The Art of Negotiation

Discussion in 'Articles & Tutorials' started by BusinessStories, Mar 2, 2012.

  1. BusinessStories

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    Dec 23, 2011
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    The Art of Negotiation

    As a new start-up, every single day involves bargaining. Many would call is hustling, but whatever you refer to it as, bargaining is a key skill to have. I’m a strong believer that every negotiation has a winner and a loser – at the end of every deal one person walks away with the upper hand – be that person.

    There are a lot of tactics for making deals, but the most important and prevalent to every day life is anchor-and-adjust. What does that mean? Think of it this way, if you anchor a boat it might sway from side to side a few feet but never very far. In the same way, when you as a buyer or seller name a price for an item (anchor it) the negotiations will not sway very far from that number.

    Here’s an example: There are two scenarios.

    You walk into a dealership, ask the salesmen for the price of a car, he names the sticker price of $25,000, you banter back and forth and eventually talk him down to $24000 – not bad, you saved a thousand dollars.
    You walk into a dealership, tell the salesman you want to pay the true value of the car which is $20,000. The salesperson laughs at you, but not wanting to lose the sale works with your offer and talks you up to $22,500.

    There’s data to back up these hypothetical scenarios, but the important concept is what caused the final price difference of $1,500. In the first situation, the customer let the salesman name a price, and the salesman, being smart, named a high price. Not wanting to sound ridiculous, the customer offers a lower price and they negotiate. The salesman won that battle because he had the upper hand from the start, he threw the anchor where he wanted it to be.

    In the second scenario, the customer took hold of the anchor and threw it on the other side of the boat. This forced the salesperson to rebound and try to regain ground, but he could never regain enough distance to get as high of a price as when he threw out the anchor.

    The most important aspect of negotiation is retaining the upper hand throughout and that’s impossible if you don’t throw the anchor first. Next time you find yourself in a “deal war” try setting the anchor where you want it to be and see what happens.

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