While many people are intimated by negotiating on a major purchase, such as a new car, house, or salary increase, there are simple and straight-forward techniques for how to become a better negotiator immediately.
Negotiating is one of the more intimidating activities for an entrepreneur, but becoming a more effective one can empower you in all walks of life – from negotiating a raise to making more sales at higher price points. The best negotiations will have both parties walking away happy.
How to Become a Better Negotiator
Read on to learn nine tactical tips that will make you a better negotiator, immediately.
1. Preparation and Knowing Your BATNA
Before you begin negotiations, you need to prepare. Be sure that you know your objectives, and write down multiple strategies for how to reach each one. Negotiating is about compromise and creativity, and if you have multiple strategies prepared you’ll be more flexible in the midst of changes.
Moreover, preparation allows you to remain resilient even under extreme pressure. By remaining resolute, the other party will be far more likely to work with you on compromises instead of pushing for their own objectives.
After you have determined the concrete objectives you’d like to reach, you’re prepared for Tip #1, which is to identify your best alternative to a negotiated agreement, also called a “BATNA” for short. This is the best fallback option for you if you’re not able to reach an agreement on your objectives.
Without a BATNA, your negotiation will crumble at the first refusal.
Importantly, a BATNA will let you make reasonable concessions to the other party, while still staying within the range of what your next best alternative would be.
For example, if you’re negotiating to buy a house with a list price of $100K and you’re offering the seller $90K ($10K under the asking price), your BATNA may be to buy another house that you like nearly as much that has a list price of $95K.
In this situation, if you have to pay more than $95K to acquire the first property listed at $100K, then the deal won’t be worth it to you.
2. Interests Over Positions (and What You Can Learn from an Orange)
As you negotiate, focus on learning about the interests of the opposite party instead of their current position. By finding mutual interests, you’ll be more equipped to address both your needs without becoming combative or adversarial.
People commonly have reasoning behind their positions that coincides with their interests. By pinpointing the interest that’s driving their reasoning, your conversations will be more collaborative as you both find mutually beneficial ways to reach your objectives.
When you understand the other party’s interests, you can often find creative ways to meet them.
For example, imagine you and another person are negotiating to split an orange. After much back and forth, you decide to settle on cutting the orange in half each each getting 50% of it, because no other solution seems fair to both parties.
However, right before this happens, you think to ask the other person, “Why do you want this orange?” Only then do you realize they want to make orange juice and you want to use the orange rind to make a cake.
Because you thought to ask this fortuitous question, you suddenly realize that you can both have 100% of what you need from the orange, without the other person’s needs having to be compromised.
As you learn how to become a better negotiator, you’ll want to focus on interests over positions, always exploring the why behind their reactions and requests.
3. Open and Confident Body Language
As you’re negotiating, be mindful of your body language and the ways you’re responding to the opposite party. If you find that you’re interrupting the other person, being curt, or coming off as defensive, you’re far less likely to achieve the results you desire.
As humans, as much as 90% of what we communicate comes from our bodies and not our mouths.
Practice active listening and pause to allow the other party to express their points. Summarize their points before you begin with your own so they’re aware you’re also considering their own side of things.
As you listen and speak, be aware of the way your body responds. Even if you’re practicing active listening, if you’re moving your leg, crossing your arms, or not making eye contact, this will suggest to the other party that you are either nervous, unprepared, or don’t care about their concerns.
Instead, use open body language, direct eye contact, sit or stand upright, and keep your arms and hands open.
As humans, we also tend to give more respect (and concede more in a negotiation) to someone who projects confidence.
4. Stay Rational (Use a Mediator if Needed)
When it’s your turn to speak, you want to ensure that the other party isn’t misinterpreting what you’re saying. You need to speak clearly, concisely, and not let emotion disrupt your ability to communicate.
If you become personally involved in the negotiations, this will disrupt and sidetrack the negotiations. You may completely forget your objectives in order to win.
It’s one of the main reasons that realtors exist within real estate transactions. They are there to act as a rational buffer between the buyer and seller, who are often highly emotional and therefore, prone to blowing a deal due to an impulsive reaction.
You’ll also want to ensure you have a solid foundation of knowledge that you can fall back on when communicating your points.
It’s good to have these elements available:
- Facts supported by evidence
- Precedents that support your stance
All of these elements will aid you in communicating your side of things convincingly and rationally.
It is best if the other party involved in the negotiation believes that whomever they decide to enter into a deal with is likely to have the same rational concerns as you.
For example, if you ask the seller of a house for $5,000 cash back at closing to help with the repair of a leaky roof, it will be extremely helpful if you explain to the seller that every potential buyer will be likely to want a similar price (or a completed repair) before they close the deal. With this logic, it will be extremely hard for the seller to turn down your request.
5. Weapons of Automatic Influence (Power of “Because”)
Another negotiating tip is to use the word “because.” Simply using the word because and giving a reason to support what you are asking for has been shown to have a dramatic impact on how willing the other side is to comply.
In his widely quoted social psychology book Influence, Robert Cialdini teaches that there are several weapons of automatic influence, meaning human psychological principles that have the “ability to produce a distinct kind of automatic, mindless compliance from people, that is, a willingness to say yes without thinking first.”
To explain the importance of using the word “because” when making a request, Cialdini cites a Harvard student conducted in 1989 by social psychologist Ellen Langer, stating:
A well-known principle of human behavior says that when we ask someone to do us a favor we will be more successful if we provide a reason. People simply like to have reasons for what they do. Langer demonstrated this unsurprising fact by asking a small favor of people waiting in line to use a library copying machine: Excuse me, I have five pages. May I use the Xerox machine because I’m in a rush? The effectiveness of this request-plus-reason was nearly total: 94% of those asked let her skip ahead of them in line.”
Compare this success rate to the results when she made the request only: Excuse me, I have five pages. May I use the Xerox machine? Under those circumstances, only 60% of the people asked complied.
At first glance, it appears that the crucial difference between the two requests was the additional information provided by the words, “because I’m in a rush.”
However, a third type of request tried by Langer showed that this was not the case. It seems that it was not the whole series of words, but the first one, “because,” that made the difference. Instead of including a real reason for compliance, Langer’s third type of request used the word “because” and then, adding nothing new, merely restated the obvious: Excuse me, I have five pages. May I use the Xerox machine because I have to make some copies? The result was that once again nearly all (93%) agreed, even though no real reason was added to justify their compliance.’
As clearly described by Cialdini in the Xerox example above, the word “because” is a powerful trigger word that has the potential to impact human behavior and should be used whenever asking for concessions or compromises within an negotiation.
Beyond its psychological impact, asks made without any justification are perceived as demands. In contrast, asks that are accompanied by reasons are received by others as reasonable requests.
6. Importance of Anchoring and Price Framing
In the 1970s psychologists Amos Tversky and Daniel Kahneman discovered the “anchoring effect.” This means that your first offer during the negotiation anchors the rest of the conversation. By aiming higher than your initial goal while remaining realistic, you’ll end up doing better by the end of your negotiations.
For instance, think about making an offer for a new couch at a furniture shop. If you offer the shop owner $750, you’ll find that she or he will likely counter you at a higher number, like $975.
Instead, try offering $500, but implying flexibility so they don’t walk away from the negotiation just because you came in with a low opening offer. With this approach, the store owner is still likely to counter at a higher number like $975, but then you’ll most likely find yourself meeting in the middle around $750 when all is said and done.
By opening higher, you have a higher chance of attaining your goal after negotiations.
Importantly, opening high also lets you concede ground in the negotiation, which makes you a much more pleasant negotiator. It allows you to be reasonable and flexible by giving up price concessions to the other party. Despite this, if you opened at the right price, you will still end up buying the furniture (or any other item) at the approximately the price and terms you were seeking.
Many people also call this “price framing” and it is a highly effective and widely studied phenomenon of the human brain. It is also why nearly all restaurants will have at least one very high priced item on the menu, such as a special seafood dish priced 2-3X higher than the other items on the menu.
To the human brain, this single high priced selection on the menu makes all of the other prices appear more reasonable and affordable.
It is also why every nice suit shop knows to sell the suit first (often priced at a $1,000 or more), and only then, offer the lower priced dress shirt for $65 and the tie for $25. With the high cost of the suit effectively price framing the buyer, the buyer becomes much more willing to consider additional lowed priced purchases.
In contrast, you would do extremely poorly if you tried to sell $10 dress socks to a buyer first and then offered then a $1500 suit at checkout.
Using this suit example, it becomes clear that there are mental short-cuts used by the human brain. Price framing is one of these mental short-cuts that dramatically impacts both our decision making and willingness to comply.
7. Make Trades of Unequal Value
You’ll get to a point where you can’t agree on a certain point in order to achieve your objective, even if you practice active listening, empathize with your opponent, and are communicating effectively. This is normal for any negotiation.
Instead of giving in to the other party’s demands, focus on making trades of unequal value. Use conditional phrases such as:
- What if I … then would you?
- If I were to … then would you?
- Suppose we … then would you?
Instead of giving away things that are valuable to you, try to get something in return that may matter a lot to you, but not nearly as much to the other party. As you go back and forth, think of it as a collaborative growth process instead of a contest. That way, you’ll both come away with a positive instead of a bitter view of the negotiation.
Many times within a negotiation, there are things of unequal value to both parties. For example, in a real estate deal, price might matter most to the seller, while having their closing costs paid might matter most to the buyer.
In this case, the buyer might offer a higher price (knowing it will only impact their monthly mortgage a small amount), while the seller might cover the buyer’s closing costs (knowing that the seller doesn’t have much money available up front).
It’s extremely important to remember that if the other party would not agree to enter into a future negotiation with you, then you have not done a good job as a negotiator. The world’s best negotiators get favorable terms, while exploring and meeting as many of the other party’s needs as possible.
8. Always Remember, an Ask is Free
Within a negotiation always remember that an ask is free. When done respectfully, it costs you absolutely nothing to make an ask.
For example, let’s say there is a house that you’d absolutely love to buy that is priced at $250K, but unfortunately, given your current income and mortgage qualification limits, you can’t offer the seller more than $230K. Using the strategy above to always give the other side a reason and knowing that an ask is free, you say, “I love everything about your house, and while I’d like nothing more to offer you the full list price, I’m only qualified to to afford a mortgage at a purchase point of $230K.”
Given this reasonable explanation and your willingness to ask for the terms you need to close the deal, the seller might just think to herself or himself, “You know, I priced this property aggressively. This is a fair and good offer with a reasonable explanation. I’ll take it.”
Even if the seller turned you down, you’ve lost absolutely nothing by asking. Your ask was free.
There is a fantastic book by Michael Alden titled “Ask More, Get More.” One thing I love about it is that the title says it all. In life, the more you ask, the more you get. Period.
Best of all, most people will respect you for asking and many will offer you creative or compelling offers in return. Even if they say no to your ask, which is totally reasonable for them to do, it literally cost you nothing to make your request.
So, flex this skill set and always remember: Ask more, get more.
9. Ask the Other Side, “How Can We Get This Deal Done?”
A final essential tool in the negotiating toolkit is to ask the other side, “How can we get this deal done?”
The best part of this approach is that it makes finding the solution collaborative, by inviting the other party to help you find a solution that will allow you both to transact. After all, you are both present within the negotiation, because you have needs that you are trying to get met.
I have noticed many times over that novice negotiators are way too combative. This is problematic because once the negotiations get tense, you’re unlikely to get your terms met simply because the other side will become less and less willing to give up ground.
When you ask the question “how can we get this deal done”, you become a partner with the other party in the deal. You are now moving in the same direction toward closing the deal instead of facing off for a fight.
For example, if you’re trying to buy a used car priced at $21,000 during a Black Friday Sale, you may want to say to the sales person, “While I’d love to get this car right now, my wife has allocated a budget of $19,000 for me to come home with a new vehicle. Given this restriction, can you think of any way that we could get this deal done, because I will be buying a vehicle from somewhere before the close of business today? I’d like to know if there’s any way we could both benefit from this transaction.”
Note that the example above is powerful for several reasons:
- First, it asks the other party, “How can we get this deal done?”
- Second, it uses the word “because” and it provides a reason to transact with you today.
- Third, it implies that you are flexible, collaborative, and want to get the needs of the sales agent met too.
- Fourth, you’ve offered a low enough price that you can still be flexible and come up a bit in price. As explained above, people are more willing to be flexible when you will bend too.
- Finally, it uses one more psychological factor, which is the fear of loss.
By saying that you will be purchasing a vehicle from somewhere today, it implies that you will find a dealer with whom to transact today and thereby creates a fear a loss that once you walk off the lot, you are a lost deal. It has been widely confirmed that humans experience much higher psychological pain from loss than they do from an equivalent gain, so use this to your advantage.
Under these circumstances, the sales person might say, “You know, my commission is higher on our Extended Warranty Plans than on our car sales. If I can get permission to sell this vehicle to you for $19,500, would you be willing to pay $30 a month ($360/year) for a Warranty Plan for the next 24 months?”
Given that paying $360 per year for two years for this Warranty Plan will only cost you $720 while saving you $1500 (a net gain of $780), and you’d get additional valuable benefits and protections for your vehicle, agreeing to this offer may be a good deal for both you and the sales person.
Of course, these exact numbers could vary substantially depending on how competitively the car was priced up front, so use this as a strategy example and not a price example. For reference, paying 2% above the dealer’s invoice price tends to be a reasonably good deal on most cars.
Alternatively – and very commonly – the sales agent may hold relatively firm on the price, but start offering you items of additional value, such as a heated seats, a sunroof, upgraded tires, a vehicle maintenance package, or other valuable benefits.
By asking the other party how you could get the deal done, they will start suggesting ways in which the deal could potentially be improved for both parties. The point is, ask for the terms that would allow you to do the deal and ask for their collaboration in putting the pieces together so that they can get their needs met too.
People are tend to be more generous when you ask them to be part of the solution.
How to Become a Better Negotiator: Making Everyone Happy
Many people are reluctant to negotiate because they view it as an aggressive, combative activity. However, if you prepare and think of the negotiation as a creative and collaborative process, you’ll be far more likely to reach the objectives you desire.
In most negotiations, you are involved with each other because there is the potential for both of you to benefit from transacting. This is true in retail sales, home sales, future sales, and in nearly every other negotiation you’ll find yourself.
Learning how to become a better negotiator goes hand in hand with learning to become a better communicator.
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