Golden Rule No. 4: If You Have to Give Ground, Do So in Small Steps

Regardless of the potential compensation, the strategy of making concessions is a key element in negotiating. You must observe six key principles:

1. Avoid being the first to make a major concession. In practice, during the trial of strength between buyer and seller, whichever of the two is the first to back down on a crucial issue loses out twice over: he loses out in terms of position and perception.

   For example, a manufacturer wants to sell at $100; a user wants to buy at $80. If one of them quickly proposes $90, he loses out twice over: He sees a reduction in his potential profit, and he clearly shows his counterpart that he is prepared to greatly reduce his demands in order to clinch a deal. The rest of the negotiations will probably prove to be very difficult for such a negotiator.

   You can help your counterpart to save face and still persuade him to accept the first major concession. An effective means of getting your counterpart to make the first major concession is to back down on a (minor) issue, provided you say no before you say yes.

2. Say no before you say yes. As we have already seen, the successful negotiator will respond to a request for concessions with a counterargument. If that request is repeated, it is desirable to respond in the negative before suggesting that something might be given in return. You thereby increase the pressure on your counterpart—and your prospect of then obtaining something significant in return.

   An error that is frequently made when negotiations start is to let the other party believe that “we’ll be able to sort something out.” You need to give the opposite impression.

3. Minimize each concession. In particular, you need to resist the temptation to “split the difference.” For example, the seller offers a 10% discount, but the customer demands 20%. If each side stays entrenched in its position for a while, you might think that 15% constitutes a good compromise for the seller to offer the customer. That is not true. In reality, there is no proof that the customer’s demand is justified or that 15% is the best compromise between 10% and 20%. The customer will simply view the compromise suggested (15%) as the new rate that the seller is demanding and will then seek to find a compromise between 15% and 20%.

   Here is what you should do:

   ° Encourage your counterpart to take the first step so that you benefit from the ratchet effect: “I’m not accepting yet, but I’m taking your new proposal into account.”

   ° If you have to break the stalemate yourself, propose a compromise very close to your starting position, but with strings attached.

   In practice, you need to remember three facts:

   ° Your counterpart does not know just how far you are prepared to go.

   ° The significance of the concessions received is assessed according to the difficulty encountered in obtaining them. An immediate 30% discount is worthless in a buyer’s eyes, as he will merely deduce that the item was overpriced from the outset. In contrast, a 3% discount acquired after difficult negotiations may give him great satisfaction.

   ° Once a concession has been granted, it cannot be given again, so it is in the interest of all parties to keep their cards close to their chests rather than to lay them on the table too quickly or obviously.

4. Choose where to give ground. Nothing forces you to answer yes or no to a request for a concession from the other party. On the contrary, the ability to “move the goalposts” and to grant the other party a concession of your own choosing is a key to successful negotiating. There is a key phrase here: “I can’t do anything for you on that issue, but I’d like to make you a proposal.” The goal is to avoid making costly concessions that are hard to reverse or that run the risk of affecting other products or customers.
5. Plan for ever smaller concessions. The reasons behind this are largely psychological. During the negotiating game, the “players” are trying to work out what cards their opponents are holding. Indeed, the game ends when each player feels she has exhausted the potential concessions from the other player. Reducing your concessions as the negotiations proceed is a message to the other player: “You’ve squeezed me enough. This is the last bit of ground I can give.”

   Thus this method has three objectives:

   ° To protect the profitability of the deal

   ° To give the other party the feeling that she has negotiated well

   ° To increase the chance of negotiations concluding rapidly

6. Plan for increasingly longer response times. Whatever the authority or power delegated to you, it can be useful to cite internal reasons for deferring your response to a request for concessions. Some examples of justifications for delay include, “I must check certain data with our technical people”; “I’ll have to review this with my line managers”; or “I must raise this issue with our finance director before deciding.”

   Imposing a delayed response can bring you considerable benefits.

   ° If the answer is no, your counterpart will have the feeling that you did your best to get the go-ahead but were unsuccessful. He therefore negotiated well and reached the seller’s bottom line regarding concessions.

   ° If the answer is yes, your counterpart will be convinced that he obtained a significant, hard-won benefit.

   Whatever your response, you have called a halt to the other party’s demands. This tactic is particularly useful when the other party is subject to time constraints. In addition, if you increase the time taken for each response as negotiations progress, you will show the other party that he has little or nothing to gain by extending proceedings through further demands.