Negotiation

Getting a raise, renting an apartment, buying a car, closing a customer—life is full of negotiations.

To improve, I watched experts, studied books, and practiced in real life.

Here is the system:

• Leverage

• Creative solutions

• Take your time

The only way on earth to influence other people is to talk about what they want and show them how to get it.

-Dale Carnegie

You have to persuade yourself that you absolutely don’t care what happens. If you don’t care, you’ve won. I absolutely promise you, in every serious negotiation, the man or woman who doesn’t care is going to win.

-Felix Dennis

Leverage

Leverage is about options. If you have alternatives, you can walk away. Similarly, you gain confidence to propose favorable deals. Studies found that leading with an extreme offer subconsciously anchored that number—every $1 increase in opening offer led to a $0.50 increase in final sale price.

Research has shown that, with leverage, even an average negotiator will do pretty well while, without leverage, only highly skilled bargainers achieve their goals.

-G. Richard Shell

Creative solutions

Many factors can matter: price, product, service, risk, time, emotions, relationships. Ask questions to discover the other person’s true goals and motivations. Then brainstorm together to expand the pie and achieve a win-win solution.

The best move you can make in negotiation is to think of an incentive the other person hasn’t even thought of—and then meet it.

-Eli Broad

Take your time

Time pressure overloads people’s brains and worsens deal-making outcomes by an average of 50%. Therefore, take a walk, sleep on it, and give yourself time to think. There will always be other opportunities.

Very few negotiations are begun and concluded in the same sitting. It’s really rare. In fact, if you sit down and actually complete your negotiation in one sitting, you left stuff on the table.

-Chris Voss

Examples

Here are two examples showing the system in action:

Getting a raise

• You keep in touch with recruiters and former colleagues about potential jobs

• You schedule a meeting with your manager to discuss a raise

• You share a 1-page memo that quantifies your track record of excellent results

• You also share a salary survey that shows the market rate is $80K–100K

• You mention that recruiters have contacted you with jobs, but you want to stay with the company

• You propose a raise to $100K because of your excellent results

• Your manager says that raise would be too high

• You brainstorm other factors: bonus, commission plan, stock options, flexible hours, vacation time, travel opportunities, learning subsidy, different responsibilities, mentorship

• After two more meetings, you agree on a raise to $90K, more stock options, and more vacation time

Renting an apartment

• You’ve been checking listings online for 2 months

• When you visit a listing, you mention there are other places renting for $400 less

• You also ask questions such as:

  • • Is it better if you move in sooner?

    • Can the place be partially or fully furnished?

    • Can Internet and electricity be included?

    • Does the landlord care if you sign a shorter versus longer lease?

• After sleeping on two places, you realize they’re not right for you

• Finally, you find the perfect place and negotiate a price $200 below market, free Internet, and partially furnished

The truly gifted negotiator, then, is one whose initial position is exaggerated enough to allow for a series of concessions that will yield a desirable final offer from the opponent, yet is not so outlandish as to be seen as illegitimate from the start.

-Robert Cialdini

References

Fisher R, Ury W. (1991). Getting to yes: Negotiating agreement without giving in. Penguin Books.

Dahlen N, Eichstädt T. (2020). Alternatives vs. time – measuring the force of distinct sources of bargaining power. Group Decision Negotiation: Multidisciplinary Perspective. 388: 56–72.

• A negotiation study with 50 participants compared outcomes for students vs. professionals

• When given attractive alternatives, students negotiated 15% better deals vs. 156% for professionals

• When put under severe time pressure, students underperformed opponents by 56%, whereas professionals continued to outperform opponents by 57%

Magee JC, Galinsky AD, Gruenfeld DH. (2007). Power, propensity to negotiate, and moving first in competitive interactions. Pers Soc Psychol Bull. 33(2): 200–212.

• In a study with 138 participants, 29% of those with attractive alternatives were willing to make a first offer vs. 8% with no alternatives

• In a study with 62 participants, those with high power made the first offer 68% of the time vs. 32% with low power, and this caused the final sale price to be 8% higher

Pinkley RL, Neale MA, Bennett RJ. (1994). The impact of alternatives to settlement in dyadic negotiation. Organizational Behavior Human Decision Processes. 57(1): 97–116.

• A negotiation study with 382 first-year MBA students found that participants with attractive options outperformed those with zero or unattractive options

Orr D, Guthrie C. (2006). Anchoring, information, expertise, and negotiation: New insights from meta-analysis. Ohio State Journal Dispute Resolution. 21: 597–628.

• A meta-analysis of 16 studies with 1,259 participants found that anchoring improved negotiation outcomes (effect size = 0.50)

• This effect size meant that every $1 increase in opening offer was associated with a $0.50 increase in final sale price

• It also meant that the opening offer or initial anchor accounted for 25% of the difference in outcomes

Gunia BC et al. (2013). The remarkable robustness of the first-offer effect: Across culture, power, and issues. Pers Soc Psychol Bull. 39(12): 1547–1558.

• 4 studies with 300 participants across 32 nationalities found that negotiators achieved better outcomes when making the first offer, even in situations where they had less leverage

• In one of the studies, final sale price was 19% higher when sellers vs. buyers made the first offer

Karagözoğlu E, Kocher MG. (2019). Bargaining under time pressure from deadlines. Experimental Economics. 22: 419–440.

• A negotiation study with 360 students found that disagreement rate was 4.5% with low time pressure vs. 31.4% with high time pressure

Grimm V, Mengel F. (2011). Let me sleep on it: Delay reduces rejection rates in ultimatum games. Economics Letters. 111: 113–115.

• An Ultimatum Game study with 342 participants found that a 10-minute break increased acceptance of low but economically favorable offers from 0–16% to 63–80%

Chernev A, Böckenholt U, Goodman J. (2015). Choice overload: A conceptual review and meta-analysis. Journal Consumer Psychology. 25(2): 333–358.

• A meta-analysis of 53 consumer decision-making studies with 7,202 participants found that choice overload was associated with decision goal (effect size = 0.56), choice set complexity (effect size = 0.55), decision task difficulty (effect size = 0.37), and preference uncertainty (effect size = 0.32)

• Decision goal reflects intent (buying vs. browsing) and focus (choosing from an assortment vs. choosing a specific option)

• Choice set complexity reflects attractiveness of alternatives, including presence of a dominant option

• Decision task difficulty reflects time constraints, decision accountability, number of attributes per option, and complexity of presentation format

• Preference uncertainty reflects product-specific expertise and knowledge of ideal product

Hüffmeier J et al. (2014). Being tough or being nice? A meta-analysis on the impact of hard- and softline strategies in distributive negotiations. Journal Management. 40(3): 866–892.

• A meta-analysis of 34 studies with 7,167 participants found that hardline strategies led to higher economic outcomes (effect size = 0.47)

• Softline strategies led to higher socioemotional outcomes (effect size = 0.40)

Sharma S, Bottom WP, Elfenbein HA. (2013). On the role of personality, cognitive ability, and emotional intelligence in predicting negotiation outcomes: A meta-analysis. Organizational Psychology Review. 3(4): 293–336.

• A meta-analysis of 6 negotiation studies with 743 participants found that intelligence was associated with joint economic value (effect size = 0.20) and subjective value (effect size = 0.14)

• A meta-analysis of 5 negotiation studies with 520 participants found that emotional intelligence was associated with subjective value (effect size = 0.25)

Did you enjoy this chapter? Read the full book. Download your free copy: EPUB PDF

Copyright © by Raven Dojo Inc.

Limit of Liability/Disclaimer of Warranty