Negotiation Tactics Essentials - Procurement Zen

Negotiation Tactics Essentials

Throughout the years I have learned a lot of negotiation tactics. In this blog posts I will show you the tactics that are successful. I will also reveal details and how you can counteract them if the other party applies them on you.

So negotiations. Everyone does them. It doesn’t matter if you want it or not but we do it all the time. If you are in the procurement space (like I am) you do it more often.

One word of warning: This post is NOT for you if you ...

  • ... fear from taking influence (especially in business negotiations)
  • ... consider them shady tactics
  • ... call it "manipulation"

The purpose of negotiations is gaining influence over your counterpart. It can happen in a respectful and gentle way. But you must accept that influence is important.  Otherwise others try to influence you (against your will sometimes).

The tactics we will cover in this post are as follows:

  1. The Anchor
  2. The Nibble
  3. The Bogey
  4. The Broken Record
  5. The Brinkmanship

I will also introduce a bonus negotiation tactic to you that I use quite often.

Are you ready? Let’s dive right into the very first negotiation tactic.

The Anchor

In a nutshell

Anchoring is setting a reference point. All future offers relate to this very reference. The party that makes the first offer is usually the only one to execute an anchor.

Example
We are meeting today today to come up with the final price. From our point this should be $657 per piece.

Important Side Note

An anchor rarely is the final result, it acts as a reference point. So don’t fall in love with your anchor.

Details and Insights

Anchoring - which we also discussed in episode 12 of our podcast in detail - is about groundwork. You set that point every future discussion after that will refer to. It's important that you as a negotiator set the first anchor. Because you cannot re-anchor or counter-anchor in reality (although some state they can). This usually makes you appear weak. Something you definitely want to  avoid.

Yet, you do not blurt out something you made up. You need to have a reasoning behind your anchor. That’s where negotiation preparation comes into place.

A good negotiator sets anchors. An expert negotiator prepares them. And even if you only have 10 minutes to prep your next negotiation, try to come up with a somewhat decent story.

Following the example above:
We discussed this with the team. Due to the fact that we need a certain margin and also want to give discounts to our customers, we came up with this price. 

The story about margin and that our sales force needs to give discounts is the story in this statement. This is crucial because this underlines how believable you are. So - as we said many times in our podcast - don’t come up with something like “10% off is always possible”. That’s not an anchor, it is ridiculous.

You also should also relate the anchor to the final result for the other party.

Example:
If we can agree on this price, we will find a way to make your payment terms of 30 days possible. It would also offer us the opportunity to sign a longer term contract.

From a psychological perspective, this works very well. We humans have something that’s a called a cognitive bias. This means that we assume first sharing of an information to be true.

After applying an anchor prepare to be silent. A lot of the times you need to let the “anchor sink in”. Don’t destroy your own anchor by talking to much.

Counter Actions

What can you do, if someone is placing an anchor against you? As I said before, re-anchoring or counter-anchoring usually is not your best bet. Here are some measures you can take:

Move away: Try to get away from the anchor by changing the topic. You could say something like this:

Interesting. I would rather discuss the delivery time first. We would expect your goods no later than …

Get clarity: Try to get clarity how "real" their story / their reasoning is. To do this ask questions.

  • What is the calculation of that price?
  • What was the average margin you mentioned before again?

It is important that you do not stay to long on their agenda topic but rather try to execute yours.

Conclusion

Use anchoring to set a reasonable reference point. Having a good explanation is key for this tactic. If you ware the one anchoring, try to stick to the topic as long as possible. This will strengthen the reference point.

The Nibble

In a nutshell

Even  small things sum up over time. That’s what nibbling is all about. Collecting small commitments soon makes a big difference.

Example
Oh, by the way, you deliver the goods free to our plant, don’t you?

Details and Insights

This is another negotiation tactic that you should prepare. Make a list of small changes that you like the other party to agree to.

  • Extended return time → sure, why not
  • A little bit longer payment terms → yeah, it’s only 2 weeks more
  • Free rework → shouldn’t be a problem

The reasoning behind nibbling is that large requests often get rejected. A good negotiator places small things that come into mind as small requests. The expert negotiator prepares these. 

Doing the preparation isn't hard. Look at your most important requests and try to break them down into smaller chunks.

As these requests are “partial requests in disguise” they often do not get recognized. More often than not, you don’t even have to give something in return.

Once they approve  a request, thank your counterpart. Mention, that this is definitely good for the relationship. As most people want to keep a good relationship, they feel rewarded. They “sacrificed” a small item on the altar of friendship (so to say). What they often do not see, is that these small thing sum up.

Another approach could be to use nibbling late in the negotiation process. Fear of loosing out is key here. The other party is willing to make these small commitments to not loose the “whole deal”.

Counter Actions

A perfect counter action to nibbling, is to write the items down.

Pick a flip chart, a white wall or something comparable. But it must be physical. In a virtual meeting share your supplier notes.

Every time you gave in to a small request - which you also can do by purpose, see below - you write it down. This makes these small favors more real. Five items on a written lists are more than five items in your head.

You could also use the nibble someone uses on you as a strategy.

  • Prepare a list of things you could give away (2 to 3 things per negotiation topic)
  • Once you have made 3 or 4 commitments - again, which don’t hurt you - and you have written them down, say something like ...

As you can see, John, we made all these commitments. Isn’t it time for you to give something back? We ask you to reduce the discount by another 3.2% to 9.6% general discount

This works very well in my experience. The counterparty has gained a lot and may be afraid to loose all these gains. You could even go as far as starting to strike through your notes, if your counterpart doesn’t comply. Make sure, they can see you erasing these notes.

Some good examples

  • Thank you, John, for making this possible. Of course we would need a small batch of free test licenses to make this work.
  • Great, Sabina. Thanks for your efforts to make this partnership work. A sponsorship of our next in house trade show would round up this deal. 
  • Looks like we’re almost done. To understand the software, we would expect you to give us some free training on how to use it, of course.

Conclusion

Prepare a list of small things you would like to have. Request them late in the process. The counter party is usually “more willing to give”. Don’t ask for them. Instead make statements of what you would like to get.

The Bogey

In a nutshell

The bogey is a negotiation tactic where you make a topic more important than it is in reality. Later in the negotiation you give it up to get something important YOU want in return.

Example
We told you now many times that payment terms is an issue for us. I could fight for the 60 days net instead of our 90 days standard. But in return we need you to reduce the item price to $341. 

Details and Insights

Consider a few topics - no more than two or three, as the bogey otherwise becomes very obvious - where you can give in. Stick to them as long as possible before you give in.

Be very clear in the beginning that giving in on your topic is really a hard change for you. Maybe you even want to use terms like ...

  • We rarely ever do this
  • It is impossible for us to ...

Stick to your position as long as possible. It is quite important to recognize that the other sides counter offer - the thing you might want to give away - is important for them, too. If they could easily give it away, they may not be willing to return your favor.

This works because of a similar psychological effect than the anchor. You mention something early on and use it as a reference throughout the discussions.

Example:
As we said, cash is king and hence the payment terms are a cornerstone of our supply chain efforts.

You also need to “play it right”. Giving up your position must leave the impression, that it is a hard thing for you to do.

Important Side Note

This is a quite aggressive negotiation tactic. As with nearly all tactics you may do an internal dry run upfront where one of your colleagues plays the other party.

It is also very important, that you brief all of your team members regarding this tactic. You don’t want to run into a situation where your colleague says

But Phil, I have never heard that payment terms are so important to us.

Counter Actions

Do you think someone is applying the bogey on you? Questions are the key to fight it! 

  • What is that makes this single topic so important for you?
  • You have not mentioned that before. How come it is so vital for you now?

It is crucial that - especially with the bogey - you gain as much important as possible. And if you think that they are using a tactic, it probably is true.

Conclusion

Prep a list of things you can give away more easily and then reject exactly that give away for a long time. Give them in hesitantly when you get to the core of what YOU really want → rather later than sooner in the negotiation.

The Brinkmanship

In a nutshell

This negotiation is making a big request although the deal is already done. You force the counter party to give in on your request to not loosing the whole deal.

Example
We have found out, that the services you have provided so far have not met our expectation in total. To pay the remaining milestones, we require you to further reduce the price down by another 9.2%. 

Details and Insights


As the name of this negotiation technique implies, this is a very aggressive approach. You apply it, if other more reasonable approaches do not seem to get you to your goal.

To make it very clear: It is not raising the same demand over and over again. That would be a lame approach. Instead you keep one major point for a time, where the counterparty is very vulnerable. Then you use their vulnerability against them.

Example:
[On a Friday] We know you are ready to start next Monday. But we received notice the price is still to high. Please reduce it to the price of $82.50 per hour. Otherwise it makes no sense to come over on Monday.

You are exploiting the others position of weakness in a very aggressive way. If you feel uncomfortable doing this and think you cannot push it through, here's my advice

Then don't use brinkmanship!

This could influence your future relations with your partners. Thus it is quite important to only use brinkmanship as a negotiation tactic every once in a while. And try not to use it more than once or twice per supplier.

The reason is this. If you make a deal too unattractive for them they might consider rather loosing it . It may seem better to give up the deal and even the relationship than to comply to your (future) needs.

Counter Actions

Install security measures: Imagine in which topics  a supplier uses rinkmanship against you. Then declare so called “made up deal breakers”.

Example:
[Imagine a situation where your supplier may use brinkmanship on delivery. For example they send you the goods 1 by 1.]
John, one important thing upfront: one by one delivery is not an option for us. This deal will only take place if we can get the goods all at once.

This is your security measure that you always have as a reference. You can also put this into a contract clause to ensure it is not used against you in the future.

Use your what's special about you: If you offer something, that is unique, then use it to defend brinkmanship.

Example:
I hear you, John. But if you improve these prices, we have to call our CEO. I am sure he would be no longer wiling to give you the reference you were asking for.

Don’t share internals (as in NEVER EVER): This should be self explanatory but still happens way too often. You do not share deadlines, product details or other internal information. That could bring you into a position of vulnerability.

So it is also very important, that any outgoing information goes over your desk. You don’t want to your colleagues to reveal any positions, that put you in a position of “easy prey”.

Conclusion

If you discover a position of vulnerability use it against them to “push through” your biggest topic.

The Broken Record

In a nutshell

In this tactic you repeat your position over and over and over again, without ever deviating from it. The idea is that the counterparty at one point gives up and accepts your position.

Example
You: Jim, I am sorry but we cannot pay more than $342 per item.

Jim: I understand, but this would cut our margin in half

You: I hear you, but again $342 is the max we can pay

Jim: Have you considered our short lead time for delivery?

You: We did. But as I said, $342 Dis fix, we cannot go above that.

Jim: What about the remote switch feature, you liked so much? That alone is worth half of what you want to pay.

You: I see, but even so, $342 is the budget limit.

… and on and on and on … 

Details and Insights

If you re-iterate the topic over and over again, you improve its importance. You make sure, that the counter party understands, how important this is for you.

One word of warning ...

Do not use this approach too often. As with every negotiation tactic the magic is in the mixture. Using only this technique is not a good idea. The other side  will discover that you’re using it against them.

The good negotiator knows how to apply this technique from time to time. The expert negotiator prepares on which items of the deal he will play the broken record.

From time to time I even use the broken record to stall negotiations. You do not talk about anything else until there is a solution to this topic.

Counter Actions

If you find out that others play the broken record on you, there are a few approaches to make the record run again.

Ask questions: Use an open ended question to overcome the question. Looking at the example above, Jim could say the following:

I understand that the prize of $342 is very important to you. Unfortunately, we are not able to do that. It looks like our discussions came to a halt. How should we proceed from here?

It is very important, that your whole negotiation team waits for a response. Be silent. Don't talk. Let the counter party answer this question. More often than not you will find angles that help you overcome the situation.

Empathize: Try to empathize with the counter party. This counter tactic goes hand in hand with the questions mentioned above.

Example:
I understand your pain and your restrictions. Yet, I also have restrictions put on me by our management and we cannot meet that price as suggested by you. Can you think of extra things that could make this more attractive for us?

The “as suggested by you” part is very important here. You are rejecting and not rejecting it at the same time. What you are looking for is more benefits for you. Benefits that could sweeten that specific price point for your company. Embrace the discussions and try to find add-ons for you . Or play What-If scenarios to come up with more advantages for your part of the deal.

Conclusion

Repeat your position over and over to make clear, that this is very important for you.

Bonus Tactic: The Missing Man

In a nutshell

The Missing Man is also known as “Higher Authority”. It refers to someone not at the table who approves the decision. An authority that would not be happy about the current results.

Example
I am sorry to say that, Rhonda, but I fear our management cannot approve this long delivery time.

Details and Insights

The Missing Man negotiation tactic can be very helpful when it comes to the end of a negotiation. Usually, close to the end only a few major points are open.

Here you can apply the Missing Man. Say that you wouldn’t even dare presenting the deal in its current status to your Missing Man. For example something like ...

... they would never accept reimbursement for first class travels...

Quite important here is the differentiation between “them” and “you”. This puts you in the same boat with your negotiation counterpart. You are fighting for the same thing, getting this deal signed. But make sure that you don’t leave an impression of “I would approve this but my management doesn’t”.

If the other side asks if you would approve this, answer that it’s not something you can decide.  Repeat that if necessary.

One word of warning ...

Don’t use this for minor topics OR too often. Applying this tactic too often weakens your negotiation position big time. Even up to the extent that it seems that you do not have a mandate to negotiate at all.

Counter Actions

The counter action here is very simple. But you must apply it early on. Ask if the counterparty has the mandate to make decisions on the negotiation table. If they hesitate or don’t answer at all: repeat the question.

Make sure you get an answer. Even if they tell you, they are not mandated, this is a good response. Then you could stop the negotiations and invite decision makers to the table. Definitely helps you to avoid wasted time and effort.

This counter tactic lives from applying it early in the negotiations. It is not something that you can ask if you recognize the game of Missing Man!

If you experience the missing man tactic applied on you respond with something like:

But during our first meeting you mentioned, that you have the mandate to finish this deal. At least, we are so can we please get ahead?


Conclusion

Reference to a higher authority, that would not accept the deal / sign the contract to due to clauses you want to have changed.

This concludes our view on 5 (plus 1) quite effective negotiation tactics.

Here are 2 extra influencing factors. They will improve your results but are not direct negotiation tactics.

Preparation

If you have any chance at all to prepare do yourself a favor and do it. Prepare lists of items you can give away (the bogey) or items you want to set a reference point for (the anchor).

An extra part of preparation is the dry-run. If you can, try to find a colleague and dry run your arguments, where the colleague plays the other side. Although people are not used to it, this will improve your negotiation results big time, I promise.

Briefing / De-Briefing

Brief the other members of your team what approach you’re going to follow. You fall from a strong strength into a very weak position if your colleagues reveal that you’re not aligned.

If it happens, make sure to de-brief the colleagues afterwards. This at least helps to avoid situations like this in the future.

I know that especially the de-briefing often feels awkward. It’s not that you should accuse anyone of doing wrong. Rather show potentials that the team can gain if you act “together”.

Conclusion

Everyone of us negotiates. No matter, if it’s a salary discussion or you are buying a new home. No matter if you’re in sales or in strategic procurement and do it for a living.

These 5 negotiation tactics can help to improve the results of your very next deal. Apply them and you will achieve above average return.

Let me know in the comments, which one you like most. Of which one you apply next. Or if I am missing out on something.

I will respond to every comment!

Phil Kowalski

I am passionate about helping other to achieve more in their negotiations. I love to prep, design and execute successful negotiations. With more than 15 yrs procurement experience I sometimes feel like the Obiwan Kenobi behind this blog and my podcast.

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Check Out Our Latest Podcast Episode

Ep. 012 - Framing and Anchoring