When we are engaged in a negotiation, no matter what negotiation styles or negotiating techniques are being used we can make the mistake of falling into common cognitive traps if we are not careful. These traps are sneaky and if we are not on the lookout for them then they can sneak up on us and they’ll end up holding us back from accomplishing what we are trying to do in this negotiation. When we do this, we end up making the negotiation that we are involved in more difficult than it has to be. In order to prevent this from happening, we need to learn how to identify the four different traps.
Thinking That What You Have Is More Valuable Than It Is
So what can make a negotiation drag on longer than it should? One simple mistake that a negotiator can make is to think too much of what they are trying to sell. When we do this, we end up overvaluing what we have to sell. All too often we’ll ignore what the experts tell us that we should value something at and we end up asking for more than we are likely to get from anyone.
So just exactly why do we think that something that we have is more valuable than anyone else would? This is part of what is called the “endowment effect”. The endowment effect occurs when people ascribe more value to things merely because they own them. The result of this is that we tend to overvalue all of the things that we own no matter how inconsequential they are. In the end, the endowment effect can end up causing sellers to have problems trying to sell an item.
So how is a negotiator supposed to deal with this endowment effect? In order to prevent ourselves from overvaluing our possessions, we need to seek out unbiased appraisals from third-party experts such as real estate agents, jewelry appraisers, or even financial experts. The hope here is that if by using the guidance of someone else you are able to look into the future, then you’ll be able to price what you own in a more rational way.
Allowing Yourself To Focus On Price Too Much
Any time that we are involved in a negotiation where we are trying to sell something, it can be all too easy for us to start to focus on one thing – getting the best price. In a negotiation, it can be all too easy for any of us to value the goal of meeting our target price. However, if we get caught up in our own self-interests and end up haggling over price then this will not allow us to see the negotiation as being a collaborative process.
When you allow yourself to get stuck in a competitive mindset, you’ll be unable to examine the other side’s needs or add more issues to the discussion, such as the timing of a delivery, schedules for making payments, and other sources of synergy that could enhance both the agreement and your bottom line. If you happen to find yourself in this situation, step back and try to brainstorm for ideas that will allow you to add more value to the deal, both on your own and with the other side.
Making Offers That Don’t Appeal To The Other Side
A key part of any negotiation occurs when we create an offer and then present it to the other side. No matter how much time you have spent creating such an offer or how well you think that you understand what the other side is looking for, you can still make a mistake. If you don’t take care and present your offer in the best possible light, then there is a possibility that you will have presented the other side with an offer that does not appeal to them.
This all comes down to how you choose to frame your offers. All too often negotiators end up failing to frame their offers in a way that would be an advantage for them. What can make things complicated is that the other side often has a target price that they are trying to achieve. What this means is that anything that would be a compromise that could move them away from this price is something that they won’t be willing to do. As a seller, you can make things worse if in your proposal you talk about the distance between the price that you are offering and the price that the other side wants to pay.
A much better way to go about doing this is to reframe your offer. What you will want to do is to show the other side that your offer presents them with a gain over the previous status quo. If instead of focusing on what the other side wanted to pay you could focus on how much they’ll save over what they are currently paying, then you will have reframed your offer.
What All Of This Means For You
As negotiators we have a certain way of viewing the world. What this means is that during your next principled negotiation, there is the very real chance that you might fall into one of several cognitive traps. These traps occur because the way that we choose to see the world may not be the way that it actually is. What we need to learn how to do is to spot these traps and then to adjust our view of the world so that we can help our negotiation reach a successful conclusion.
The first cognitive trap that we can fall into is when we are trying to sell something, but we have convinced ourselves that it is more valuable than it actually is. This is part of what is called the “endowment effect”. We need to get the advice of outside experts so that we can understand what something is truly worth. We can also get hung up on the price of what is being sold. If we are not careful, we’ll not be able to collaborate with the other side in order to reach a deal. Finally, if we don’t take the time to understand what the other side wants out of a negotiation then we’ll run the risk of making them an offer that does not appeal to them. We need to reframe our offer in a way that will meet their needs.
Understanding that often in a negotiation we can end up being our own worst enemy, we need to become aware of what we may be doing that will hold us back. Once we understand what we are doing, we can adjust our behavior and start to move the negotiations forward. Don’t let yourself get trapped and unable to reach a deal with the other side.
– Dr. Jim Anderson
Blue Elephant Consulting –
Your Source For Real World Negotiating Skills™
Question For You: When trying to determine how much something is really worth, how many outside sources should you consult with?
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What We’ll Be Talking About Next Time
What would the perfect negotiation look like to you? Would it happen if you sat down at the negotiating table, presented the other side with an offer without using any of your negotiation styles or negotiating techniques, they accepted it and everything was over and done? Immediately sensing that you asked for too little, you would probably feel as though you had screwed up. In a negotiation, we’re often excited to close a deal. But at times, the fact that we’ve “won” a prize means that we’ve become the latest victim of the “winner’s curse”. The good news for you is that there are steps you can take to avoid the winner’s curse in negotiations.