What is negotiation?

For some people the word negotiation conjures up images of salesmen in suits on opposite sides of a table, trying to strike a major deal. Whilst this is certainly one type of negotiation, it often surprises people to learn that most of us have opportunities to negotiate every day - whether it is in business or with friends and family.

So what is negotiation? It can be defined as a discussion or dialogue between two or more parties to come to an agreement which is mutually acceptable.

Some cultures around the world embrace negotiating or "haggling", whereas other cultures seem to shy away from it. Negotiation can be used to reduce the sale price of a car or a house. It may improve the salary offered to you by a potential new employer. It may just be a better agreement within your family on what chores are going to be done by whom.

When can you negotiate?
You have the opportunity to negotiate whenever you agree to do something in return for another party also doing something for you. Sometimes people don't even realise that a negotiation is possible. Prices may seem fixed but when you try to change your cell phone or cable supplier it's amazing how flexible a company can suddenly become.

Example – buying in a store
Maybe you are thinking of buying two of the same item in a local store. The individual price per item is marked as $30. Buying two rather than one product gives you options to negotiate. You could:

• ask what discount they would give you if you bought two items rather than one
• offer $40 for the two items
• just pay the $60

Golden rule #1: Ensure you are negotiating with the right person.

The store owner is more likely to be able to negotiate price than a sales assistant. Make sure you are negotiating with someone with the authority to agree to what you want.

You can't guarantee the store's response but you can plan what to do for various store responses. The balance of power in the negotiation will depend on who has most options. If you absolutely need the two items and they are not available elsewhere in town, then you are in a weaker position than if the products are also on sale just a block down the road at the same price. 

Let's assume you can't get the product anywhere else. What is the worst that can happen if you negotiate? You may end up having to pay the $60. If you start by asking what discount is available there is a good chance you will get something off, especially if the store thinks you have other choices and may buy nothing.

Even if the store owner knows he's got exclusivity on the product he may still move on price. In the back of his mind he may be thinking "this is a regular customer and I don't want to risk them taking the rest of their business elsewhere". He may even make a counter-offer "I can't give a discount on two but if you take three items I can do them at $25 each". Great if you need three, not so great if you don't.

You don't always have to do a "deal"
Thankfully it's mostly a free world and people don't have to do what you want or even what seems sensible for them to do. So when negotiating there's often the option of walking away for both parties.

Golden rule #2: If the deal isn't right for you, don't do it.  

However also watch out for rule #3.

Golden rule #3: Think about the full consequences of not doing a deal BEFORE you start the negotiation.

In the example above, it's no good storming out of the store because it won't reduce the price from $60 if you absolutely need the products immediately. Whilst you may feel reluctant to do the deal, the consequences of not getting the products may be far worse for you. Just don't undermine your position in the negotiation by showing the owner how desperate you really are!

What's the best negotiation style?
Questions on negotiation style are almost as common as the question "What is negotiation?" Most people have a preferred negotiation style and when they are offering or being offered a "deal" will respond in a particular way.

However, no one negotiation style is perfect. Six of the styles are listed below. The trick is to understand the different styles and know when to use each. Novices or non-negotiators will often only use the first three or four styles, whereas experienced negotiators will use all six from time to time.

Golden rule #4: Understand as much as you can about the other party: what they want; what is likely to make them do a deal; what will make them walk away.   

Negotiation Styles include

1. Grab what's offered
2. Take the middle ground
3. Bargain 
4. Use threats
5. Use rational arguments
6. Play on emotions

Let's take a brief look at each negotiation style.

1. Grab what's offered

This is the weakest style to use in a negotiation. It's often just a surrender to the other party. Actively avoid this style in most situations. However if you are at the front of a very long queue for the very last ticket for the big game then you may be better to pay the asking price!

2. Take the middle ground

Splitting the difference between your position and that of the other party is a start on the road to being a good negotiator - but only a start. Look to use other styles wherever possible.

3. Bargain

Now you are starting to think like a negotiator. Trading concessions can add value to your side of the deal. Maybe they can't move on price but how about throwing in free delivery? Maybe they can move on price if you can help introduce them to other potential customers.

4. Use threats

This style must be used with caution but can be used when negotiations appear to be going nowhere. The threat that you may walk away from the deal may be enough to push the other party into a compromise. However be prepared for them to call your bluff. Do you really want to walk away?

Threats should be subtle rather than harsh – "I have been given an enticing offer from your competitor" may be better than "give me what I want now or you lose the business". It is not a good style to adopt if you are planning to have a close and long-term business relationship with the other party.

5. Use rational arguments

Demonstrating that the deal is beneficial to the other party may help them to move their position: "I know the cost of the equipment is $10,000 higher than you wanted to pay but by my calculations it will save you $7,000 a year on maintenance costs. So over three years you could save $11,000". Most negotiators would listen to this type of argument.

6. Play on emotions

Showing emotion can be a powerful means of gaining agreement when the parties are close to a deal. Even saying something like "I can't offer any more but I would really love to work with you guys" may be enough to clinch the deal.

If you would like to gain further insight into your own approach to negotiation then try this quick self-assessment activity on preferred negotiation styles.