Negotiating for Success: 3 Skills and Strategies for Sellers

How to Negotiate as a Seller

Many of the most popular ideas about negotiating have outlived their usefulness. While helpful at one time, these outdated ideas rarely hold up in today’s complex selling environment. Sellers need to rethink their approach to negotiation and unlearn negotiation styles that no longer yield the most success.

One of the most prominent changes to business negotiations is the increased number of people involved. Buyers have more options, giving them more leverage. Information is democratized, which influences the buyer's perceptions of value.

These factors have made the process of negotiating far more difficult for sellers. Adding to this difficulty is the fact that negotiation mainly occurs at the end of the sales pursuit when the seller is likely hyper-focused on closing the deal. In this state, it's easy to resort to "rule of thumb" negotiation strategies that have little value or can even work against the seller.

When these myths work against the seller, they often do so in unseen ways. A seller might consider the signed contract a win when, in fact, they have left money on the table. The seller might assume that a customer's demand can only be met by reducing the scope of the sale. It might seem as though silence is a sign that the deal is deteriorating when, in fact, remaining calm is a way to reaffirm one's position.

Now, sellers require an agile approach to negotiation. By using agility, sellers can recognize and overcome the most enduring myths about negotiating, they immediately make themselves more effective while keeping the door open for future deals.

Here, we teach sellers a new set of negotiation skills and how to avoid falling back into old negotiation styles.

Make the First Offer in the Negotiation

Many think that making the first offer risks presenting a number lower than what the other side is willing to accept, but there is no data to support this idea. Research makes clear that the advantage lies with the person who makes the first offer. This approach is called anchoring.

Anchoring is the act of setting expectations. When a seller makes the first offer, they " anchor" the solution's value to a particular number. As a result, the customer's response is not likely to deviate far from the initial offer. Economist and Nobel Laureate Daniel Kahneman and mathematical psychologist Amos Tversky introduced this concept.

During their research, they asked a group of participants to quickly estimate the product of 8 x 7 x 6 x 5 x 4 x 3 x 2 x 1. To compare, they asked another group to rapidly estimate the product of 1 x 2 x 3 x 4 x 5 x 6 x 7 x 8. The median estimate for the first equation was 2,250. The median estimate for the second equation was only 512. Seeing bigger numbers earlier had an enormous impact on perceptions of value.

This effect is so strong that it can be quantified. A meta-analysis from academics at Vanderbilt University showed "a correlation of 0.497 between the initial anchor and the outcome of the negotiation." This figure means that "every one dollar increase in an opening offer is associated with an approximate fifty-cent increase in the final sale price."

But what about a scenario in which the customer is an experienced negotiator familiar with anchoring and ready to resist its effects? The same research shows that even in this setting, the correlation is 0.37, meaning that every one dollar increase in an opening offer is associated with about a thirty-seven cent increase in the final sale price. No matter the situation, anchoring proves to be a powerful tool for sellers.

The anchoring effect impacts every negotiation. For better negotiation success, sellers should use it to their advantage by making the first offer.

Winning Doesn’t Always Equal Success

To win the sale, an eager seller is inclined to accede to a customer's demand, even if it is a major one. This tendency comes from the need to reach a win rate or hit a quarterly quota, even if doing so means giving in to cost demands. In reality, the seller doesn’t need to immediately concede. For a better outcome, sellers can address a customer's demand in a way that satisfies the customer's requirement while preserving the sale's financial value. To do so, the seller must convert the customer's demand to a need.

How do the two differentiate though? A demand is a non-negotiable ultimatum. A need, however, is a requirement that can be met in various ways. The seller who can convert a demand to a need will succeed because they can meet that need in ways that do not require sacrificing valuable factors like payment terms, pricing, or the scope of the sale. Converting a demand to a need requires three specific skills.

First, the seller must neutrally acknowledge the customer's demand. The key is letting the customer know their position has been heard. "In a negotiation, that's called labeling," explains Chris Voss, the former lead international kidnapping negotiator for the FBI. Neutrally acknowledging someone is an act of empathy. It breaks down the wall between the sales professional and the customer, creating trust in the relationship.

Second, the seller must uncover the underlying need. The seller needs to know the root of the demand. Answering this question helps reveal how the seller can address the need in a variety of ways rather than just agreeing to the surface-level demand.

Third, the seller needs to shape perceptions of value by adjusting the customer’s focus. The customer needs to focus on what they will gain by reaching an agreement and what they will lose by falling short. Creating this influence is important because it makes the customer more receptive to a trade later.

Negotiations Can be a Win-Win Situation for Both Sellers and Buyers

A negotiation is not a zero-sum game. It is possible to reach a mutually beneficial outcome, and it should be the goal. Doing so opens the door to expand or extend the partnership between buyer and seller. Unfortunately, too many people believe that one side's success must come at the cost of the other.

Research published in the Harvard Negotiation Law Review cites a wide-ranging study that shatters "the myth that adversarial bargaining is more effective and less risky than problem-solving." The research shows that "a negotiator who is empathetic is perceived as more effective."

Developing this style means taking a consultative approach where the seller builds trust, reinforces the relationship, and meets the customer's needs. This approach, however, requires balance. The seller must not slip from consultative to accommodating or from consultative to competitive. Maintaining a consultative approach takes preparation, focus, skill, and careful phrasing. One way to remain consultative without conceding is to have a trading strategy.

Trading guards the negotiator against one of the most common traps in a negotiation: making a concession. A concession occurs when someone relinquishes something and receives nothing in return. When a sales professional narrows the scope of the solution to meet a customer's budgetary needs, they concede in the negotiation.

To combat this, sellers need to focus on trading. When a sales professional engages in trading, they are giving something and getting something in return. Put simply, trading creates cooperation.

To implement a trading strategy, the seller must first know what to trade. Therefore, they need to know the intrinsic and extrinsic value of every aspect of the deal. Next, they must learn how to time the trade. Trades should be spaced in increments to make their value more perceptible. Lastly, they must trade with clarity. Sellers need to explicitly communicate what they are trading with specific, intentional language.

Learn more about trading with our videos on effective and ineffective negotiation strategies.

The Most Effective Negotiation Strategy Starts with Unlearning Old Styles

Being a successful negotiator means moving past the enduring myths that undercut effectiveness. Sellers should anchor the value of the sale by making the first offer. They should also have a clear plan for converting the customer's demands to needs to protect the financial value of the sale. Finally, effective negotiators must remember that mutually beneficial outcomes are not only possible but necessary for continuing the business relationship.

Deepen your negotiation skills with Richardson’s SprintNegotiations program. Download the brochure here.