As a Business Owner, you’ll find yourself at points where you’ll need to negotiate a deal, and you’ll quickly discover that the quality of sales that come to you is dependent on your ability to negotiate properly.
In this post, you’ll discover three strategies that will guarantee you are in control every time you are faced with business negotiations.
If you are not aware of these strategies, you will pay heavily for it if you meet someone who understands these strategies.
What is Negotiation?
According to Wikipedia, Negotiation is a dialogue between two or more people or parties intended to reach a beneficial outcome over one or more issues where a conflict exists with respect to at least one of these issues.
Wikipedia also defined Negotiation as an interaction and process between entities who compromise to agree on matters of mutual interest, while optimizing their utilities.
So learning how to negotiate will empower you to protect your interest in any deal.
Why is it Important to know how to Negotiate a Deal?
Strong negotiation skills can be the difference between a beneficial compromise and a loss. There will always be conflicts in life and the ability to solve them, particularly in the business world.
That’s why negotiation is vital in business — it is what creates success.
Strong negotiation skills can be the difference between a beneficial compromise and a loss
3 Ways to Negotiate a Deal
These strategies seem simple, but they are beneficial; nonetheless, it will put in command when you do your negotiations going forward.
Make the First Offer
Always try to make the first offer.
The person who makes the first offer is slightly at an advantage.
This is so because of a cognitive bias known as Anchoring.
Let me share the outcome of this research with you.
A study published in the journal of marketing research tested the effect of limiting the number of cans that soup customers could buy.
There was a limit of 12 cans of soup per person.
Before the limit was placed, people bought an average of 3.3 cans of soup, but once the limit was set at 12 cans per person, the average purchased per person went up to 7 cans.
People saw the limit of 12 cans of soup, and it became their anchor, this led to more sales.
Have you realized that usually, when you offer a price first, the haggling seems to revolve at your offer price?
In most cases, your offer price becomes the anchor.
Though this blogpost is exclusively for sellers, if you find yourself as a buyer, it is crucial to do a bit of research, so you do not offer way higher than the market price.
The person who makes the first offer is slightly at an advantage because of a cognitive bias known as Anchoring.
Make an Aggressive First Offer
If your first offer is not aggressive, then what is the point of making the first offer?
If your first offer is the same as your reservation price, which refers to the minimum you would be willing to accept, you will end up with either a bad deal or no deal at all.
So set your anchor price at a level where you would be thrilled to make a deal.
Doing this allows you to be able to make concessions in the face of a counter-offer from the buyer.
This strategy is crucial to make any deal happen as it will make the buyer feel better about reaching an agreement too.
Make a Precise First Offer
A new study by Columbia University published in the journal of Experimental Psychology found that when you make a precise first offer, you will get a less aggressive counter-offer, leading to a more favorable outcome for you.
So instead of saying your product costs $100, say it cost $99.98 or $107. Instead of saying ₦100,000, say ₦100,800.
Remember that the point is not about how high or low the price is, it’s about using a precise number rather than a round number.
The anchor you set with a precise number is more effective than when you use a round number; this is because using a precise number shows that you are not just pulling a price out of thin air.
When you make a precise first offer, you will get a less aggressive counter-offer, leading to a more favorable outcome for you
I have a bonus tip for you.
Be Willing to Walk Away
If you are not willing to walk away from a negotiation, then you are already desperate and in a wrong position to make a favorable deal, try and get the most you can from such a deal and move on.
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Granted, you won’t become a negotiation superstar immediately, but as you put these strategies to work, you’ll discover that you can close better deals for your business.
I want to read about your thoughts in the comments.
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