The Art of Negotiation: Why it Pays to Haggle in Business
A guide to holding your own in a bargaining situation and securing the best possible price to buy and sell at
Haggling can seem like a petty and embarrassing practice to many business people, but it certainly pays.
Learning how to negotiate well can help save your business thousands on purchases, and stop you cutting too much from your sales prices.
This guide will help you establish a strong negotiating position by using proven negotiating tactics so you can buy low and sell high.
What should my objectives be when negotiating?
Every negotiation is conducted with the aim of achieving at least one of the following four objectives.
You will have both a price you are aiming to secure, and a lowest possible price you are willing to settle for. The buyer will be trying to achieve the lowest price possible.
You will be trying to negotiate a deal to secure business in a quiet period. Perhaps knowing this, the buyer will be trying to secure the best possible deal in this period.
You will be trying to maintain a high volume of sales, particularly if you have production capacity to spare. Again, the buyer will be trying to secure a good deal.
You will be trying to ensure a fast payment on behalf of the buyer. They buyer will be aiming to sample your offering, and put off this payment for as long as they can.
What are the fundamental principles of a successful negotiation?
There is no golden commandment for what makes a successful negotiation – it depends upon your own needs and the needs of the buyer. In one instance, you might be able to sell quickly and aggressively; in another, the process may be slow and require you to make several concessions.
In addition, the type of deal being made affects what negotiation principle you should follow – a one-off deal will be different from a deal in a series conducted with a single buyer or supplier.
That said, there ARE fundamental principles that successful negotiators tend to stick to, on the whole.
Firstly, fix your objective and your strategy. Know which of your aims and objectives is the most crucial to you and the objectives you believe your buyer/supplier to have. Outline any tactics you plan to use.
Offer ‘win-win’ deals. You should emphasise how a deal will benefit you mutually in different ways. Unless a buyer/supplier feels themselves to be getting something positive out of the transaction they will avoid establishing a long term business relationship.
Finally, don’t give something for nothing. Be firm, and make no concessions that offer you nothing in return.
Always offer a trade-off – ‘we can do X, but only for X amount’.
How do I put myself in a strong position when negotiating?
Establishing yourself in a powerful position is key to any successful negotiation. If you feel your position to be weak, you cannot hope to achieve all you want from the transaction.
Set an agenda and establish from the outset the points you will be negotiating over, and do not deviate from this list. This will prevent the buyer/supplier from bringing new factors into the negotiation, and preventing an easy agreement from being reached.
The more the other party knows about your negotiating position the better the terms they will be able to negotiate for themselves so keep as much keep information to yourself as possible.
Establish all you can about their own position before giving anything fundamental away – e.g., do not offer them a price before you have established how the other party intends to use your offering, or how large their order may be, or when they will be able to pay. Furthermore, make sure to give yourself alternatives. The more reliant you are on a deal the worse the position you will put yourself in when negotiating.
Ensure you have sufficient credit (by controlling your credit or securing a bank loan) so you are not desperate for the money, and seek out as many different possible buyers/suppliers as you can.
Keep an eye on timing as, in negotiations, timing can be everything. Ensure you negotiate at a time as conducive to your needs as possible.
Negotiate when you have sufficient credit, and when the other party is most in need of a deal (for example, at the end of a tenancy period, if you are negotiating with a landlord).
Finally, build relationships. The most mutually beneficial deals take place between parties in a healthy, established relationships. Use your contacts to find partners, and find out all you can about them. Where possible, forge a relationship before negotiations start.
How can I negotiate a low buying price?
Very few sellers are made of stone – it’s usually possible to negotiate a lower price.
Open with a low bid, don’t accept the first bid and make a counter offer to whatever initial offer they make.
Search for discount options and ask if you can get a discount for a larger order, or an immediate payment, even if the unit price is apparently fixed.
How can negotiate a high selling price?
Your negotiations should begin at the first sign of interest from the customer. Be aware that they will always be trying to work out your bargaining position, so give away as little as possible.
Start with a high demand.
A high demand will put you in a powerful position.
Don’t begin with concessions.
Don’t mention any discounts in your advertising (any introductory discounts you offer you will be stuck with), and make only minor concessions at the beginning of negotiations. Concessions offered at this point will only convince the other party your opening price was unreasonable.
Flaunt the benefits.
When making an offer, spell out all the attendant benefits it comes with. For example, if selling a car, mention all the interior features and aspects of the cover and guarantee.
Hide the costs.
Detract any extra costs (e.g. expenses, consumables) from the headline price to make it lower.
Alter the deal, not the price.
See if there is anything more you can offer the other party for the same price – better payment terms, delivery service, special specs, etc. Of course, only offer extras that are worth less than the money you will be paid.
Find out how much your offering is needed.
Depending on their situation, some customers will need your product more than others. If this need is high, make fewer concessions; if it is low be prepared to lower your price, or offer a more suitable product.
Avoid ‘auctioning’ your offering.
If you suspect a customer is dealing with not just you but your competitors in an effort to find the best price, ask them to come back to you with the best offer they have been made, and see if you can beat it. Don’t blindly make offers without an idea of what others have been made.
What negotiation tactics can I use?
There are several proven tactics which it pays to use when negotiating. Don’t go overboard – no one will appreciate negotiating with an amateur Derren Brown.
Use silence. People will usually try to fill silences – often by agreeing to your terms.
Use budget limits. Explain that you only have X amount of money to spend on a deal/purchase.
Use deadlines. Link any concessions you make to a deadline. This puts pressure on the other party to come to an agreement.
Don’t make threats. You will only meet hostility in return.
Avoid mind-games. Some negotiators will try to use psychological tactics to put themselves in a dominant positions – e.g., by name dropping, or displaying obvious status symbols to convince you of their superiority. Learn to recognise and ignore these.
How should I tie up negotiations?
Summarise the agreement and make sure you both understand and agree on all the points, and confirm this mutual understanding in writing.
Sweat the small stuff and don’t offer any unnecessary concessions as a way of speeding the deal to a close – negotiate over every detail, no matter how small.
Cope with last minute changes. Don’t conclude the deal until every last detail has been settled and agreed upon, and you are both satisfied.
Finally, shake hands. Make the agreement personal – the customer will honour it more.