Negotiating can be at the heart of every business decision. But what are the keys to negotiating?
Whether you're a smaller business trying to get off the ground or you're facilitating conflict resolution at a company, understanding what’s at stake – and what’s influencing the other side’s psyche – may help you get your desired outcome.
Here are some negotiation tips that may help you close the deal.
1. Focus on the first few minutes.
The first few minutes of a negotiation can be especially important. The other party may be evaluating you closely, trying to figure out if you actually mean what you say.
Research from Harvard has shown initial views and impressions can reign over new information about the negotiator. Therefore, it can help to establish a positive rapport and start out as likable as possible. This can help later if the negotiation gets heated. Instead of shutting down, the other person may listen to your arguments more closely if trust has been established. You can start building trust early by having a brief introductory call before bargaining starts, setting ground rules and establishing clear communication.
2. Make your arguments first.
When making the opening move during a negotiation, you're introducing the "anchor" number. In what’s called the “anchoring effect,” researchers have found the first number typically anchors every number that follows during the negotiation. For instance, if you're bidding on an item, and the first bid is $25, every bid after that will be based on, compared, or related to $25.
Making the first offer rather than waiting to hear from the other side can help you wield more influence over the early negotiating stages.
What do you do if the other party has made the first offer? Researchers at Harvard say you can avoid being swayed by the anchoring effect. Instead, you can return to the research you conducted beforehand, and offer the best alternative offer, including your ideal offer and the other party’s alternatives. If that doesn’t work, you can move on to your next best option.
"The best negotiations can be the ones where value was added for everyone involved."
3. Aim for your target price.
If you do find you’re able to make the first offer, you can start with putting the target price on the table or an offer that meets all of your goals. You may want to start higher in negotiations to form an anchor price. To better make your case, the opening offer can be backed up with data points and research. Knowing what you're fighting for can be key.
4. Know when to walk away.
Whether it’s an integrative negotiation or adversarial bargaining, try to make sure the other party understands you’re willing to stay only if all parties can feel like they’ve “won” when the bargaining is over.
Margaret Neale, a professor of management at Stanford Business School, advises knowing your options or what you would do in the case of an impasse before you start negotiations.
“If I have a really good alternative, then you’re going to have to pay a premium for me to stay and play in this interaction,” she says in a podcast. “Otherwise, I can just walk.”
You can spend some time beforehand identifying your most advantageous option behind your target one. This is known as the 'best alternative to a negotiated agreement' (BATNA).
5. Provide as much data as possible.
If you want to influence someone, providing as much information as possible can help. This can involve doing your research on numbers and facts ahead of time and being as prepared as possible. When you're clear about your 'why' it can make it easier for the other party to say 'yes.'
The Takeaway
In negotiations, the other party can be influenced by various tactics and preparations. It can be helpful to keep these in mind when approaching your next business negotiation. The best negotiations can be the ones where value was added to a contract for everyone involved.
A version of this article was originally published on September 19, 2012.
Photo: Getty Images
