Previously we looked at seven common mistakes we make in a negotiation or a sale. They were as simple as not knowing what you really want (more common than it sounds) or not being able to explain to the other side what you want to get out of the deal (even more common). Lack of research, not listening carefully to the other side and not having a plan B are also common at the “negotiating table”.
Now let’s move on to another kind of mistake, a more complex one that can catch us out in business just as easily as when we’re buying a house or a second-hand car.
Which mistakes should we avoid in a negotiation?
(See also: 10 tips and strategies for negotiating successfully)
1. Waiting for the other side to set the price
It’s true that sometimes, if we let the other side speak first, they might come straight out with a price much better than the one we were thinking of asking or offering. But as a rule that isn’t what happens, and letting the other person speak first can immediately put us in a weaker position.
And this happens because of the famous “anchoring”
It’s one of the cognitive biases that marketing takes advantage of. Whoever drops the anchor first plays with a psychological advantage, because they’ve set the bar from which the game will begin.
In a shop we might see the famous “Was €150, now €99”. The €99 is the price the shop wanted to sell you the product for all along, while you see a bargain thanks to a discount that doesn’t exist.
It’s the same in a negotiation, which is why people always say “ask for more than you want to get and offer less than you’re prepared to give”.
Suppose you’re going to buy a second-hand car whose seller wants to get €3,000. If you let him speak first, he might ask you for €4,000, starting a round of haggling in which one side comes down and the other goes up, until the deal is finally closed at €3,500 or €3,200, more than the seller actually wanted.
If you’re the one who drops the anchor first, saying you’d only pay €2,000 for the car, the anchor works in your favour, and most likely you’ll get the car for €3,000 (which is what the seller wanted) or, if you’re a tough negotiator and play your cards well, even for €2,500 or €2,800.
So, as far as possible, try not to let the other side drop the anchor.
2. Telling the other side how much you’re willing to spend
This may seem to contradict the previous point, but as the saying goes, “information is power”, and giving this kind of information to the other side means handing them power for no reason.
You may remember when we published a simple trick for making more money from a client. The trick was as simple as asking: “How much do you have in your budget to spend?” The client can only give you three answers to that question, and any of them will help us make more money from that client.
Giving this information to the other side will have them rubbing their hands; it’s information that only we should know.
That said, knowing about anchoring, you could always use the strategy of telling the other side a false budget or limit. In other words, if your budget is €10,000, you can say it’s €6,000, and that way you force the other side to adapt to the anchor you’ve set.
3. Showing too much enthusiasm
Enthusiasm for a product (a house, a car…) is the biggest sign of weakness in a negotiation, because it’s no different from the art of seduction: “Seduction works like a shadow. If you chase it, it moves away. If you walk in the opposite direction, it follows you.”
If the seller hears words like “This car is the best one I’ve seen all week” or “I love this house. I want it. Let’s see if we can reach a deal”, we’re giving the seller everything he needs to empty our pockets.
If, on the other hand, we show little interest and let it be understood that we’re torn between other houses and cars we’ve seen, which were better than what this person is selling us, we force the seller to compete on the only thing he can compete on: price.
So if you’re looking for your dream house and it turns up, don’t get carried away by emotion and enthusiasm. Show more interest in another, imaginary house and let’s see how the seller plays his cards.
When the time comes and you get down to haggling over the price but can’t reach an initial agreement, don’t be afraid to get up from the table and leave (politely, always). Let the seller think it over with a cool head and improve his offer.
Could someone else snap up the house or the car if you do this? Yes, but as a rule, if the seller has shown too much interest and has started lowering the price (even if not to the figure we asked for), it’s because he doesn’t yet have a “hot buyer”.
(See: 9 tips for getting a lower price on anything you’re going to buy)
4. Not setting limits, or not sticking to them
Before we sit down to negotiate, we need to be very clear about the most we’re willing to pay, or the least we’re willing to accept.
It may seem very obvious, but it’s actually one of the most common mistakes people make, not only at the negotiating table but in their personal lives. How many times have you gone out to buy a television or a laptop with a price in mind and, little by little, raised that limit because of the device’s other features, until you ended up spending 50% more than you’d planned?
If you go out to buy a second-hand car and set yourself a limit of €3,000, respect that limit, and don’t accept anything until something comes up below it. This will also help you practise negotiating.
Setting limits (and sticking to them) is the best protection we have against our own mind betraying us and hurting our wallet.
See also: Four truths about the art of negotiation
Featured image: Pockethealer, CC BY-SA 4.0, via Wikimedia Commons.
