5 Myths About Negotiation Busted!

Most people mistake a negotiation for a competition and end up in “mindless haggling”, as Harvard Negotiation Expert Deepak Malhotra calls it. “A negotiation”, he says, “is not about dollars and cents or deal terms or human emotions.  A NEGOTIATION IS ABOUT HUMAN INTERACTION.”

The conversation is not about the ‘WHAT’s but the ‘WHY’s. It entails a thorough understanding of the other person’s needs and what drives their demand – The underlying problem that is causing them to look for solutions. Even a confirmation e-mail about the discussion must fetch more information. Hence, negotiations must not end in a ‘NO’ but either a ‘YES’ or an explanation of why it is not. Even if it is a NO, the objective is to dig out WHY.

Here are 5 common myths about negotiations busted and why they’re wrong:

Myth 1: Let The Buyer Initiate The Offer

Why you should not: Sellers when pitching an idea are trained to size the buyer’s belly for spending so that they don’t leave any money on the table. The question “what would you have to budget for to get this done?” is very common from sellers. But in doing so they’re giving the buyer the first chance to establish a ballpark figure.

Research from Columbia Business School indicates that over 85% of the times, the closing negotiated price is the very close to the first proposal. Although it is in fact okay to discard emotions when angry or dejected lest you should say something you shouldn’t have.

What can be done instead: The seller at the end of his pitch must go on to give an impression of what it would cost the buyer. This process qualifies the buyer* and sets an anchor on the price range. This is a concept called “investment norming”.

* What is a qualified buyer? If the buyer rejects it outright, he’s not a qualified buyer (he doesn’t have the appetite to spend) and you’re in good shape. But instead if he opines that it is highly priced, he’s brooding over it & not rejecting the proposal altogether and you’re still in good shape to get what you want.

Myth 2: Emotions Should Not Be Involved In Negotiations

Why it is wrong: The objective of the negotiation being to comprehend the needs of the buyer, it is healthy to establish a connect with him/her. As a seller you are in part a stakeholder in the solution you provide and the buyer must believe so from your interactions. It is about how you make the other person feel and establish mutual trust.

What to do instead: Involve emotions instead of stepping on them. Here’s why:

Myth 3: You Must Not Budge On Price

Why it doesn’t always work: “The price is the price” is a statement of non-flexibility from the sellers end. It clearly communicates to the buyer that the seller has no regard for the client’s capacity or needs and does not wish to understand them either. Adhering dogmatically to such a mindset often leaves the most important question unanswered “Why does the client have an objection to the price?”

What to do instead: All price objections are not the same is what one must realize. Price objections can indicate a variety of things as shown in the following table:

Myth 4: Always Get What You Can

Why it is wrong: This is a short sighted strategy. Sellers sometimes resort to tempting buyers with red herrings and digressing from the real point, placing an unreasonable first proposal, etc. Such practices of manipulation are despicable and earn no loyalty or trust from the customer/buyer. Manipulations are jeopardizers of healthy trustworthy relationships.

What to do instead: Sellers must read the situation prudently and employ ethical approaches towards closing deals. Most deal closures are often arrived when both parties extend a hand towards each other. They are a mix of protection of self-interest and win-win situations which we will talk about next.

Myth 5: Always Use A Win-Win Approach

Why it doesn’t always work: This approach is the flip side of “Always Get What You Can” A win-win approach must be employed under 2 circumstances only viz:

• When you can expand the pie offering and add more value to both parties instead of throwing out a piece
• When continued business dealings are necessary in the long run and it is necessary to sustain a relationship based on trust and respect. (Let’s be real and face it that there is usually a lot of diplomacy / vested political interests in business dealings. Strawberry worlds do not ideally exist)

Pragmatically speaking, even after verbally arriving at a consensus when the time comes to formalize the contract, the buyer usually tries to extract concessions from the seller while the seller has been under a different impression all along. The idea is to keep your antennae raised and transmitting.

What to do instead: Free sharing of information between both parties involved is encouraged only when the pie offering can be expanded and value generation be discussed following it. However as quoted “Complete disclosure as a blanket approach is naïve.”

When sellers walk into a negotiation unplanned, they often get chewed to the bone and do not come out of the meeting with their expectations intact. One must not solely rely on mindset

“It typically takes years of practice – getting wins and taking lumps – to master it. You may be able to shorten the timeframe to success if you follow good advice. However, it’s up to you to figure out which advice is good and which is flapdoodle.”