When it comes to business negotiations, what kind of negotiator are you? Do you look for ways to coax the other party to submit to your demands? Do you confidently make an offer that the other party just can’t refuse? Perhaps you are the peacemaker, always looking for a solution that benefits everyone. Regardless of which type of negotiator you tend to be, wouldn’t it be nice if you could simply convince your counterpart to do what you ask simply with the wave of your hand? While this type of magic might not be possible, there are psychological tools that can be used during negotiations. Here are some effective negotiating techniques that are backed by psychological research. 

Diminishing Marginal Losses & Gains

Research shows that people tend to be happier with smaller gains rather than a single gain of the same size.

Example: Imagine you are walking down the street and you find a $20 bill. Now, imagine you are walking down the street and find a $10 bill and the very next day it happens again! Most people would be happier with the latter. In other words, people prefer to receive payments in installments as opposed to one lump sum. On the other hand, most people would rather lose $20 at once than lose $10 a day for two days in a row. This demonstrates that people would rather lose money in one lump sum. 

This same theory applies to negotiation. Your opponent is more likely to accept an offer that includes several small gains rather than a single gain of the same amount. Conversely, your opponent would rather accept a single loss rather than an offer that includes multiple losses of the same value. 

Loss Aversion

Studies have shown that people are more motivated to avoid losses than to achieve gains. In other words, your offer is more likely to be accepted if you frame it in a way that demonstrates what your opponent stands to lose if they reject your offer rather than in terms of what they will gain if they accept your offer. 

Example: An car salesman tries to sell you an electric vehicle by telling you how much money you will save if you make the switch. Now, the next salesman tries to sell you the same car by telling you how much more money you will spend on gas every year by not switching to an electric vehicle. While both are giving the same information, most people are more likely to be swayed by the second offer. 

In terms of a negotiation, your offer is more likely to be accepted if you state it in terms of what your opponent stands to lose rather than telling them what they have to gain.

Disclose Some Personal Information

Self-disclosure is a process in which a person reveals something about themselves to another. People may reveal something personal about their lives in an effort to develop a closer bond with the other person. 

Example: When you sit down at the negotiating table, you begin making small talk and share personal information about your family in an effort to find common ground with your counterpart. 

Self-disclosure is a great way to build rapport and connect with others on a more intimate level. This in turn affects the way in which they communicate with you. It could make them less aggressive and more agreeable toward finding a solution. 

Give Your Counterpart a Surprise Gift

There is a psychology term known as the reciprocity norm that says people feel inclined to return a favor when a favor has been done for them.  

Example: You show up to the next business meeting with coffee and pastries for the group. This simple gesture would make the other party more likely to compromise during the negotiation in an effort to reciprocate your kind gesture. You could also offer to give something, such as a discount or expedited shipping services, to your counterpart and use cooperative language such as, “That’s what partners are for.” 

Giving a gift or something of value can motivate the other person to reciprocate during a negotiation.

No matter your business or industry, there will always be times when you need to negotiate. Negotiations allow all parties to resolve differences and come to agreements. During the process of negotiating, not only are different opinions taken into consideration, but also individual needs, interests, backgrounds, and cultures. Not only is negotiation intended to help one or more parties reach a solution, but it can also be an opportunity to build and strengthen business relationships. 

The Win-Win Approach to Negotiation

Many professionals choose to aim toward a win-win solution. This involves looking for solutions that allow both sides to gain something of value. In other words, this type of negotiation requires negotiators to work collaboratively to find a solution that results in both parties walking away satisfied. 

In an ideal win-win negotiation, both parties are willing to make concessions and comprise. If one party gives something away, the other party reciprocates by negotiating some form of compensation. In the end, both parties feel comfortable with the outcome. 

Focus on Building and Strengthening the Relationship

Disagreements are a normal part of negotiation, but it’s important to maintain the integrity of the relationship. This means leaving your emotions at the door, not placing blame on the other party, and aiming to separate the people from the problem. You must remember that you will be communicating with these people in the future, so you want to build and strengthen those interpersonal relationships. Seek to resolve differences in a respectful manner and remember that the goal is to find an agreeable solution to the problem. 

How to Reach a Win-Win Agreement

• Focus on Interests, Not Positions

People aren’t usually difficult just for the sake of being difficult. Rather, there are almost always underlying issues and valid reasons behind their position. The person may be influenced by their values, beliefs, or responsibilities. Therefore, try to keep the conversation courteous and be receptive to different points of view. 

• Listen to the Other Party

It is so important to not only look out for your own interests but also seek to understand the needs of the other party. Actively listening and understanding the other person will make them feel heard and validated. It is important that everyone has the opportunity to clearly express their own needs, desires, and concerns in order to reach an amicable solution. 

• Seek Options for Mutual Gain

Once each side has a better understanding of the other’s needs, a solution might be easier to reach. If not, brainstorm and explore options that might help solve the problem. Be open to all suggestions and bring any new proposals to the negotiating table. 

When it comes to negotiations, everyone wants to have an advantage. How can we ensure that we get one leg up on the competition? There is ample research to suggest that space and location can influence the outcome of a negotiation. Just as in sports, there is something to be gained in negotiations with the home turf advantage. However, it’s not just about the location itself. The room design and setup of the space can also level up your effectiveness in negotiations. Here we will take a closer look at how the location and use of the space can improve one’s influence and persuasive abilities. 

Negotiating on Home Turf

When you are in your own office, you get to control the environment. This means you can control the seating arrangement, the layout of the room, and even who gets to attend the meeting. You also get the psychological comfort of negotiating in a familiar environment. If you are at ease, you will be able to maximize your negotiating effectiveness. People also tend to fight harder on their home turf, as is often the case in sports. Here are a few ways you can make a home field negotiation work in your favor. 

Impress: When the other party comes to your office, you get the chance to put on a display of your strengths. Given your level of comfort on home court, you will likely be more comfortable and confident, and your confidence will be impressive. You can also display awards, certificates, and diplomas on your office wall, which can portray you in an impressive light.  If you are able to impress the other party, you may have an easier time getting concessions from them. 

Room Design

You may not realize it, but a room’s design can have an impact on your discussions. The physical appearance of the room can set the mood and tone for negotiation. For example, windows that allow natural light along with adequate lighting in the space can create a sense of calm. You also want to make sure there is good airflow so everyone is comfortable. If not, people may find themselves making concessions just to get out of the room. 

In most negotiations, people tend to be seated directly across the table from their counterparts. However, this can be more adversarial and there are better options that lead to better collaboration. For example, you can create a more harmonious environment by having people from opposite parties sitting next to each other. You can also try seating the group in a circle, as this can avoid any sense of hierarchy and can lead to more inclusive discussions. Circles are great for bringing people together.  

Proxemics is a branch of study that focuses on how humans view and interpret the use of space. Oftentimes, despite our knowledge, the space and location around us can have a direct impact on our behavior, communication, and social interactions. Given that all of these elements are present in a negotiation, it is important to consider your space and location in order to maximize negotiation efficiency.

You don’t have to be a master negotiator to close that important business deal. Psychological research suggests that there are plenty of ways to motivate people to do what you want, without them even realizing it. So, the next time you’re trying to negotiate a higher salary, get the best pricing from a supplier, or close that high-stakes deal with a client, consider the following psychological maneuvers that will help you increase your odds of getting what you want. 

The Reciprocity Norm

This is one of the oldest tricks in the book that simply refers to the old adage, “You scratch my bike, I’ll scratch yours.” Research has shown that people are more likely to do something for you if you have done a favor for them. In most cases, people feel an obligation to repay you for the favor. So, how can you use this in negotiating? First, do a favor for your counterpart. Perhaps you show up to the meeting with a cup of coffee or a nice pastry. You may even offer to take them to lunch. When the time comes to negotiate, there’s now a better chance you can persuade them into your way of thinking. 

Maintain Eye Contact

Making eye contact with another person with whom you are speaking is more than just being polite, it can increase awareness and understanding. Eye contact can help you display honesty, create a bond with the other person, build respect, and foster attraction. This simple technique is a great way to get the other person to do what you want without having to say a word. 

Choose the Right Environment

“Priming” is a powerful psychological phenomenon in which one stimulus produces a specific response to another stimulus unconsciously. For example, if you placed someone in a room with a briefcase, portfolio, and fountain pen and then made them an offer, there’s a higher chance they will fight for more money than if they were in a living room with pillows and snacks. That’s because the business-related objects elicited a sense of competitiveness. This tactic could be used when negotiating in much the same way. Rather than meeting in a boardroom, consider meeting in a coffee shop. 

Mimic People’s Body Language

Scientists refer to this as the “Chameleon Effect” and it’s what happens when subtly mimicking someone else’s body language. For example, you might sit in your chair the same way the other person does, nod your head the same way, or copy their facial expressions and mannerisms. Researchers have found that we like people who have similar body language so this can help you get what you want. 

Start Small

Referred to as the “Foot in the Door Technique,” this psychological technique involves asking the other person to do something very small. It could be as simple as asking them for the time or asking them to hand you something. Once they have helped you in even the smallest way, it becomes difficult for them to back out. So, gradually work your way up and eventually you can ask for larger favors. 

Use the Person’s Official Name

People love when you refer to them by their official name and title. Using titles such as Mr., Mrs., Dr., Professor, and so on help to make the other person feel respected. This also makes the conversation feel more personal and intimate. Instead of making the person feel forced into something they don’t want to do, this simple technique makes the person feel important and in control.

Whether you’re trying to get the best deal on that new car, find bargains at a yard sale, or get a pay raise at work, you are constantly using negotiation in your daily life. We all want to get the best deal possible, but not all of us are great negotiators. Fortunately, the ability to negotiate is an important skill that, like any other skill, can be practiced and improved. Despite popular belief that good negotiators just have a natural knack, anyone can become a good negotiator with the right mindset and plenty of practice. 

For decades, researchers have been studying the science behind negotiations and have found that there are a wide variety of factors that drive us to agree to the requests of others. This research has shown that our decision-making process is not necessarily guided by logical examination of facts, but rather by universal shortcuts our brains take to make quick decisions in overwhelming situations.  Understanding this research and implementing it correctly can greatly increase your chances of getting to “yes” in your next negotiation. Here are a few scientific principles that can help you persuade others when you are negotiating. 

The Principles of Liking

As the name suggests, the science of persuasion indicates that people are more likely to accept the requests of people they like. Generally, we like people for three reasons: they are similar to us, they pay us compliments, or they cooperate with us in the pursuit of common goals. In terms of negotiation, research shows that likeability is one of the most important factors in reaching a successful outcome. Therefore, take some time to get to know your counterpart and find common ground before proposing any terms. 

Scarcity

People tend to want more of something when quantities are limited. Consider the following sales tactic: A new shoe is hitting the market but the company is only making a limited amount of these shoes so you have to get them before they are all gone. To this same point, effective negotiation requires you to demonstrate the value of your product as well as its limited availability. You want to convince your prospect of the benefits of acting now on your offer. 

Authority

In general, people tend to trust others who appear knowledgeable, credible, and trustworthy. Doctors are a great example of this. You tend to believe what your doctor tells you because you feel good about their expertise. The same is true for negotiations. You want to convince your prospect that you are an authority on the matter at hand before you attempt to influence their decision. Once you have established credibility, you are seen as someone who can be trusted which in turn makes you more persuasive. 

Reciprocity

When someone gives you a gift, you tend to feel obligated to give one back in return. This can be a great negotiating tactic. You can start by offering something to the other party, such as a discount, additional services, extra perks, or extra products. Research shows that if you give an initial gift that feels personal or customized in some way, the other person will feel indebted to repay you. 

Consistency

Research has shown that people tend to act consistently with past actions. In other words, when a person agrees to a small commitment, there is a greater likelihood that they will agree to a larger commitment that is consistent with the first one. Think about a membership to a gym for example. You may be hesitant to agree to a full year membership right away, but you would be willing to try it for one month. After that one month, you are now more likely to agree to that full year. Consider this strategy when you are negotiating. Try asking for smaller commitments up front, knowing that you will likely be able to close that larger deal later on without much hassle.

Negotiation is a necessary and critical part of running a business. The right negotiations can create lucrative opportunities for businesses, form symbiotic relationships, and lead to greater success. When utilized to its full potential, the ability to negotiate can pay dividends for employers and businesses alike. Whether it’s negotiating price with suppliers, salaries with employees, or closing a high-value deal with a client, the ability to negotiate well is essential for any business. Here we will explore reasons why businesses either succeed or fail in negotiations. 

Why Business Negotiations Fail

Lack of Preparation

In today’s busy and fast-paced world, it’s easy for businesses to forsake valuable preparatory time in hopes of “winging it” when they step into the meeting room. To the same point, many businesses also assume they have all the information they need to be successful and therefore forgo doing additional research. This lack of preparation can mean doomsday at the negotiating table. It is vital that businesses spend adequate time preparing for negotiations by studying market conditions, history, and the objectives and goals of both parties. Without the right preparation, businesses are likely to stumble. 

Ego

Many deals are unsuccessful because of self-pride and ego. Some people may not be willing to make certain concessions or give things up because of their ego. On the other hand, the desire to be liked can also be a deal killer. You may give up more than you should simply to appease the other party. Getting wrapped up in your ego can be dangerous, especially when it comes to negotiations. 

Fear of Failure

Another reason companies often fail in negotiations is simply because of fear. Fear of the unknown and fear of failure are common reasons for sabotaging a deal. Some negotiators are consumed with thinking about the possible negative outcomes associated with the deal rather than addressing and calming their fears. 

Why Business Negotiations are Successful

The Needs of Both Parties Were Addressed

One of the most important tactics for a successful negotiation is listening and understanding the needs of the other party in addition to your own. Some of the worst negotiators are the ones who spend the entire time talking and controlling the conversation. Successful negotiators take the time to truly listen and empathize with the other party’s needs and point of view. Understanding each other’s needs will help negotiators reach a more successful outcome for everyone involved.

Good Preparation

As stated before, there is nothing quite as important as preparation when it comes to negotiating. Good preparation involves the following:

• Researching and understanding the needs of the other party
• Reviewing the background of the person you are negotiating with as well as company values and history of decision making.
• Understanding the offerings and pricing of competitors
• Knowing your goals and objectives as well as your walkaway point

Negotiations are Polite and Courteous

No one wants to do business with someone who is rude, combative, arrogant, or aggressive. Nor do they want to deal with someone who wants to play hardball. Not only is it to the company’s advantage to close the current deal, but there is also a good chance that they may want to do business with the other party again in the future. Establishing a good long-term relationship is advantageous for both parties, so all negotiations should be polite and courteous.

The role of psychology in negotiation is fascinating. Understanding how the human brain works can provide useful insights into predicting our behaviors. Humans experience a variety of emotions throughout the negotiation process and understanding what causes these emotions is important in learning how to master the art of negotiation.

Believe it or not, when we make decisions, we are not always in charge. We can act impulsively, deliberately, or emotionally. The more scientists have studied the human brain, the more it becomes clear that different parts of our brain collaborate and compete when we make decisions.  While there is no specific formula for making good decisions, the more we understand about how decisions are made, the better we can manage them. 

The Role of Cortisol

Cortisol is a steroid hormone that the body produces in reaction to stressful situations. It is often known as the body’s “flight or fight” response. When you or the other person in a negotiation begins to feel stressed or frustrated during the discussion, this means there is a heightened level of cortisol. This causes us to move into a more emotional state and can cloud our thinking. When this happens, it is important to deescalate the situation  by acknowledging the emotions, offering compassion, and engaging in problem-solving tactics. 

What is Happening in the Brain

When a person receives an offer during a negotiation, it fires the dorsolateral prefrontal cortex. This part of the brain is responsible for making us self-aware and gives us the ability to reflect on the information that has been presented to us. It is the part of the brain that allows us to solve complex problems, which is why it activates when we are presented with an important financial decision. 

If an unsettling offer is made, another part of the brain, the anterior insular cortex, is activated. This is the region of the brain that is responsible for our emotions, allowing us to feel pain and anxiety. When you get that ‘gut feeling’ that something isn’t right, you can thank this part of the brain for your body’s response. 

When you are presented with an offer during a negotiation, these different parts of the brain begin communicating and conferring with each other allowing you to assess the situation. In other words, your emotional  wing and your logical reasoning wing arecompeting with each other. Do you fight back with a better offer or take the deal even though it’s not what you wanted? When one side of the brain is more active, we tend to make a decision based on either logic or emotion. The decision-making process in the brain is quite complex, but the more we learn about the brain science of motivation, the more we can learn to become effective negotiators. 

Have you ever been part of a negotiation in which the other party was willing to stop at nothing to get what they wanted? If so, this probably left you feeling angry and irritated and there’s a good chance you will never do business with that person again. The truth is, playing “hardball” is an ineffective negotiation strategy that sours relationships. The most successful negotiations are those that result in a win-win outcome. Win-win strategies allow both parties to find mutually beneficial solutions. This can help to avoid conflict and also builds a respectful relationship that opens the door to future negotiations. Here we will take a look at some tactics and techniques for finding a mutually beneficial solution in negotiation. 

Separate the People from the Issues

It is important to avoid identifying your counterart as your “opponent,” as this tends to feel like there should be a winner and a loser. Instead, focus on the issues at hand, and try to ignore any personality differences or emotions. Try putting yourself in the other person’s shoes so you can more easily find common ground and compromise on a solution. When you are willing to look beyond your own interests, you are more likely to reach a solution that works for both parties. 

Seek Options for Mutual Gain

Once you have a better understanding of the other party’s interests, you can seek solutions that will benefit both them and you. For example, your counterpart may be looking to increase productivity and you may be selling a service that helps them achieve this goal. If you can close the deal, both parties will achieve their end goals.

Present Multiple Offers

Another great strategy is to present the other party with multiple offers that you believe to be equally valuable. Allowing your counterpart to choose from the offers makes them feel empowered and also provides you with information about what they value most. This not only makes you look accommodating but can also be helpful in future negotiations. 

Include a Matching Right

A matching right is a guarantee that one party can match any offer the other party receives at a later time. For example, leasing negotiations between a landlord and renter may include a matching right. If the landlord wants to sell the property at a later date, they must first present the offer to the renter, allowing them first chance to negotiate. This allows the landlord to consider new offers but also gives the renter the first chance to counteroffer, resulting in a win-win solution for both. 

Look for Interdependency

You can also reach a win-win outcome by analyzing whether or not the two parties have dependencies on each other. When interdependence exists, it becomes easier to reach a mutual understanding of the situation. Both parties can then collaborate to reach a mutually beneficial agreement.

What makes a great negotiator? Some would say it’s communication skills while others would say it’s one’s ability to seek mutual understanding. In many cases, however, a great negotiator is simply the one who holds the power. Typically, the more power we hold, the more confident we feel and that can lead to successful outcomes. 

Though most people would argue against using power as a way to get what you want, there are times when this may be the only solution. For example, if teachers feel they are being underpaid and overworked, they may have tried voicing their concerns to no avail. This may leave them with no other choice but to go on strike. In other words, they are using their power to get what they want. If you find yourself in a similar situation where you must use the power of coercion to get what you want, here are some ways you can use that power to negotiate a deal in your favor. 

What is Coercive Power?

Coercive power is the ability of the power holder to take something away from the other person or to punish them for noncompliance. The example of the teachers on strike stated above would be an example of using coercive power. Using the threat of a strike, threatening a non-payment, threatening to go public, or threatening to take legal action would all be instances of coercive power. What all of these practices have in common is the element of fear. 

When to Use Coercion?

The use of coercion should certainly not be the first choice of action for most negotiators. This type of negotiation would only be necessary if there was no other option available and it was worth the risk. There is a steep price to pay for using coercive power and threats. You risk ruining relationships with the other party or even ruining your own reputation, and the outcome may be short lived. 

Although coercive power and threats can sometimes result in amazing short-term effects, it is not likely that it would produce the long-term outcome you would hope for. Instead, it may be more beneficial to use reward power. Reward power is used to support legitimate power. Someone might receive a reward such as recognition, a pay raise, a bonus, or other rewards for a job well done. Reward power comes from having the ability to reward the other party in the negotiation. It could be the power a salesperson has to give good service or solve a problem. This use of power is typically more beneficial in the long run.

Time is a fundamental element of negotiation, often used as a condition by the negotiator. Time can be strategic, used by the negotiator to achieve a goal. Time can also affect many aspects of negotiation, such as outcomes, motivation, and even choice of tactics. Time pressure can be used to produce greater cooperation and faster agreements, thus making it a powerful negotiating tool. 

Time Pressure Can Lead to Results

Think about a time when you went shopping and saw a sweater you really wanted. Next to the rack was a sign that said, “Sale…today only!” Did you end up buying the sweater? Chances are you were persuaded to act quickly because of time pressure. You worried that if you didn’t buy the sweater that day, you would be missing out on a great deal. This same logic applies to business negotiations. The salesperson can motivate the customer to act simply by applying time constraints. “I must have an answer today.” “We can only offer this price until tomorrow.” “Our inventory is running low so you better act now.” 

Time pressure is effective because if a deal is made over a short period of time, this gives the buyer less time to shop around or reconsider the offer. The key, then, is for the salesperson to know and leverage the time window in order to optimize their position. 

Never Negotiate Until You Know They are Ready to Make a Decision

If you have ever visited a car dealership, you were likely approached by a salesperson asking if you needed any help. If you replied, “I’m just browsing today,” there’s a high probability that the salesperson left you to browse. On the other hand, if you replied, “I’m browsing because I really need a new car this weekend,” the salesperson likely never left your side. That’s because they knew you were in a place where you were ready to make a decision. The most effective way to use time is to never even begin negotiations until you know the person you are dealing with is ready to make a decision, and it should be done in a short period of time. The more time the other person has to make the decision, the longer it will take. So, always start by asking the customer what their timeline is for making a decision.