1. Share information
We often approach negotiation being very guarded and wary of showing our cards. Yet, while we believe this is a smart approach, it has a negative impact on our outcomes and inhibits trust. People tend to be matchers and "follow the norm of reciprocity, responding in kind to how we treat them. If we want to be trusted, we must first offer it.
Information, even when it is unrelated to the negotiation, increases the outcome. You don´t have to put all of your cards on the table at the outset. Simply putting something of yourself out there - your hobbies, personal concerns, or hopes - can set a positive tone that´s conducive to gaining agreement.
2. Rank order your priorities
Typically when we negotiate, we know what our key issues are, and we sequence them. For example, if we are trying to close a new client, we might say that the price is most important, and if we do not agree, there is no use to continue.
A more strategic approach is called "rank ordering". Researches show that you are able to achieve better outcomes by ranking and leaving all the issues on the table and being transparent about it. That way both parties can compare their rankings and determine what the full set of options really are.
In the above example, perhaps you could make trade-offs in scope or travel requirements if the client can´t get to your price.
3. Go in knowing your target price and your walkaway terms
Know your walkaway price (or terms) also called "reservation price". Your target price is what you are aiming for.
Often we go into negotiations with one or the other or let our partner start the bidding. This puts us at a disadvantage. Nobody will negotiate your interests as strong as you.
It´s critical to do the research ahead of time here. You need your research to be based on firm data, expereiences with the customer, selling points, etc. It s not only will it provide more confidence and power to you, but it also reduces the chance that you will throw something "crazy" out there.
By knowing your own range, it will help you make better decisions in the moment, and be clear about your limits. Preparation prevents pain
4. Make the first offer
This is one piece of advice that clearly defies conventional wisdom. In negotiations, information is often equated with power. We all believe it is best to extract as much as possible from the other person before tipping our own hand.
Research are clear on this point: people who make first offers get better terms that are closer to their target price. The reason is the psychological principle of anchoring. Whatever the first number is on the table, both parties begin to work around it. It sets the stage.
Often we are reluctant to go first because we may be way off, and disengage the other party. Studies are showing that most people make first offers that even are not aggressive enough.
5. Don´t counter too low
If you are not able to make the first offer, then you need to also protect yourself against the anchoring effect.
Caution: most people go too low, too quickly. Your counter should be based on the same information you would have used if you´d made the first offer.
You may also want to consider re-anchoring. Let the other person know that their offer is way off, and go back in with a new reset. It also may be helpful to call out what you are observing to redirect the conversation, i.e. you may be trying to test my thinking with that first offer, but here is more of what I had in mind.
6. Counter offers make both parties more satisfied
Every buyer wants to feel that they got a good deal; every seller wants to feel as if they drove a hard bargain.
Parties are most satisfied on both fronts if there was some back and forth. This may come as a surprise if you are someone who abhors negotiation.
You also should not take the first offer, even if it meets your needs. By going back and asking for concessions you can ensure that you got the best deal, and increase your customers satisfaction as well. More satisfied customers are more likely to work harder and be more committed to the end result, which is the ideal outcome from the start.
Additional Reading & Sources:
@Adam D. Galinsky is an assistant professor at Northwestern University's Kellogg Graduate School of Management, in Evanston, Illinois. His research interests include how particular strategies affect objective and subjective outcomes in negotiations, conflict and dispute resolution, power in negotiations, and the influence of stereotypes and stigma on negotiations.