Chapter 7 - Practical Tactics
The author insists that "there's nothing mysterious" about negotiation tactics: they are common method for being clear about what you want and presenting your case to a person whose assistance you need in a way that leads them to agree. It's less accurate to say that a person who considers their tactics to be at an advantage than to say that a person who fails to do so has put themselves at a disadvantage, as they go about negotiating in a haphazard and reckless way.
Frame the Issue
The author suggests that the way the argument is framed can often determine its outcome. Particularly in the business world, there are two ways at looking at virtually any proposal: you can approach a proposal considering the amount of money that will need to be spent in order to act on it, or you can approach a proposal considering the amount of revenue that's going to be made when the proposal has been carried out. It will be a lot easier to succeed in your argument if you focus on the benefits rather than the cost.
Framing deals with the perspective of the argument, and focuses the conversation on a specific outcome, and sets the expectation of what topics are most important to discuss - and generally, when an argument is framed effectively, the party who framed it has control of the topics, the goals, and even the language used in the debate over whether to proceed.
(EN: The author doesn't mention this, but if your frame is obviously skewed it undermines your credibility and reputation - it makes it easier for an opponent to reframe the argument by suggesting that you are attempting to be deceptive by framing the argument to ignore important details or the implications of a decision.)
Set an Anchor
The concept of "anchoring" involves skewering the argument in your favor by setting an initial value to be discussed. The best example is the stated price of an item - the listing price of a house or the sticker price of a car. The buyer is then in a disadvantageous position, as he must talk the seller "down" from the demanded price - whereas the seller merely has to fold his arms and refuse rather than defending the initial price.
(EN: Recent research has suggested that anchoring also has a psychological effect - such as the Ariley experiment in which people were asked to write down the last two digits of their social security number, then asked to estimate the prices of things. Those who had written higher numbers generally bid higher prices.)
Consideration of anchoring leads to serious mistakes, like setting an unreasonably high price or offering an unreasonably low bid in hopes the other party will move further in your direction - the net result of which is often that the other party refuses to negotiate at all because your suggestion is ridiculous. As such, setting an anchor must be done with some consideration - a seller's demand may be anchored a little more, but not much more, than the highest price the buyer is likely to offer.
A countermeasure to anchoring is to set your own anchor - to point out that the asking price is significantly overstated, present some research that supports a much lower price, then suggesting that price as a new anchor. This must be followed up by walking out if the other party refuses to move to your anchor.
Another countermeasure is to ask the other party how they came to set their price - which may put them in the awkward position of having to defend an unjustified anchor (leaving you free to suggest a substitute) or perhaps they will be able to present a rationale that will lead you wither to consider whether their anchor might indeed be fair (or the research biased).
Note that anchors are most effective against individuals who are not prepared. If you have a solid sense of what something is worth, as supported by the knowledge of the price of similar items in the same market, you will be less susceptible to being dragged to the other party's anchor.
Use Time to Your Advantage
In any negotiation, one party is generally more eager than the other to come to an agreement, and will tend to concede more in order to come to an agreement. One factor that may be creating pressure for one of the parties is time.
The author details a few examples of a seller who is motivated by time - essentially he may be losing money or the item is losing value as time passes, or there may be factors that make it more convenient or less expensive to sell now rather than later. He will generally be more flexible in accepting a lower price than a person who loses nothing by passing on an offer and waiting on another.
Time pressure can be artificially created by a limited-time offer. Either a buyer or a seller may state a price that the other is free to accept up to a certain date, at which point the offer expires. The notion that they will "lose" the offer is sometimes enough to make the other party feel pressured into taking it. (EN: This was once a very effective tactic, but it has been played so often that people have become inured to it. The deadline is just as arbitrary as the author, and a negotiator who sets a deadline without providing a credible reason is a clear indication the offer is unfair.)
The author names various other tricks - such as having a limited supply that is selling out, suggesting there will be a price increase in the near future, making the offer contingent on an immediate agreement, etc. (EN: Most of these cornball tactics are also old-hat and signal a lack of integrity or negotiating skills.)
Offer a Package or Options
In some instances, negotiation is a trade of one thing for another, but in many instances the value that is being offered is multifaceted. A job offer is not merely a negotiation about salary, but includes many other factors: health and dental insurance, vacation time, flexible hours, and other "perks" can make a lower salary more appealing - or there can even be requirements (long hours, heavy travel, inconvenient location) that might make a higher offer less appealing.
In some instances, you can create a package deal. One example the author provides, likely fictitious, is a the owner of a dry cleaning business who was offered a flat price for the business, half-time employment at a generous salary for a year, and a percentage of the business's earnings for a two-year period after the sale.
The value in a package deal is that it gives both sides a number of factors to negotiate over - such that if the buyer of the business above had a fixed budget for the purchase, there are two other factors they can negotiate upon (and each has both an amount and a duration that can be adjusted). Creating such a package recognizes needs that the other party may not have considered - such as a business owner's need to say a slow "goodbye" to the business they have built via a more gradual transition to new ownership.
It is also possible to insist that the other side accept additional conditions for a deal. One example considers a buyer who is considering opening a liquor store - there is a bakery in a great location, but it is full of equipment he does not need. As such, he indicates that he will make one price offer on the condition the current owner clears out the equipment, or a significantly lower one to take the place as-is and take on the task of moving it himself.
Risk can provide an opportunity to provide (or a reason to request) additional conditions for a deal. People will generally offer concessions to another party that shows a willingness to accept risk for them. Moreover, risk is always inherent in any deal: the buyer risks committing to a price and later learning he could have gotten an item cheaper, the seller risks committing to a price and later learning he could have gotten more for it. In that sense, one party may offer to absorb risk for the other.
For example, consider the price-matching guarantee of retail stores that draw bargain shoppers by promising to pay the difference if they find the same item offered for less within a given amount of time. The buyer who was hesitant of this risk would be more amenable to buying immediately at the seller's offering price.
Make Concessions Wisely
In some instances, negotiation is an exchange of concessions - each side must give up a little of what it wants, or give a little more of what the opposite party wants, in order to gain agreement to a deal. Negotiation may involve multiple rounds of concessions as each party attempts to accommodate the other.
The author's first suggestion to avoid giving away too much in negotiation is simply to slow down. If you rush into an agreement, you may give away things you didn't need to in order to get to a fast resolution, and in many cases there is no need to achieve an agreement by a certain date. Take time to consider the value gained or lost by a concession and decide whether the deal is still worth pursuing, as well as whether refusing to make a concession is really a deal-breaker. Proceeding slowly and taking your time ensures you can give the task the mental focus it requires, and that you don't make costly mistakes.
The second suggestion is to consider your priorities when you enter a negotiation. Know your walk-away price, and the must-have concession you need from the other side. In particular, never concede anything of critical value, and never let yourself be pushed or cajoled outside of your boundaries. Many of the conditions of a deal are not critical and can be negotiated away, but a few of them are absolutely essential.
Finally, when asked to give a concession, seek to get one of proportional value. Consider whether something is critical, important, a nice-to-have, or inconsequential, and when the other side demands a concession, insist on getting something of equal or better value in return. Trading away something of lesser value to get something of greater value is always a good trade, and the converse is equally true. It may be necessary to be explicit in pointing out that the other side is asking for a concession and that you expect one in return.
It's also noted that the importance of value is subjective: one side may consider something to be very important while the other regards it as being of little importance. In that way, a win-win exchange occurs when each side concedes something the other values more. However in competitive negotiation it is not uncommon for one side to make a token concession and demand a significant one in return. This, too, may require an explicit discussion.
(EN: The author also doesn't mention the trick of pretending that something that is included in the previous bid was a concession. For example, it's not uncommon to agree on a price for an item and for the seller to then want to negotiate separately for the price of delivering it, when the customer expected that was included. Listing out the conditions of the deal and making sure all of them are included in the deal is necessary to avoid an after-agreement surprise that gives the other side the opportunity to nibble at you for more.)
Close The Deal
The goal of a negotiation is to come to an agreement and close the deal. Ideally, all the terms of the arrangement have been discussed prior to this point, and you should be vigilant that the other side doesn't "sneak" any additional conditions or concessions into the final document. Toward this end, documentation during negotiations can be useful in reminding the other party what was or was not agreed upon.
When the other side insists on re-opening an issue for discussion, you should take that as your right to re-open other issues at your discretion. For example, "If you insist on renegotiating the timing of the sale, I insist on renegotiating the price, as these two are a total package." This may get the other side to back down, or it may return to the negotiating table.
Inexperienced negotiators will often make concessions at the last minute to avoid having to resume negotiating - per the earlier point, it is a mistake to make concessions in order to get the negotiation over with more quickly. You should instead take the perspective that you need to invest more time in getting a deal.
Closing a deal should involve some formality - it doesn't have to be a written contract (though it often is), as a simple restatement of the terms in a verbal agreement makes sure that all sides know what they are agreeing to, given the back-and-forth nature of the discussion. However, recall that closing is the end of negotiation, but the beginning of interaction. Because each side must take action to fulfill the agreement, documenting it for reference is generally a good idea.
For the same reason, many contracts include stipulations that should follow if one party fails to live up to its promises. Typically, if a payment is not made by a given date, the contract has been broken and the unpaid party may sue to collect - but there are often lesser recourses, such as allowing the other party to pay a "late fee" for breaching its promise.
(EN: There's much more to be said about closing a deal, and a good reference for this are training and manuals for salesmen, for whom "closing" is a major goal.)