, it would be to never give anything away--always tradeoff items. Don't give up anything without requesting something in return. You will end the negotiations in a better position, but that is not the only reason to always tradeoff concessions. Again, your buyer's (or seller's) satisfaction surfaces. For example, how would you feel if you asked for a lower price the last time you purchased supplies or went to a doctor's office, and you got it? If they agreed to drop the price without hesitation, you would think the original price was unfair, and that you would have been cheated.

So, if you offer a unilateral concession, your customers may interpret it as proof your price was excessive, although you thought it was a gesture of goodwill. Again, less is more; a request for a concession met with an offer for a tradeoff or counter proposal provides more satisfaction than simply agreeing to a lower price. Giving items or dollars away not only costs you money, your customer will question your credibility. Some negotiators give concessions, hoping the other party will like them better for it. Usually, the gesture is ineffective. It is important to ask for something, even if it is not worth very much.

Say Yes

Once you see the importance of never giving anything away, but always trading off, a new negotiating perspective emerges. Think about this: you can respond to demands for concessions with a "yes" instead of a "no." Agree to their terms, but add your request for a concession or modify their proposal. You can say, "I can agree to that, if you will _________." This technique allows you to keep the negotiation momentum going on a positive note.

Rate of Concession

Giving concessions only when you get one in return increases your customers' satisfaction and your success. But, here is a word of caution. Limit your concessions; make several small concessions instead of a single large one. When your customer sees a large concession early in the negotiation, the message to them is: there may be more large concessions to come. A large concession will not endear you to the other party, only give them the wrong message. Also be cautious to reduce, not increase, the rate of concession. You also give the wrong message if your concessions increase in size. Your customer will expect larger and larger concessions.

For example, if you are discussing price and begin at $100, then lower it to $90, then to $70, next, you may be expected to offer $40 or $50, or even less. If your initial concession in this example was from $100 to $90, your next one should be a smaller one, say from $90 to $86.

Get More

The other reason you shouldn't forget the tradeoff step is economic. Although it sounds simple, the more you ask for, the more you get. Since most buyers and sellers focus almost exclusively on price, there are many concessions they will make in your favor that provide value, often hard cash value, for you-everything from financing, added features, delivery or closing dates and service to research and development. The value of these concessions to you frequently exceeds their cost to your supplier or customer.

Making It Work

Improve your negotiation skills by recognizing the critical, but forgotten step of trading off concessions. It's not only valuable for getting more of what you want, it's necessary to maximize your customers' satisfaction. Begin today by practicing in everyday, common purchases. You maybe surprised at how easy it is-and at the results.


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"Deal-Maker" Bernard Zick, a top Business Growth Expert, has spoken to over 250,000 top leaders in America. His expertise is widely recognized, and he is considered a master negotiator. You can contact "Deal-Maker" Zick at www.zick.com. His best-selling b