Mastering the art as well as the science of negotiation...
By Ian Hirst, Greenbank CEO
Most negotiation training quite rightly focuses on the science and process of a negotiation – preparing the numbers, exploring deal variables, understanding your walk-away position and considering your BATNA (what you will do if the deal doesn’t happen).
All good ideas – but of course this very logical approach assumes we all act rationally and predictably – and of course we don’t! To help us with this, recent neuroscientific research has shown that our behaviours are consistently triggered by very specific drivers or ‘cognitive biases’- especially in stressful situations such as negotiations.
These triggers lead us act instinctively, emotionally and irrationally – and even what we perceive as rational thoughts are often influenced by irrational ones.
So how does this help us during negotiations? Well, great negotiators either instinctively or consciously understand both their own drivers and importantly how other people are ‘triggered’. So if you want to be a top negotiator, it’s worth taking this into account!
Perhaps the most influential work in this area has been done by Amos Tversky and Daniel Kahneman – and in particular there are 3 cognitive biases that are particularly relevant to negotiations.
1. Loss Aversion
The principle here is that our instinctive drive to avoid pain is much higher than our drive for gain!
Recognising this bias can help negotiators ‘frame’ offers that minimize perceived pain or risk for the other party, making agreements more likely. For example: imagine you are a procurement professional trying to gain agreement to a reduced price from a supplier – which of these approaches would work best?
Gain Frame: “By agreeing to this price of £50 per unit, you will not only secure a long-term partnership with us but also benefit from a stable and predictable revenue stream. Additionally, you’ll be positioned as our preferred supplier, which could open doors to further business opportunities.”
Loss Frame: “However, if we are unable to agree on a price closer to £50 per unit, we may have to consider alternative suppliers. This could result in your losing out on the long-term business relationship and the consistent orders that come with it.
For most people the Gain Frame statement, whilst being nicely positive, could be seen just as a ‘nice to have’, but the Loss Frame starts to hit some fundamental trigger!
Obviously, you could use them together to balance the toughness of the 2nd message with the positive relationship-focussed nature of the initial ‘Gain’ statement
2. Anchoring
This is a well-known negotiation principal, proven with multiple studies
Essentially, the initial offer in a negotiation often serves as an ‘anchor’, significantly influencing the final outcome – especially if the offer is framed in such a way as to sound ‘reasonable’ – so here are some ways you might consider if you want to show the anchored offer is ‘reasonable’…
Highlight Unique Value
Emphasise the unique features and benefits of your solution that justify the high price. For example:
“Our enterprise software is equipped with AI-driven analytics that no other competitor offers. This advanced capability can save your team hundreds of hours in data analysis each month, quickly paying back the initial investment.”
Benchmarking
Start with a high initial offer to set the expectation for negotiations. For example:
“Based on our market research, similar consulting services are valued at around £100,000 annually. We believe our proposal at £95,000 is competitive given the extensive expertise we bring to the table.”
Emphasise the tangible value you are delivering
Share success stories and testimonials that highlight the value delivered. For instance:
“Our previous clients have experienced a 25% reduction in operational costs within a year of implementing our supply chain management system. Your own technical team has suggested that this is a conservative estimate of the savings you could make”
By using these strategies, you can effectively both anchor a high price and demonstrate the value that your solution brings to the table.
3. Recency Bias
People give greater weight to immediate examples that come to mind when evaluating a situation or making decisions.
A sales manager is negotiating a deal with a potential client for a new marketing automation platform. Recently, the prospect heard about a high-profile case where a similar platform from a different vendor failed to deliver the promised ROI, leading to significant losses for the client. Although this incident is unrelated to the current negotiation, it is fresh in their mind and influences their decision-making.
During negotiations, the recency bias might lead the prospect to disproportionately weigh this recent incident against the potential value of the platform being proposed. They might overemphasise risk mitigation measures, demand extensive trial periods, or propose overly cautious contract terms.
Understanding why the potential client is focused on risk could be really useful in a negotiation – e.g. the sales manager might emphasise in turn how their solution can help them mitigate risks – making it an important differentiator…
In summary....
By recognising these triggers you can better anticipate and respond to the client’s behaviour, tailor your approach to address and mitigate their biases, and create more compelling and persuasive arguments. Additionally, being aware of your own biases (you will have them!) might help you maintain objectivity and avoid pitfalls that could derail the negotiation….
Greenbank and Negotiation
Over the last 20 years, we have worked with professional services firms, technology companies and sales organisations of all shapes and sizes to develop their negotiation capabilities. If you would like to explore how Greenbank might support your organisation, we would be delighted to begin the conversation…. so give us a call on (+44) 7812 074359 or use the contact form below to get in touch.
About Greenbank
Greenbank are an innovative, ‘boutique’ consultancy delivering completely tailored leadership, negotiation and sales development programmes to clients ranging from top 5 global firms to tech start-ups.
We are now delighted to be running truly blended programmes, which make the most of both virtual platforms and interactive face-to-face workshops, to deliver motivational, cost-effective development.
We also have our own industry-leading, multi-lingual, 360° assessment platform, Navigator360 which provides our clients and other training providers with a completely flexible approach to gathering powerful confidential feedback.
If you would like to discuss how we can help your own sales or leadership teams, then we would be delighted to have a relaxed conversation – please contact Ian Hirst or (+44) 7812 074359.