Negotiation is a lot like a game of poker, in that it often rides on how well you know the person sitting across from you: their tells, their style of communication, how they perceive you, how they want to be perceived — you name it. The more you know, the better you’ll be able to play around their strengths and capitalize on their weaknesses for your own benefit. And when you don’t know your sparring partner very well, this quickly becomes an exercise in how much information you can extract in as little time as possible. In the world of business negotiations, whether it’s between suppliers, customers, or internal, setting the right level of aspirations early on can help you do just that.
Let’s take a closer look at why it’s so important to enter into any business negotiation with the right targets in mind.
What you don’t ask for, you won’t get
By setting high aspirations, you’re significantly more likely to get a better deal. This is because doing so provides calculated room for compromise, so you can make a visible concession and still land on a price point that’s equal to or better than your target.
Starting the negotiation off with low aspirations automatically hamstrings your future efforts, as the only way to go is down. Remember that you can always lower your expectations, but it’s exceedingly difficult to raise them once they’re known and your cards are figuratively on the table. Starting high will give you far more tools at your disposal when reacting to your opponents counter offer — and you never know, they might just bite a lot higher than you initially thought they would.
Always have three prices up your sleeve
This is why you should go into every negotiation with three different prices in mind: your asking price, your target price, and your “walkaway” price. The asking price is your initial pitch that sets the tone of the entire discussion, serving as an anchor for all subsequent negotiation. As such, it should be an almost unrealistic best-case scenario (key word: almost) from which you can dial back if needed and still be in a highly favorable position. If you’re buying, your asking price should be low; if you’re selling, it should be high.
Your target price, on the other hand, is what you’re mentally prepared to accept going into the negotiation. Going back to the poker analogy, this price is your actual hand — it’s the most valuable piece of information your opponent could acquire, and they’ve likely spent some time trying to narrow it down. Note that your target price should be far enough away from your initial asking price to allow for a few convincing compromises.
Your walkaway price is the point at which the deal simply isn’t worth your company’s time, so you might as well walk away. But this doesn’t mean kicking over the table and storming out of the saloon guns blazing (unless you’re lucky enough to be negotiating in Westworld, of course). Rather, it means folding your hand with confidence, knowing it’s the right move, and then looking for a better opportunity elsewhere.
Don’t underestimate your opponent’s range of reason
Many professionals set their aspirations too low for a similar reason novice poker players are easily bluffed off a hand: they underestimate their opponent’s range of reason. In the context of a negotiation, this is the full spectrum of price and value that’s reasonably entertained by the buyer or seller. When poor negotiators underestimate this range, they end up with low aspirations that significantly limit the potential value of the deal.
The best way to ensure you don’t fall into this trap is to communicate high expectations at the start and to “feel out” how the other party reacts. This is the only way to test both their resolve and range of reason — giving you valuable information about them — and will additionally increase the perceived value of your position.
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 testing the boundaries of these additional factors and negotiating better terms of the deal.
Help your team realize their negotiation potential
RED BEAR Negotiation Company is a global performance improvement firm dedicated to maximizing the profitability of the agreements negotiated with customers, partners, suppliers, and colleagues. If your team could benefit from better negotiation skills that guarantee more favorable outcomes for your business, contact us or click here for more information.