Most people hate negotiating. The thought of looking someone in the eye and asking for more salary, or asking for a lower price, feels incredibly stressful. Because of this, many people willingly go with much more expensive options that save them that experience. In other cases, people accept much lower pay and benefits than they are due.
In either case, that’s money down the drain.
Negotiating, while uncomfortable, is an important skill that can save you literally thousands of dollars in a single purchase.
Many articles can be written with tips on negotiating, but here are three tips to get you started on your path to becoming a master negotiator.
Photo by Gabrielle Henderson on Unsplash
#1 Research, research, research
When you enter a negotiation, the person at the other end of the table will make an offer. And it will almost always be in the other person’s favor.
Why? Because if you say yes at that moment, then they’ll be getting the best possible deal. They’ll have saved time and effort, and an amazing price.
And if you say no, then your expectations will still be skewed towards whatever end of the spectrum they’ve said.
This is a tactic called “anchoring” and it works even when we don’t realize. For instance, if you are buying a car, and they offer you a price of $30,000, you’re going to think of the price of the car in that ballpark.
The best way to protect against this is through research ahead of time.
Research will give you the context to know that most cars in the area of that model sell for much less.
Or, research might tell you what the average salary is for your job.
In short, if you don’t research to put prices in context, the other person will do it for you, and it will not be in your favor.
#2 It never hurts to ask
This is the hard part. Even armed with research, most people are simply too afraid to ask for a better price.
Why? Because people imagine that getting a “no” will be extraordinarily painful.
The truth is that most times, people will not get a flat out “no.” They’ll get a reduced price, or, in a best case scenario, they’ll get all the concessions that they wanted!
When the salesperson spits out a high number, or an employer offers a low salary, take a breath, and ask for more. In the worst-case scenario, you’ll be in the same exact place.
There’s actually a strategy to it. Select a price you want ahead of time, and then make asks in this order:
- 80% of your price - This “anchors” the negotiation in your favor.
- 90% of your price - At this point your counterpart will see that you’re willing to make a concession, which will make them more willing to make concessions as well.
- 95% of your price - You’ve made another concession so your counterpart will be more likely to move their price again. However, not as much as last time. Your counterpart will notice this and that you’re getting close to your limit.
- 97% of your price - Similar to the previous step. You haven’t moved too much. At this point, you’re probably still speaking in round numbers (e.g. “$10,000 for the car”). That will change on the next step.
- 5% and add a non-monetary bonus (e.g. “I’ll give you a raving review on Yelp!”) – At this step, don’t move much at all in price. Take a moment and do some math, and come up with a very specific number. For instance, instead of $10,000, offer $10,027.52. On top of that, offer something that has nothing to do with money. This will be different from situation to situation. It might be a positive review, a write up in a newspaper, a free pen. These two things will make it seem like you’re at your absolute limit and won’t be able to move any more. If the other person wants to make a sale, then they’ll accept the offer.
You’ll notice that these steps never hit that 100% mark. Good! Do yourself a favor and anchor yourself in a mindset that expects a lower price. If you expect a higher price, the other person will oblige you.
#3 No, really, it never hurts to ask
Beyond asking for a better deal, it’s also important to ask questions – as a whole. Specifically, open ended questions are your friend.
The goal is to make the other person do the thinking for you.
The most powerful question you can ask is “How am I supposed to do that?”
That question in various forms will make the other person start doing all your work! They’ll start to figure out payment plans, discounts, shipping, everything.
It’s a way to say no, without actually saying the word “no.”
Go out and do it
The only way to get better at negotiating is experience. Go out and negotiate small things. Prepare yourself for the big negotiations down the road.
Remember, negotiating isn’t a fight. It’s not boxing with another person. It’s dancing. It’s showing each other respect, and learning each other’s boundaries so that you both come away with what you want.
Negotiating is an important skill to learn. A financial professional can give you the groundwork and encouragement you need to bargain hard, so you’re getting the most out of every deal.
Click here to sign up for a free Bronze account. A financial advisor will reach out to set up a complimentary 60-minute coaching session, during which you can learn several other negotiation strategies.