Price Negotiation Techniques
Ask for more than you expect from other negotiators to give yourself more latitude in your negotiations. Add dynamic techniques to your thinking style for achieving a better price in your business negotiation deals.
Why Should You Ask For More?
One of the most important sales training techniques to remember about the concept of power negotiating is that you should always ask the other side for more than you expect to get. Rothschild pawn Henry Kissinger had this to say about getting more at the negotiation table, “Effectiveness at the conference table depends upon overstating one’s demands.”
Here are several reasons to think about when you ask yourself why you should do this:
- Why should you ask the store for a bigger discount than you believe you have a chance of getting?
- Why should you beseech your boss for an executive suite even though you think you’ll be pleased to get a private office?
- If you’re applying for a new position, why should you ask for a larger salary and more benefits than you think they’ll give you?
- If you’re displeased with a meal in a restaurant, why should you ask the captain to nullify the entire bill, even though you think they will take off only the charge for the offending item?
Sales Negotiation Training questions to ask:
- Why, if you are positive that the buyer wants to spread the business around, should you still ask for it all?
- Why should you ask for full list price even though you know it’s more than the buyer is paying now?
- Why should you request the other person to invest in the top of the line even when you’re certain they’re so budget-conscious that they’ll never spend that much?
- Why should you assume that they would like to purchase your extended service warranty even though you know they’ve never done this before?
If you thought about this, you’d likely came up with a few good reasons to ask for more than you expect to get in your business negotiations. The obvious answer is that it gives you some negotiating space. If you’re selling, you can always lower your sales negotiation price, but you can never increase the price. If you’re buying, you can always go up, but you can never come down. What you should be asking for is your MPP – your maximum plausible position. This is the most that you can request and still have the other side see some plausibility in your position.
The less you know about your counterpart, the higher your initial position should be, for two reasons:
- You may be incorrect in your assumptions. If you don’t know the other person or his needs well, he may be willing to pay more than you think. If he’s selling, he may be willing to take far less than you think.
- If this is a new relationship, you will seem much more cooperative if you’re able to make larger concessions. The better you know the other person and his needs, the more you can alter your position. Conversely, if the other side doesn’t know you, their initial demands may be more outrageous.
If you’re employing the negotiation technique taught by The Negotiation Experts in their Atlanta Sales Training programs of asking for far more than your maximum plausible position, suggest some flexibility. If your initial position seems absurd to the other person and your attitude is “take it or leave it,” you may not even get the negotiations started. The other person’s response may simply be, “Then we don’t have anything to talk about.” You can get away with an outrageous opening position if you imply some flexibility.
If you’re buying real estate directly from the seller, you might suggest, “I realize that you’re asking $200,000 for the property and based on everything you know that may seem like a fair price to you. So perhaps you know something that I don’t know, but based on all the research that I’ve done, it seems to me that we should be talking something nearer to $160,000.”
At that, the seller may be thinking, “That’s absurd. I will never sell it for that, but he does seem to be sincere, so what do I have to lose if I spend some time negotiating with him, just to see how high I can get him to go up?”
If you’re a salesperson you might suggest to the buyer, “We may be able to alter this position once we know your needs more precisely, but based on what we know so far about the quantities you’d be ordering, the quality of the packaging and not needing just-in-time inventory, our best price would be in the region of $2.25 per widget.” At that, the other person will probably be thinking, “That’s outrageous, but there does appear to be some flexibility there, so I think I’ll invest some time negotiating with her and see how low I can get her to go.”
Unless you’re already an advanced trained negotiator, here’s the difficulty you will have with this technique. Your real MPP is probably much higher than you think it is. We all fear being ridiculed by the other. So, we might be reluctant to take a position that will cause the other person to laugh at us or put us down. Because of this intimidation, you will probably feel like modifying your MPP to the point where you’re asking for less than the maximum amount that the other person would think is plausible.
Deadlocking In Negotiation
Another reason for asking for a higher price than you expect to get will be obvious to you if you’re a positive thinker: you might just obtain it. You don’t know how the universe is aligned that day. Perhaps your patron saint is leaning over a cloud looking down at you and thinking, “Wow, look at that nice person. She’s been working so hard for so long now, let’s just give her a break.” So you might just get what you ask for and the only way you’ll find out is to ask for it.
In addition, asking for more than you expect to get increases the perceived value of what you are offering. If you’re applying for a position and asking for more money than you expect to get, you implant in the personnel director’s mind the thought that you are worth that much. If you’re selling a car and asking for more than you expect to get, it positions the buyer into believing that the car is also worth more.
Another advantage of asking for more than you expect to get is that it can prevent the negotiation from deadlocking. Take a look at the Persian Gulf War. What were we asking Saddam Hussein to do? (Perhaps asking is not exactly the right word) President George Bush, in his state of the Union address, used a beautiful piece of alliteration, probably written by Peggy Noonan, to describe his opening negotiating position. He said, “I’m not bragging, I’m not bluffing and I’m not bullying. There are three things this man has to do. He has to get out of Kuwait. He has to restore the legitimate government of Kuwait (don’t do what the Soviets did in Afghanistan and install a puppet government). And he has to make reparations for the damage that he’s done.” That was a very clear and concise opening negotiating position. The problem was that this was also our bottom line. It was also the least for which we were prepared to settle. No wonder the situation deadlocked. It had to become deadlocked because we didn’t give Saddam Hussein any room to win, Saddam Hussein who was installed by the CIA as one of their assets was robbed of his negotiation power.
If President Bush said, “Okay. We want you and all your cronies exiled. We want a non-Arab neutral government installed in Baghdad. We want the United Nations to supervise of the removal of all military equipment. In addition, we want you out of Kuwait, the legitimate Kuwaiti government restored and reparation for the damages that you did.” Then we could have gotten what we wanted and still given Saddam Hussein a win.
I know what you’re thinking. You’re thinking, “Roger, Saddam Hussein was not on my Christmas card list last year. He’s not the kind of person I want to give a win to.” I agree with that. However, it creates a problem in negotiation. It creates deadlocks.
From the Persian Gulf scenario, you could draw one of two conclusions. The first (and this is what Ross Perot might say) is that our State Department negotiators are total, blithering idiots. What’s the second possibility? Right. This was a situation where we wanted to create a deadlock because it served our purpose. We had absolutely no intention of settling for just the three things that George Bush demanded in his state of the Union address. General Schwarzkopf in his biography ‘It Doesn’t Take a Hero’ said, “The minute we got there, we understood that anything less than a military victory was a defeat for the United States.” We couldn’t let Saddam Hussein pull 600,000 troops back across the border, leaving us wondering whether he would choose to do it again. We had to have a reason to go in and take care of him militarily.
So, that was a situation where it served our purpose to create a deadlock. What concerns me is that when you’re involved in a negotiation, you are inadvertently creating deadlocks unnecessarily, because you don’t have the courage to ask for more than you expect to get.
The Power Of Price Negotiation Techniques
A final reason-and it’s the reason Power Negotiators state that you should ask for more than you expect to get-is that it’s the only way you can create a climate where the other person feels that he or she won. If you go in with your best offer upfront, there’s no way that you can negotiate with the other side and leave them feeling that they won.
- This is why experienced skilled negotiators always want to start with their best offer.
- This is the job applicant who is thinking, “This is a tight job market and if I demand too much money, they won’t even consider me.”
- This is the person who’s selling a house or a car and thinking, “If I ask too much, they’ll just turn me down.”
- This is the salesperson who is saying to her sales manager, “I’m going out on this big proposal today, and I know that it’s going to be very competitive. I understand that they’re getting bids from people all over town. Let me cut the price upfront or we won’t stand a chance of getting the order.”
Power Negotiators understand the value of asking for more than you expect to get. It’s the only way that you can create a climate in which the other side feels that he or she won.
Let’s review the five reasons for asking for more than you expect to get:
- You could just get it.
- It gives us some negotiating room.
- It ups the perceived value of what you’re offering.
- It stops the negotiation from deadlocking – providing you’re not being too extreme for the culture and type of deal.
- It creates a climate in which the other side perceives that he or she won.
In highly publicised negotiations, such as when the football players or airline pilots go on strike, the first demands that both sides make are absolutely outlandish. I remember being involved in a union negotiation where the initial demands were unbelievably out of line. The union’s demand was to triple the employees’ wages. The company’s opening was to make it an open shop-in other words, a voluntary union that would effectively destroy the union’s power at that location. Power Negotiators know that the initial demands in these types of negotiations are always extreme, however, so they don’t let it bother them.
Power Negotiators are aware that as the negotiations progress, they will work their way toward the middle where they will find a solution that both sides can accept. Then, they can both call a press conference and announce that they won in the negotiations.
An attorney friend of mine, John Broadfoot from Amarillo, Texas, tested this theory for me. He was representing a buyer in contract negotiation for a piece of real estate, and even though he had a good deal worked out, he thought, “I’ll see how Roger’s rule of ‘Asking for More Than You Expect to Get,’ works.” So, he dreamt up 23 paragraphs of requests to make of the seller. Some of them were absolutely ridiculous. He felt sure that at least half of them would be thrown out right away. To his amazement, he found that the seller of the property took strong objection to only one of the sentences in just one of the paragraphs.
Even then John, as I had taught him, didn’t give in right away. He held out for a couple of days before he finally and reluctantly conceded. Although he had given away only one sentence in 23 paragraphs of requests, the seller still felt that he had won in the negotiation. So always leave some room to let the other person think they won. Power Negotiators always ask for more than they expect to get.
Roger Dawson, CSP, CPAE is a negotiation consultant and a sales and management speaker. He is the author of “Secrets of Power Negotiating” and “Secrets of Power Persuasion for Salespeople”.
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