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"Why in the world would you plan what you will give away before you go into a negotiation? Surely you shouldn't be planning to give away anything or very little. I mean this just seems silly." This was the feedback I got from one student a few months ago. And before you either agree with the person or cast off the statement as trolling, let's give him the respect he deserves and dig into what he's really trying to say.
In one way, he's absolutely right. We obviously want to try give away as little as possible in any negotiation we go into. But in most ways, he's wrong. In most negotiations, you're going to have to concede something. Now, I can already hear the 'value creation' band getting out their drums and banging them loudly, singing about creating value versus conceding. The truth is that in most business negotiations, making concessions is a reality that you need to face.
Making concessions in negotiations is a part of negotiation. Yes, we want to try to minimize the concessions, obviously, but concessions will likely be made. So, if we know that concessions will need to be made, then we should plan for it.
Because when you're in the middle of a negotiation and emotionally tied up (and you will be), you're less likely to make rational decisions about what you plan to give away and the relative value of those concessions. So what ends up happening is that you make silly decisions about what you concede and generally end up giving away a lot more value than you need to or should.
So how do you plan for your concessions?
Objectively write down all the things you're willing to concede in your next negotiation before you go into it. This could include any number of things (warranty, product, trials, price, inco terms, security, risk, etc) but it should be objective. Then, rank those items from least valuable to most valuable. Now, quite separately, do the same thing from the perspective of the other party you're going to negotiate with. Remember that the value you place on an item may be different than the value the other party places on an item. This is why it's so important to try to think of this from their perspective. What you'll likely notice is some overlap between the lists and potentially some gaps. The overlaps are where deals start to come together and the gaps are the areas that will likely need to be filled with additional value creation.
Once you have both lists developed, you'll be better prepared when you go into the negotiation. Now when you're trying to gain something in a negotiation and the other party asks for a concession from you in return you can reference your list to determine whether the relative value of the concession makes sense. This allows you to make better decisions and it drives better deals.
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