Negotiation is the foundation to business discourse. Everything is a give and take. Productive negotiations actually form strong relationships, help companies get ahead, resolve conflict, create long-lasting solutions, avoid future problems, and build value in contracts.
When negotiations prove successful both parties have a deep feeling of satisfaction and will seek to do business together again at a later date. In this ultimate guide to negotiation, we will explore the strategies, behaviors, and tactics needed to come out ahead.
At RED BEAR Negotiation, we help transform people and teams with our negotiation workshops. Our powerful negotiation training experiences produce measurable results.
In this complete guide, we’ll walk you through the framework of our negotiation strategies, principles, and tactics. But before we dive in, it’s important to first establish the foundation of negotiating – learning how to manage tension.
Managing Tension
As humans, we’re naturally averse to dwelling within a state of tension — it’s uncomfortable, it makes us feel vulnerable, and it often leads to behavior that dissipates as much of the tension as possible. Managing and overcoming this discomfort is actually what sets the world’s best negotiators, athletes, and poker players apart from the rest. They’re not only at ease in a state of tension, but they also thrive in it: using it to their advantage in a calm and collected fashion.
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Tension is the Key to a Successful Negotiation
But tension is an inevitable part of any negotiation process. It’s only natural: if both parties are looking to gain at the expense of the other, the moment those desires clash there’s bound to be a degree of conflict and discomfort. Just as you can’t have your cake and eat it too, pardon the cliche, it can be difficult to retain an item of value while simultaneously trading it for something else.
RED BEAR’s 3-Dimensional Negotiation Model postulates that there are three different negotiation dimensions that lead to successful negotiations: Collaborative, Competitive, and Creative. These three dimensions work together in varying doses and help negotiators get more value from their negotiations, while simultaneously building the foundation for a productive long-term relationship.
The Three Dimensions of Negotiation
The Competitive Dimension focuses on your self-interest and that of the party you are representing. The Competitive Dimension means protecting your desires, looking out for yourself, and occasionally playing hardball to not give up ground without gaining anything in exchange.
Often, this dimension focuses on a single or small negotiable item, such as money or terms. A negotiator that takes the Competitive Dimension to its extremes ends up with a “win-lose” mindset where every win you get comes at the expense of the other party.
The Collaborative Dimension is all about facilitating communication in hopes of building a productive relationship and opening the playing field by searching for multiple negotiables. The Collaborative Dimension wants to find mutually satisfactory outcomes for the negotiation. A negotiator that takes the Collaborative Dimension to its extremes might end up sacrificing otherwise achievable wins or leaving value on the table for the sake of closing the deal.
The Competitive and Collaborative Dimensions fundamentally function as antagonists to each other, but both need to be utilized to reach a negotiation’s maximum potential. Without the competitive drive for self-interest, the negotiator may give in too quickly, reduce the level of tension, and diminish the chances that new and creative solutions will emerge. Without the collaborative drive for a relationship, negotiators might not be able to engage in the “give and take” needed to generate new ways of looking at the situation. Impasses and bad feelings might emerge.
The natural tension that emerges from these two antagonistic elements actually acts as a positive force that helps nudge negotiations forward that give birth to creative solutions. Tension, however, is a concept that is often hard to grasp for many people. As humans, we’re hardwired to avoid discomfort and tension. In order to give our negotiations the power to transcend your typical run of the mill stagnation without giving up too much of your self-interest, we need to embrace this tension and alchemize it into something productive.
That’s where the Creative Dimension comes into play. When there is a healthy tension between the self-interests of the parties and the desire of both to maintain their relationship, the chances of a creative breakthrough—a truly creative and unanticipated approach to a mutually profitable settlement—increase dramatically.
The Creative Dimension seeks to break through deadlock and potentially find even better solutions that would otherwise be left unexplored.
Creating Positivity and Creativity from Discomfort
You’ve heard that pressure makes diamonds, and in much the same way, tension makes creative solutions. The best negotiators are able to masterfully utilize various skills in their toolbox to lead negotiations and get more of what they want.
How to Navigate the Three Dimensions of Negotiation
Most negotiation analogies involve some kind of sport or strategic game, such as boxing, poker, chess, basketball — you name it. This is because most people see negotiation as an inherently competitive activity. It’s one negotiator competing with the other for the better deal and more favorable outcome — simple, right?
Actually, no. As we’ve mentioned before, competitiveness is only one of three dimensions of the negotiation process. The other two are collaboration and creativity, which we’ll delve into in more detail below.
While a skilled negotiator knows that acting in self-interest isn’t everything, they never underestimate or neglect the competitive dimension of negotiation. Rather, an artful negotiator understands how each dimension waxes and wanes throughout the course of the negotiation, and deftly glides between them as the power dynamic changes and need arises.
Now that you have a better understanding of the importance of managing tension and shaping your negotiation strategy within the three dimensions mentioned above, let’s explore the six principles of successful negotiating...
The 6 Principles of Negotiation
Negotiation is both a complex subject to learn and a difficult art to master. There are, however, fundamental principles which enable us to break through the complexity and practice the art with understanding.
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The 6 Principles of Successful Negotiation
Let’s take a closer look at each one of the principles of negotiation:
- Position Your Case Advantageously
- Set High Aspirations
- Manage Information Skillfully
- Know the Full Range and Strength of Your Power
- Satisfy Needs Over Wants
- Concede According to Plan
1. Position Your Case Advantageously
Describing your case in a succinct and compelling way helps to convey the value of your proposal or solution at its maximum potential. Value is subjective, and the way you frame your case affects how the other party perceives its value. In order to effectively do so, you need to find that sweet spot of being brief and compelling.
Choose a few of your absolute best data points to anchor your value proposition or theme and learn how to redirect discussion towards your most appealing and powerful themes. Simply repeating your positioning theme in a natural way throughout the conversation helps to demonstrate your conviction about the value of your ideas.
Average negotiators tend to skip over this Principle because they assume the other party already fully understands the value of their proposition or solution, which oftentimes isn’t the case.
Including too much data or too many arguments to help the other party understand your value proposition can decrease the effectiveness of your positioning. Remember: your position must be brief, compelling, and repeatable.
2. Set High Aspirations
Those who ask for more tend to receive more. You don’t want the reason you underachieved in a negotiation because you set low aspirations. This is why it’s important to start high and concede strategically.
High aspirations not only help you anchor the conversation to a higher perceived value proposition, but they also help to test the range of reason of the other party.
Savvy negotiators will set high aspirations for all potential negotiables, such as:
- Access to key people
- Access to key resources and information (process control or pricing)
- Agreement with your process, system, or approach
- Schedule flexibility
- Quality specifications
- Favorable contract language
- Broader warranties
- Generous payment terms
Establishing either too high or too low of expectations can seriously hamper your ability to achieve a satisfactory outcome. Be reasonable but aim high.
You are more likely to achieve a positive outcome and build a stronger relationship by reaching for the highest aspirations without being offensive or appearing to take advantage of your counterparty.
Aspirations can, and will be, lowered in a negotiation, but it’s extremely difficult to raise aspirations once they’ve been revealed.
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Why Setting High Aspirations is Vital for Any Negotiation
3. Manage Information Skillfully
Effective negotiators know how to plan the way they leverage, protect, and uncover information, rather than doing so spontaneously.
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How to Manage Information Skillfully in Any Negotiation
How to Master Information by Managing Information
There are three points of focus to manage information skillfully: uncovering information, leveraging information, and protecting information.
Uncover Information:
Uncover what the other party really needs to solve their problem by asking questions.
It’s more important to focus on getting information rather than sharing information.
Experts tend to ask 2.5 times more questions than average and do one third of the talking.
Leverage Information:
Provide information that works to your advantage.
Share information when it is most advantageous to do so.
Protect Information:
Sensitive information such as financial flexibility, internal deadlines, and free “extras” shouldn’t be shared at the wrong time.
Remember, when managing information, don’t share too much too early.
- Anticipate the most subjective questions the other party may ask and prepare the appropriate answers ahead of time.
- Prepare to answer disadvantageous questions without lying or misleading.
- Always operate within clear contractual, legal, and ethical boundaries.
4. Know the Full Range and Strength of Your Power
Expert negotiators are able to continually assess their level of power in a negotiation. This doesn’t mean that the entire negotiation hinges on your personal level of power, but your power relative to the other party’s power.
The majority of people tend to underestimate their power and are so focused on the pressures they face and blind themselves to the constraints of the other party. Power starts with personal conviction. You are as powerful as you believe you are.
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The 6 Sources of Power in Any Negotiation
How to Power Up Your Negotiations by Knowing Your Power
Power is perception. If others perceive you to be powerful, then you have that power. The best way to enhance your power is to be noticeably clear in the communication of your expectations and boundaries.
Many people tend to become overly dependent on information as their main source of power in a negotiation.
5. Satisfy Needs Over Wants
Savvy negotiators know how to uncover and address the other party’s fundamental concerns, interests, and motivations (needs) rather than simply reacting to specific and narrow demands (wants.) However, in order to do so, you need to have an excellent radar to differentiate wants and needs.
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How to Satisfy Needs Over Wants for Negotiation Success
Wants: specific, measurable, and on the surface, or requirements that can be met in only one way. For example, a $1,500 discount, delivery by Friday, or 500 units.
Needs: general, subjective, less measurable. For example, looking good to one’s manager, managing personal risk, or increasing market share.
Uncovering the other party’s needs requires good questioning and listening skills, and the patience to leave no stone unturned until you discover them. The key is to understand why the other party wants versus what they want.
Identifying the other party’s needs allows both parties to be more creative and lead to a true win-win agreement that meets the true needs of both parties and can be more satisfying in the long term.
6. Concede According to Plan
By preparing value-based exchanges in advance, you can get “concession psychology” to work for you rather than against you.
Making concessions is a key part of any negotiation. It’s the difference between artfully exchanging value in a way that encourages a long-term partnership and standing there like a petulant toddler demanding the world without giving anything in return.
The world’s best negotiators treat concessions in an equivalent way that experienced chefs use condiments when preparing a meal: sparingly and with purpose. In doing so, they’re able to reach a far more favorable — and delectable — outcome. But when you concede either too much or too little, your outcome will be unpalatable for both parties: bland and unsatisfying, or so overwhelming that it grinds the entire process to a halt.
To help you hit that Goldilocks Zone of negotiation concessions, we’ve compiled the following list of 6 key guidelines. Let’s dig in:
- When You Give a Concession, Get One in Return
If you find yourself in a deadlock and want to make a concession in the hopes of moving the negotiation forward, always make sure to receive one in return. Failure to do this communicates that you’re willing to give value away for nothing; either because you aren’t confident in your case, or you feel that you owe your opponent. This sets a dangerous precedent for the negotiation going forward. - Do Not Make Any Concessions Unless You Have To
You don’t automatically owe the other party any favors, so don’t give them anything just for the sake of it! Doing so hurts your company’s self-interest and sends a confusing message to the other party. So, if you believe your offer is fair, do not concede. - Get the Other Party to Give the First Concession
In a negotiation, making concessions is less a quick draw and more a game of chicken. Rather than beating the other party to it, you’ll be in a far stronger position if they concede first. That being said, in line with the previous guideline, always be prepared to make a concession if it’s needed to keep the negotiation going. - How You Concede is More Important Than What You Concede
A great negotiator is a storyteller. You need to create a narrative for the other party that engages them, gets them on your side, and leaves them feeling richer for the experience.
The difference between an exceptional story and a mediocre one isn’t what transpires, but how. Just imagine if Darth Vader was revealed to be Luke Skywalker’s father in the first few scenes of A New Hope, or if Bruce Willis was revealed to be a ghost in the first few scenes of The Sixth Sense (SPOILER ALERT).
The situation wouldn’t be any different, but the viewer would have a far blander experience of the films and, as a result, be less emotionally invested. Similarly, how, and when you make concessions will affect the other party’s emotional investment in the negotiation. - Concede Elegant Negotiables First
When you make concessions, first try to give up things that have high value to the other party, but which are low cost to you. These “elegant negotiables” are a magic bullet for making effective concessions that move the negotiation in a positive direction. Before going into the negotiation, try to identify negotiables that meet the other party’s needs and then prioritize those that are of low cost to you. - Slow and Reluctant Beats Quick and Eager
Lastly, don’t be too hasty. If it becomes clear you arrived with predetermined concessions that you’re eager to get out of the way, then there’s a good chance the other party won’t feel it’s a genuine sacrifice on your part. This also undermines the organic, natural negotiation
atmosphere needed to reach creative solutions. By slowing down and being visibly reluctant to concede, even a small concession will feel like a great victory to the other side. Use this to your advantage!
Tips for Navigating the Competitive Dimension of Negotiation
Be Assertive to Strengthen the Perception of Your Position
How the other party perceives you will define their attitude towards you and how they react to your demands. This means that even if your ultimate goal is to collaborate and find new creative solutions that benefit both parties equally, you’ll never have the chance to do so if you don’t set a competitive precedent.
Any negotiator that enters discussions without the competitive drive for self-interest will all too quickly become a pawn for the other party. They’ll give in to demands too quickly, reduce the level of tension, and diminish the chances of new, creative, and mutually beneficial solutions emerging.
One of the best ways to be assertive going into a negotiation is to speak clearly and confidently about your expectations. Remember that positioning your case favorably is a core Principle of Successful Negotiation. If you don’t believe in your case enough to assert its value with confidence, you can hardly expect anyone else to give it the same respect.
Set Clear Boundaries to Protect Your Interests
The second tactic to help you thrive in the competitive dimension is to have clearly defined limits and boundaries beyond which you will not cross. Your interests are what brought you to the negotiating table in the first place.
This is essential to ensure you don’t walk away with an unfavorable deal that undermines your negotiating skills and sets the business relationship off to a rocky start. Having these boundaries in mind will help you navigate between competitive and collaborative modes as needed, especially when you feel that the other party is close to crossing them.
When you’re negotiating on price, for example, one such boundary will be your “walkaway price.” Having this number in mind — and being confident enough to walk away if the other party won’t entertain one that is higher — will empower you to make the demands needed to thrive in the competitive dimension and, with strategic cooperation, reach the ideal outcome.
Implement Effective Planning
Effective planning improves your negotiating power. Effective planning helps you to:
- Apply the negotiation principles.
- Develop your negotiation strategy.
- Anticipate and prepare for your opponent’s strategy.
- Identify areas where you need to gather more information about the other party.
- Provide a template for negotiation planning.
Negotiation planning is a two-phased process:
1. The research phase.
This is where you do your objective preparation. It is where you gather your facts, “run the numbers,” get approvals, and develop a variety of options. Most negotiators do a considerable amount of their planning in this phase.
2. The anticipation phase.
This is where you do your subjective preparation. It is where you try to picture yourself as the other negotiator, attempting to see the negotiation through his/her eyes. It is a much more demanding or challenging aspect of negotiation planning.
Here are some questions you should ask yourself during the anticipation phase:
- Where will the other party begin his/her demands?
- What are the pressures on the other party?
- What puzzling questions is he/she likely to ask?
- How will I answer?
- If he/she says “this,” what will I do?
- If he/she says “that,” what will I do?
The best negotiators spend a substantial portion of their planning time in the anticipation phase, which tends to enhance their power in the negotiation.
RED BEAR’s Negotiation Planner is straightforward and will help you to think through your negotiation process, and develop a strategy for any negotiation.
Tips for Navigating the Collaborative Dimension of Negotiation
There’s an old Aesop tale that tells the story of the wind and the sun arguing about which was more powerful. Seeing a traveling man walking down the road, they saw a chance to settle their debate finally.
Whoever could get the traveler to remove his coat would unarguably be the most powerful of the two. The wind went first, but no matter how hard it blew, the traveler just held on to his coat more tightly. Eventually, the wind gave up, exhausted.
When it was the sun’s turn, all it had to do was shine warmly on the traveler for a few minutes before he stopped, took off his jacket of his own accord, and continued on his way.
The moral of this story is as relevant to the world of effective negotiation as it is to any other human interaction: warmth and empathy are far more persuasive than force and severity.
In a negotiation, persuading the other party to agree to your terms of the deal is key to securing a favorable outcome. This is the territory of the collaborative dimension of negotiation, which is the domain of activities like building a relationship and finding mutually satisfactory outcomes.
Balancing the Competitive & Collaborative Dimensions of Negotiation
Every negotiation is, at its core, a balancing act between collaboration and competition.
While it’s important to look out for your own self-interest, you nevertheless need to work together to build a relationship and reach the goal of a mutually beneficial agreement.
If a sales negotiation becomes overly competitive and the other party is increasingly inflexible in their demands, the salesperson needs to balance the atmosphere of the negotiation with relationship-building behaviors.
For instance, they could ask an open-ended question and then listen attentively to their response. In addition to making the other party more involved, this is a terrific way to gain more information and uncover the needs underlying their stated wants.
On the other hand, if you’re tempted to become too collaborative and risk compromising your core interests, you can restore balance with competitive behaviors like making demands and insisting on trades.
Remember – The More Negotiables, The Merrier
To operate effectively within the collaborative dimension, it’s helpful to have a number of different negotiables at your disposal. As a quick refresher, a negotiable is anything that you can exchange for value in a negotiation.
If you only consider primary negotiables – those that are apparent and agreed upon, like price – then you’ll have far less to work with in your collaboration and concession.
You should always arrive at a sales negotiation with as many negotiables as you can muster anything that satisfies a need of the other party, but that isn’t too obvious.
Understanding the 5 Negotiation Behaviors
Once you’ve hit healthy tension, it’s important to use it to keep the momentum of the negotiation moving forward. To do so, you must utilize the five negotiation behaviors as necessary: make demands, make trades, ask open questions, evaluate, and summarize, and propose conditionally.
5 Types of Negotiation Behavior
To succeed in any negotiation environment, a negotiator needs to be able to adjust their approach according to the situation. Much like a soldier on the battlefield doesn’t use a single type of weapon for every combat situation, the best negotiators have an arsenal of distinct negotiation behaviors that serve specific purposes depending on the situation.
The five negotiation behaviors listed below help to build a healthy amount of tension needed to lay the foundation for successful negotiations. With tension, you can actually draft innovative solutions.
Each behavior falls into one of two categories.
- Self-interest behaviors are used to move the negotiation from an overly amicable state by introducing elements of the Competitive Dimension.
- Relationship-building behaviors, on the other hand, introduce elements of the Collaborative Dimension to a situation that is overly competitive.
1. Make Demands
The first self-interest behavior is Make Demands. This can seem counterintuitive for many inexperienced negotiators, as making a demand that asserts one’s self-interest can feel aggressive and combative.
The trick is to be confident, assertive, and genuinely believe in the value of your position. If you’re clear about your wants, needs, and expectations, the other party will quickly realize that they’re dealing with someone who knows what they’re doing – and who won’t be manipulated easily.
Use this behavior to: Communicate what you want and need from the negotiation and encourage the customer to defer discussion of price until needs are fully explored.
2. Ask Open Questions
Asking open questions is a relationship-building behavior that can help diffuse unhealthy tension and reduce the other party’s frustration. It is also a wonderful way to gather vital information about the other party’s actual needs, as opposed to their surface-level stated wants.
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Asking The Right Questions in A Negotiation
Open questions shouldn’t have a simple yes/no answer but encourage discussion and engagement. For instance, you could ask how the other party reached their position, or how they see the business relationship playing out in the next few years.
Use this behavior to: Uncover information, especially about underlying customer needs, opportunities for adding value, and the rationale behind the price objection.
3. Test and Summary
Testing and summarizing the other party’s position is also relationship-building behavior. This entails articulating their needs and wants in your own words, and then asking them to confirm whether your understanding is correct. Doing this not only demonstrates a willingness to consider the situation from the other party’s standpoint — it also forces you to listen carefully to everything they say.
Use this behavior to: Clarify customer needs and build the relationship.
4. Propose Conditionally
Once you’ve made demands, asked a few open questions, and assessed and summarized the other party’s viewpoint, then there should be enough healthy tension to move on to the fourth negotiation behavior: Propose Conditionally. This involves coming up with creative ideas about how to move the negotiation forward in a way that satisfies both parties’ needs. When proposing your ideas, try to keep them tentative and non-specific.
Use this behavior to: Generate creative solutions that build value and solve the customer’s “price problem.”
5. Make Trades
Lastly, we have a self-interest behavior that adds definition to our creative solutions and ensures our needs are met. Making trades is all about value-based exchanges that break gridlocks and go both ways. This means that if you are prepared to make a concession to move the negotiation forward, always ensure you’re getting something of equal – or greater – value in return.
To make trades effectively, it pays to have a solid understanding of all negotiables at play — especially those that the other party might not have previously considered.
Use this behavior to: Break impasses and reach a favorable negotiation outcome.
Tips for the Creative Dimension of Negotiation
Many people become uncomfortable when the tension level increases in a negotiation. They fail to understand that the tension they feel is a natural part of the process, and that it can help both sides of the negotiation develop better solutions. When this happens, they might be tempted to do one of the following things:
1. Become too firm in their convictions and focus too much on protecting their own interests. They might say something like, “We just can’t grant that request; it’s against company policy;” or
2. Begin giving things away with the hope that by being generous they can get the other party to start making concessions in return. They might say, “That’s an unusual request, and it’s against our standard operating procedures, but because of our past relationship we’ll give it to you;” or
3. Reach “dysfunctional agreements,” where people say “yes” to get out of the tension, but all players have some sense that the solution isn’t fully workable. This is especially true of internal negotiations where participants work together on a daily or ongoing basis.
In either case, as the tension in the negotiation diminishes, the chances for a creative breakthrough diminish also. A better approach is to use the five key Negotiation Behaviors mentioned above, stay with the tension, and search for a creative solution.
When tension arises in a negotiation, our natural tendency is to do what we can to make it go away. The most successful negotiators understand the value of tension as a catalyst for creativity and are therefore better able to resist the temptation to diminish it too quickly.
7 Steps of Negotiation: Matching Elegant Negotiables to Needs
It is now time to enter the actual negotiation. We will explore a seven-step process for using Behaviors to match elegant negotiables to needs.
- Step 1: Hear what they want. The other side will focus on only a limited number of primary wants for which there are a limited number of primary negotiables that can satisfy. Listen for the other side’s conviction in their wants.
- Step 2: Find out why they want it. Ask Open Questions to uncover the motivation embodied in the stated want.
- Step 3: Uncover needs by persistently asking questions and Testing and Summarizing the information provided. It will be rare for the other side to state an explicit need in response to your questions. Anticipate what the other side’s needs might be going into the negotiation so that you can be sensitive to them when listening.
- Step 4: Reinforce the other side’s legitimate needs by Testing and Summarizing them back. It will take the focus off their wants and will reinforce their legitimate interests. Be careful, though, not to Test and Summarize manipulatively.
- Step 5: Expand the negotiation by Proposing Conditionally around their needs. This helps confirm their needs, reinforces their legitimate interests, and keeps the focus off wants. It also creates an avenue for introducing your elegant negotiables.
- Step 6: Propose Conditionally around your elegant negotiables. Determine the level of interest the other side has in these elegant negotiables. Make it clear that you are not offering these negotiables. Create some mystery around these negotiables by first Proposing Conditionally.
- Step 7: Make Trades with elegant negotiables matched to high-value needs in order to reach closure. Condition the trade (a concession) on receiving a commitment from the other side.
While competitive negotiating is still an important piece of the negotiating puzzle, the changing business environment requires a broader, more comprehensive view of procurement.
Collaborative negotiating is dictated by the need to reduce the number of suppliers a company works with, the need for shorter and shorter cycle times for new product introductions, and closer working relationships with suppliers of critical technology and components.
We explored the shift from competitive to collaborative negotiating, where long-term relationships, multiple negotiables, and true “win-win” negotiating had to be considered in order to reach an agreement. To compete more effectively in a global marketplace, companies must find better ways to create strategic alliances, and collaborative negotiation is critical to this process.
Finally, creative negotiation can take different sides of the negotiation to higher levels of value for both parties, in effect, making the “pie” bigger.
Test All Boundaries of the Deal - Not Only the Money
While the financial aspect of a sales negotiation is clearly important, it’s always good to consider any other aspects that could improve your outcome. This includes factors like delivery time, broader warranties, more convenient payment terms, access to key information, and other kinds of flexibility.
If you’re dealing with a person whose price point isn’t very flexible, you should still set and leverage high aspirations by evaluating the boundaries of these additional factors and negotiating better terms of the deal.
Alternate negotiables like this can include delivery time, order size, complimentary products, and privileged channels of communication. Pay particular attention to elegant negotiables – those that are of high value to the other party, but of little cost to you.
RED BEAR Negotiation Company is dedicated to maximizing the profitability of the agreements negotiated with customers, suppliers, partners, and colleagues. If you’re interested in empowering your sales or procurement teams with world-class negotiation skills, contact us or click here for more information.