How To Negotiate Like A Pro: Prepare

As we go through our lives, we negotiate all the time. It is because we constantly want something. We want to buy a house. We want to get a salary increase. We want our kid to go to bed. We want others to do something. That means we have to negotiate.

For many of us, especially introverts, there is a serious problem to overcome. The aversion to even start the negotiation. It feels uncomfortable. It feels like we are asked to take advantage of others. So instead, we let them take advantage of us.

It also feels like there is an imminent danger of argument or emotional response. We hate arguments and emotional responses. We never know how to react to that. We rather don’t negotiate in the first place.

Unfortunately, the world around us is based on negotiating. You get things only when you ask for them. If you don’t ask, then don’t complain when you are not getting what you want or need. Learn to ask for what you want and what is important to you. Even if it means being uncomfortable for a bit.

Understand the human mind

There are three concepts to be aware of, the framing effect, the prospect theory, and the loss aversion.

The framing effect describes that we respond differently to the same choice depending on our frame of reference and how the choice is being explained. For example, you want to buy a bottle of wine. You come to the shop, and there are two bottles on the shelf. One costs $20, the other one $50. The one for $50 seems really expensive, so you decide to buy the cheaper one.

Only then you glance at the shelf above, and there are several bottles in the $100 range. Suddenly the one for $50 doesn’t look that expensive. In fact, you don’t want to buy the cheapest wine. So you go for the one that will cost you $50. It is still the same bottle it was a minute ago. It hasn’t changed. What has changed is your perspective. This is a neat trick for how to make you buy more expensive stuff than you would otherwise do. Just place it next to a more expensive item.

The prospect theory is here to explain why we take unreasonable risks in the face of inevitable losses. The expectation of gaining something versus losing the same thing feels very different.

The theory was first developed by Daniel Kahneman and Amos Tversky to model decision-making processes and is in stark contrast with the expected utility theory. The theory postulates that people make decisions based on the potential value of gains and losses, rather than on the real final outcome.

When you have a choice between several alternatives, you prefer to avoid losses even though the potential gain is significantly higher. The possible pain of losing something is far greater than the satisfaction of an equivalent or even more significant gain.

The most common example from real life is purchasing insurance. Just consider all the unlikely things you and your family might be insured against. The chances of accidents happening are meager.

When I bought my last home insurance, I paid a special fee to get protection against my aquarium breaking and water spilling out and damaging stuff. I’ve never heard about this happening to anyone. In fact, because of the amount of time I spend traveling, I don’t even have water in the aquarium anymore. But I still bought the insurance on the remote chance that I may put water and fish in one day, and it may break at some point, and it may damage some stuff.

And that leads us to one of the widespread cognitive biases. The loss aversion explains why we are more likely to spring into action to avoid a loss than to get equal gain.

The classic example that was tested in various studies is offering you two options. I will give you either $9 or a 90% chance to win $10. Which one will you choose? The vast majority of us would go for the $9 as in the second case, there is a 10% chance of getting nothing. However, logically and mathematically, both these options are equal. Calculating the probability of gain in second option is $10*0.9 + $0*0.1 = $9.

Funnily, if I asked you to choose again from the same options, but now there is a danger of losing, your decision will be the exact opposite. Once again, the math is exactly the same. I give you a chance to either lose $9 or a 90% chance to lose $10. There is a 10% chance of losing nothing, so you go for the other option. Again, math is the same!

Now you understand why gamblers have so hard time stop playing even though they might be on a losing streak. The need to somehow recover the losses leads them to increasingly risk-seeking behavior.

Prepare, prepare, and prepare some more

Now, since you understand some of the mental forces at play, let’s talking about what you can do to negotiate like a pro. For any good negotiator, preparation is a must. This is good news for introverts. You may hate haggling, but you have some of the skills and prerequisites to be an excellent negotiator. You prepare, you know how to listen, you can use silence as a weapon, you can observe and mirror.

Preparation is the key. You need to know what you want and what you are willing to sacrifice. You need to have your data straight and do your research to understand what is realistic and what is not.

Part of the preparation is to understand what you would consider a good deal and what is your walk-away threshold. The one crucial component of this is to understand your BATNA.

BATNA, or Best Alternative To a Negotiated Agreement, is a term first used by negotiation researchers Roger Fisher and William Ury in their book Getting To Yes. It essentially describes the most desirable alternative if the current deal doesn’t get through. It will help you to protect yourself from accepting a bad deal or walking away from a good one.

Let’s say you want to buy a car, and the dealer asks for $10.000. You might be willing to accept the price. But because you did your homework, you know that you can get a similar car in another dealership for $9.000. Your BATNA, if this particular deal doesn’t get through, is to go to the other dealer and get the $9.000 car. This informs you that any deal higher than $9.000 is not a good deal.

The same can be said the other way around. The dealer asks for $8.000, and you know that if this deal doesn’t push through. Your best alternative is the $9.000 car. You don’t want to walk away from this deal.

The one word of caution I would have when coming up with your BATNA. Take a holistic view. Especially when negotiating a job offer, you may consider that it is not all only about the base salary, but other, often non-monetary things too. Just think about the team, the company culture, the benefits, the image of the company, the future career opportunities, and the lost opportunities if you take the job. It should be all considered as one package. And it all needs good preparation.

Don’t try to win

This might be a bit counterintuitive, but negotiation should be about trying to find a mutually beneficial outcome. It is not a competition. The correct mindset is not to try to win and beat the opponent. If you have this competitive mindset, you won’t be able to listen and understand the other side. You won’t be able to empathize and won’t be able to collaborate on making the deal happen. It is not about beating anyone. It is about getting what you want. These two are not the same.

The best outcome of any negotiation is when both sides leave the table feeling that they’ve got a good deal. In the vast majority of negotiations, it is entirely possible as often each side wants something slightly different. Just look at the example about BATNA I used above. Both you and the car dealer can come out as winners.

Be positive

A positive mindset and a smile on your face help to put the other party at ease and also has the effect on your own mood, confidence, and ability to stick with your prepared plan and to be more resilient when you feel being under an attack.

Preparation and self-confidence in your knowledge that you know what you want and that you can always walk away will help you significantly to reduce stress and anxiety.

Don’t bring your ego

Ego has no place in negotiation. If you make it all about yourself, the other party will see it and will push back. They will understand that you are not trying to reach an agreement, but you are trying to force your way onto them. You want to win, and you want them to lose.

Putting it all together

As you can see a proper preparation and understanding of your options is a key to enter a successful negotiation. Obviously, you don’t want to spend this amount of preparation when you want to get your kids to bed. But you should always at least have a basic feel of what are the alternatives, what you truly want. And finally, make sure your emotions don’t get in the way of finding a mutually acceptable deal.

In the next article of the series, we will talk about the importance of understanding the other party at the negotiating table.

 

Photo: rawpixel / Pixabay.com

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