Golden Rule No. 2: When Asked for a Concession, Always Respond First With a Defense of Your Offer

The other party may attack your offer in two ways. First, by raising an objection: “The price you’re quoting is unreasonable,” “The payment terms in your draft contract are absurd.” And second, by making a direct request for a concession: “Make an effort!”

To Make an Immediate Counteroffer Is a Mistake

In Response to an Objection

In response to an objection, naturally you must defend your offer. Under no circumstances meet an objection with a proposed concession!¹

Points to note:

• A concession may cost you dearly, while defense of your offer costs nothing.
• In no way does raising an objection indicate that your counterpart will not ultimately accept your initial proposal.

In Response to a Direct Request for a Concession

When your counterpart raises not an objection, but a direct request for a concession, you might be tempted, as Carl Ritchie was, to immediately respond with a counteroffer: The initial offer was $100, the buyer is asking you to “make an effort” (suggesting $96), so the seller explains that he cannot go below $99.

As Margaret Peake explained to Carl Ritchie, immediately responding with a counteroffer is a mistake for three reasons.

1. You lose money immediately. The counteroffer (e.g., $99) means that you are backing down from the initial proposal. This retreat is “free of charge”: It yields neither compensation nor a real opportunity of obtaining an immediate decision. Yet that retreat limits your subsequent room for maneuver by bringing you closer to your “minimum position”—room for maneuver that might be very useful as the discussions progress.

   As Carl Ritchie can testify, immediately responding with a counteroffer really amounts to “wasting your ammunition.”

2. The concession offered is worthless in the eyes of the other party. The retreat implicit in the counteroffer ($1 in our example) merely constitutes a “first step” for your counterpart. From his perspective, you were trying it on with the initial offer and this immediate counterproposal constitutes a “starting point” for more serious discussions.

   In our example, Carl Ritchie’s counteroffer merely shifts the negotiating boundaries: The negotiations are no longer taking place between $96 and $100, but between $96 and $99. So the $1 deduction was indeed a significant move from the seller’s viewpoint, but the buyer sees it as negligible, as it came “too quickly.”

3. You are squandering your “minute of power.” Lastly, the immediate $99 counteroffer is a serious error for strategic negotiating reasons. As Margaret Peake explained, someone making a direct request for concessions is giving her counterpart the power, for a few moments, to say no. This is what Carl Ritchie describes as your “minute of power.” During that minute, it is your counterpart’s turn to wait for a response—which he hopes will be positive, or why would he waste time talking to you? At this point he is the one making requests, and those very requests betray his interest in your offer.

Thus you enjoy a unique opportunity to take control of the discussions. By making him wait, you can put yourself in a position to demand compensatory concessions, to obtain a quick response, or, if you prefer, to slow down the negotiating process. It is clear that coming back quickly with a counteroffer involves squandering your “minute of power,” once more giving the other party the power to say “No, that’s not enough.” You are then back to square one—except that you are now that much closer to being pushed to your limit.

But if you should not respond to a request with an alternative proposal, what should you do?

Buyer–Seller Negotiations as a Game of American Soccer (or Football to Non-Americans)

Everyone Wants to Take the Game to His or Her Opponents’ Half

It is advantageous to play on the field closest to your scoring goal. The terrain that the buyer wants to play on is price and commercial terms and conditions. Indeed, in these areas the buyer has privileged access to information (e.g., competing bids), whereas the seller is playing with “the sun in her eyes,” making it difficult to see down the field. Furthermore, the buyer can take advantage of each error or hesitation on the seller’s part in order to win penalties and opportunities to score. In short, the more the game takes place on the terrain of price and terms and conditions, the easier the game is for the buyer and the greater her chance of scoring a goal.

In contrast, the seller must try to play on the other half of the field. For him, this is the area of products, techniques, services, and so on. These are areas in which the seller generally has more knowledge and information than the buyer. It is here that the seller can break through and use decisive arguments to score a few points.

You Need to Be Able to Get the Ball Back Into the Opposing Half

You don’t want to play in a defensive position for the entire game and you have to be able to move the ball up field. In other words, when the ball lands on the terrain of pricing, terms, and conditions, the seller’s first instinct should be to move it back up the field toward the terrain of products and services. Even if such moves are obvious, and even if the tactics are predictable and are “blocked” by the buyer, or even if you are “kicking the ideas wide of the field,” at least the danger will have been eliminated for a while.

Likewise, if you are the buyer, you must quickly put the seller on the defensive by raising price issues without allowing him to use technical arguments to distinguish himself from his closest competitors.

Defend Inside Your Goal Area, but as Little as Possible

Of course, at the end of the match, you may have to “defend on your own turf” and play under pressure, on terrain that is less favorable to you. Yet the final score will be that much better for you if you spend limited time on your defensive terrain. The second golden rule then takes on its full significance: “When asked for a concession, your initial response should be to defend your offer first.”

Under certain rare circumstances, offering arguments in response may allow you to clinch a deal on the terms of your first bid. That is clearly ideal, provided that you do not cause your counterpart such frustration that he seeks revenge when he has the opportunity.

Even under the more common scenario where your arguments are insufficient to clinch the deal on the terms of your initial bid, Golden Rule No. 2 offers crucial advantages:

• “Saving your ammunition” for later in the negotiations
• Assessing those concessions that could be granted after strong resistance
• Making the most of your “minute of power” when responding to your counterpart’s insistent demands (As we shall see, that “minute of power” is key to your ability to control the negotiations, to obtain concessions, or to push for a quick resolution.)