Follow The Bouncing Price: What Sales Negotiators Need To Know

by drjim on March 19, 2010

During A Sales Negotiation, A Price Can Go Up Or Down Many Times

During A Sales Negotiation, A Price Can Go Up Or Down Many Times

A Price Is Not A Fixed Thing

Inexperienced sales negotiators often enter into a negotiation thinking that the price of something that they are trying to buy or sell is fixed – it’s set in concrete and cannot be changed. They think that their goal is to “discover” what this price is through negotiating. Those of us who have been doing this sales negotiating thing for awhile know differently. It turns out that the price of just about everything is constantly in flux – and we need to understand what can make it go up as well as go down…

It’s All About Expectations

Although I love talking as much as the next person, the goal of any sales negotiation is to eventually reach a deal that is acceptable to both sides of the table. In order to reach that goal, the other side of the table needs to feel that they’ve reached the best deal that they’re going to get – that it’s pointless to continue to negotiate.

This brings up the issue of expectations. Whether we’re willing to admit it or not, we’ve always got a price floating around in our head when we are negotiating. This is the price that we think that we can buy or sell something for. During the course of the negotiation, depending on what is going on, this price is going to go up or down.

Since the very same thing is going on in the heads that are on the other side of the table, perhaps it would be a good idea to take the time to understand just what makes this imaginary price go up or down.

There has been a fair amount of research done on how people manage their expectations. Specifically, the researchers have taken a close look at what makes our expectations go up or down. Here’s what they’ve found:

  • It’s All About Success (and Failure): It turns out that our expectation of what we think that we can sell something for or what we think that we can buy something for goes up or down after we experience a success or a failure during a sales negotiation. In other words, if the other side makes a concession to us, we feel that we will be able to sell at a higher price or buy at a lower price. Likewise, if we have to make a concession to the other side, then we start to feel as though we’ll have to sell at a lower price or will end up paying more for what we are trying to buy.
  • Let Them Be Successful Slowly: This understanding of mental prices leads us to the understanding that if you slowly make concessions to the other side, then their expectations for being more successful during the negotiations will only go up a little bit.
  • We Just Don’t Get Failures: Much like small successes, small failures have even less impact on the other side of the table’s mental price expectations. This is why when you are trying to get them to lower their expectations for what they’ll walk away with, you may need to get them to make the same compromise over and over again so that they finally get the point.

Where You Aim Is Where You’ll End Up

With all of this new understanding about what makes us expect more or less from a given sales negotiation, you might be wondering if there is any way that you can protect yourself from all of this up and down stuff. It turns out that there is.

The same researchers who studied how success and failure affected our expectations also too a look at what it takes in order to be more successful. It turns out that the people who set higher expectations for themselves were almost always more successful during a negotiation.

When you set high expectations for what you want to get out of a negotiation, then all of a sudden that sets the mental price that you are shooting for. Everything else gets measured against this. You can’t help but to walk away at the end of the negotiation in a better position that you would if you had set your expectations lower.

What All Of This Means For You

Like it or not, every time that we start a sales negotiation we have a price in our heads that we want to buy or sell at. The other side of the table is exactly the same — they have their own mental price. The key to a successful negotiation is making sure that you mange the other side of the table’s expectations during the negotiations.

Successes and failures during a negotiation are what cause our mental prices to go up and down. This means that you need to manage how concessions are given to the other side of the table – give too much and their expectations will shoot up.

In order to make sure that your rising and falling expectations don’t doom your negotiations, make sure that you set high expectations for yourself before starting any negotiation. If you can do this, then you will always be successful.

Question For You: Do you think that making a single big concession or multiple smaller concessions would have the largest impact on the other side’s expectations?

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What We’ll Be Talking About Next Time

As I work with sales negotiators and teams of negotiators I am constantly surprised by just how hard it is for them to say one simple word: “No” . Normally, this is no big deal – I mean who wouldn’t want to hang out with somebody who is always agreeable. However, this inability to say “no” can spell disaster when you are in a negotiation…

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