The Value of Making Concessions to Close a Deal

By RED BEAR March 7, 2023 | 6 min read

During the concessions portion of a negotiation, a strategic balance of give and take is critical to a successful outcome for both parties.

While novice negotiators may see the act of making a concession as a retreat or failure, that couldn’t be farther from the truth. In reality, concessions provide value to both sides and help guide meaningful discussions and strengthen long-term relationships.

When used correctly, concessions are a fundamental pillar of influence and become an essential tool in any negotiator's kit. Let’s explore the value of making concessions in a negotiation.

The Pitfalls of Average Concession Strategies

Before we delve into the ultimate value of making concessions, it’s important to understand how concessions can work against you.

In the hands of a skilled negotiator, concessions can build rapport, drive value, and close the deal. If misused, the outcome can be unsalvageable deals and unhappy parties.

For example, you don’t want to appear inflexible to the other party. Holding onto a position for too long is often seen as a bad-faith approach to negotiation. Conversely, giving into the other party's demands at the first sign of resistance can put you in a precarious position of giving away too much too soon.

Poorly conducted concessions negotiations don’t just disrupt a single deal. They can set the precedent for future negotiations.

A good concession strategy will accomplish a few tasks:

  • Set targets effectively, ensuring proper wiggle room during negotiations
  • Value concessions as essential resources
  • Adhere to a give-and-take methodology

You’ll find many ways to approach concessions to help concede according to plan. But strategies aside, what value can you expect from a well-balanced approach to concessions?

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It’s All About Reciprocity

Reciprocity is a fundamental concept of the gentle science of persuasion.

As humans, we’re hardwired to seek a return in kind for actions we take to help others. If someone helps us in some way, we have a built-in drive to offer them value in return. That’s reciprocity.
Using this to your advantage is a matter of strategy.

A skilled negotiator can leverage concessions to build a sense of reciprocity and trust between parties — even small gestures can equate to big returns.

In sales and procurement environments, reciprocity can lead to better deals. When both parties trust each other and are willing to participate in give and take in good faith, nobody walks away empty handed.

Concessions help strengthen the collaborative aspect of negotiations and lead to a win-win scenario for everyone. It can also help build strong bonds that can prove lucrative in the future.

Building Long-Term Relationships

No deal is a one-time event. While the deal itself might represent a single negotiation session, the repercussions of that deal reverberate across many different business operations.

Whether it’s future business or networking opportunities, the end results of a well-planned negotiation strategy can impact business in many ways. Understanding the basic principles, behaviors, and tips for a successful strategy means incorporating effective concessions into your negotiations.

As humans, we’re always looking for easy ways to establish trust. Concessions and reciprocity are critical to building that trust. Concessions help strengthen long-term relationships in this way and play into the psychology of negotiations and relationship building.  

When it comes time to do business again, that client will undoubtedly recall the pleasant and rewarding experience of working with your team.

A Better Experience for Both Parties

Approaching negotiations with cutthroat business goals might be an effective strategy in the moment, but don’t forget about how the other side will react to such tactics.

Negotiations often feel tense. It’s that tension that produces results.

Becoming comfortable with tension and building strategies to leverage this feeling is key to successful planning. While you might reach the same outcome with differing methods, how you navigate tension can lead to future opportunities.

For instance, if you play hardball and offer no give and take in your concessions strategy, you might end up with a good result.

This is risky, though, as this inflexible technique will likely lead to, at best, a win for your team and a bad experience for the other side. At worst, it will result in a stalled or lost deal.

Negotiations are an emotional experience. How you make a concession is sometimes more important than what you decide to concede. Using effective negotiation strategies helps produce predictable and positive emotional results. This means a better experience for both sides.

When it comes to concessions, it’s not just about what you concede — it’s also about how.

Every concession sends a message to the other party, so be sure your team treads carefully.

At the end of the day, you want your customers or clients to walk away from negotiations with positive sentiment toward your company, product, or service.

That’s the value of effective concessions.

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Perfect Practice and Repeatable Results

While many say experience is key, the value in adopting a strategic approach to concessions means repeatable results.

Concessions strategies almost always follow a pattern.

These patterns, in turn, tend to produce predictable emotional responses from the other side. Using the right approach means planning ahead of time and using the right pattern.

Moreover, additional value comes from understanding how each concession pattern produces results. “Practice makes perfect” may work for repetitive tasks, but with the dynamics of negotiations, you should rather adopt a perfect practice mentality instead.

It’s all about understanding how to negotiate concessions.

A good concessions negotiation strategy can have a real effect on business. If a negotiator can leverage concessions that result in an agreement at or above the target price, it has a huge impact on operating profits.

Even a 1% positive price change can result in an 11% increase in operating profits. Conversely, bad concessions may lead to a 1% price decrease and an 11% decrease in operating profits.

Having a good concession strategy in your toolkit allows you to approach each individual negotiation with a general set of guidelines to follow to find success.

Getting the Best Deal

Concessions are an essential piece of any good negotiation. That’s why a poor concession strategy is one of the 10 common negotiation mistakes.

But, more than just a foundational concept in good negotiations, concessions help both parties reach the best possible outcome. That means getting the best deal is a product, in part, to a good concession strategy.

If you’re looking to get something from the other side, you want to offer something in return.

Moreover, the best deal may not be the most obvious. Skilled negotiators will often employ alternate and elegant negotiables. These are items that might not be immediately apparent to you and provide high value to the other side with little cost to you, respectively.

When approaching a concession strategy with an understanding of effective tactics and guidelines, you can create an advantageous environment for reaching the best deal. When you offer a concession that requires something in return, the other side will have to “pay” to get it.

This brings you and the other side closer to your initial negotiable goals and expected outcomes.

Questions to Ask Yourself

  • If you have to make concessions during your upcoming negotiation, what are two or three things you could ask for in return?
  • Are your targets high enough that you have room to make concessions?
  • Have you listed and prioritized potential concessions by value?
  • What message do you want to send? How can you make concessions which convey the message that you want to send?
  • Are you prepared to get a concession for every one you give?

Negotiation Training — Get the Most Out of Concessions

Now that you understand the value of an effective concessions negotiation approach, how can you make the most out of your own strategies?

At RED BEAR Negotiation Company, we provide valuable negotiation training to maximize profitability and leave both sides with a positive experience. Choosing the right negotiation training program is mission critical and you need a trusted team with a track record of results.

When it comes to concessions, our tested methods have produced results for hundreds of businesses just like yours.

Do you want access to the formal RED BEAR Concession Planning Worksheet? Our sales team is a quick call away. Get started today.

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