with No Comments

Post No.: 0582concessions

 

Furrywisepuppy says:

 

When bartering, the way most concession patterns go is that the first concession is the largest, then further concessions gradually get smaller and smaller until it seems like it’s going to stop at around a certain figure. Although this isn’t a foolproof rule of thumb – use this tapering as a ruff clue as to where the other party’s true bottom line is.

 

It’s not always the case but decreasing increments suggest a tendency towards a limit. Meanwhile, increasing increments might suggest a willingness to offer even greater concessions and a desperation to make a deal rather than leave without one – and this desperation can be exploited by the other party.

 

So your own concessions should taper downwards too, with only tiny concessions come the end of the bargaining. So for instance, if you own an item and you first offer to sell it for $100, then if this price is rejected then you could re-offer it for $95; and if this is also rejected then you could re-offer it for $92, and so forth (unless you find any intervening counter-offer from the other party acceptable – in which case you should logically consider accepting it).

 

You also want the other party to work or sweat for every single concession from you (e.g. every time they make a proposal, you’ve got to go away and confer with your partner and call back the next day, rather than say, “Yes” right there and then; within reason). You want them to feel like at the end they couldn’t have done any better and they’ve wrung every last penny they could out of you. This will leave them with a greater sense of satisfaction – whether you could’ve conceded more to them or not if they had worked even harder! (One of the worst feelings is the other party accepting your first offer – could you have driven a harder bargain? Did you get ripped off?)

 

Remember to research what the value of each possible given concession is to you and to the other party, as well as what the value of each possible received concession is to you and to the other party, before making your concessions, and use any differential to your advantage. Just because something has little value to you, it doesn’t mean it’ll necessarily have little value to the other party; and just because you receive a concession that’s valuable to you, it doesn’t necessarily mean it’ll have as great a value to the other party. A concession that’s unimportant to you might be valuable to them, and vice-versa, and that’s how the pie can be expanded.

 

Thus if another party offers you a gift in a commercial context, be careful and don’t just humbly accept their generosity as it may be of little value to them and they’re just using it to try to get you to reciprocate but with something that’s disproportionately of higher value to them in return. Bear in mind the relative value to both parties of any concession or gift.

 

A trading plan or concession strategy is a table or chart that sets out your goals, interests, positions, and which tradable gifts or concessions you’re willing and able to trade with the other side. It should also identify the goals and interests of each and every party and have them ranked. You could also decide whether each item is best off using a collaborative, competitive, accommodating, avoiding or compromising negotiation style.

 

Giving away value too early or easily can leave you with a poor hand for the remainder of the negotiation, thus leaving you with little to offer later and gambling on the other side’s level of generosity. Additionally, it might (erroneously) signal that you’ve got deep pockets hence they’ll expect more from you. If you make concessions with no strong rationale then the other party may assume that you’ll continue making more concessions to them and they’ll appeal to you by using more weak rationale. Therefore only make concessions if you have a solid rationale for doing so and when you’re being rewarded in another way i.e. make reasoned exchanges.

 

Ensure that you only reciprocally concede information at roughly an equal level of detail too – too much and you can be exploited; too little and the other side may become hesitant to share anything with you again. This is like in most relationships!

 

Your opening position or opening offer is your anchor, and their opening position or opening offer is their anchor. You could either state it firmly if there’s little room to make concessions (e.g. if the market valuation of a product is quite clear), or you can state it loosely if there’s good flexibility and a wider willingness to make concessions (e.g. if the market valuation is unclear).

 

An extreme opening offer is usually met with an opposite but equally extreme counter-opening offer if the other party knows (or believes they know) the market value of what’s on the table clearly; or they might alternatively walk away if they have better alternatives. But if the market value of what’s being negotiated is unclear then an extreme opening anchor gambit could pull the other party into making their respective opening offer closer to your desired position. Anchoring or priming with information – in this case with the first number stated – will affect how the other party will react to subsequent information. (Of course all these things can work for or against either party hence it’s about taking advantage of any tricks whilst simultaneously watching out for when these tricks may be attempted against you.)

 

You could try to set an opening offer that’s at the high-end of what can be ‘reasonably justified’ (but this is typically highly subjective!) Whatever the case, if you make an extreme opening offer then it’s wise to signal that you have the fluffy flexibility and willingness to move from this position, otherwise you might miss out on making a deal altogether as the other party walks away for thinking that you’re just too far away from their own position i.e. you risk them guessing incorrectly that an overlapping area of agreement doesn’t exist.

 

The opening offers from both sides are crucial for defining the initial boundaries of the possible area of agreement, and therefore for the rest of the agreement and what you could each potentially get from the negotiation. Once you state an opening position, you cannot subsequently go better (for you) than that, and the same for them. For example, you offer to sell a grooming brush for $20, but then increase the price to $25 once the prospective buyer tries to negotiate you down(!) This might however possibly work for something that’s in incredibly high demand and is rare or exclusive as it pressures the prospective buyer to buy without further hesitation, but it’ll still seem quite unprofessional.

 

Your opening valuation can cause the other party (or vice-versa) to reassess or recalibrate their own valuation (assuming they’re still interested in making a deal), cause them to reassess their bottom line and alternative options, lessen their resolve regarding their willingness to walk away, or even potentially encourage them to settle for a valuation outside of the limit they set themselves before the negotiation began – such is the gravitational pull of the anchoring effect!

 

Being the first to give your opening offer can assert control (e.g. by allowing you to frame the area of agreement more favourably) but going second can be more strategic (e.g. by allowing you to take advantage of any error of valuation made by the first mover, usually by them not going as extreme as you had anticipated). Generally, if you know enough about the other party’s valuation then go first, otherwise go second.

 

An aggressive tactic would be to avoid anchoring your position for as long as possible, get or wait for the other party to state their first number, respond with an assertion that it’s too extreme whatever number they give, then wait for them to give another response. But if the other party doesn’t believe that they’ve missed the true or fair valuation at all or by much then they won’t fall for this hardball tactic or the doubt it seeks to create, and they won’t bid against themselves – it’ll backfire as they’ll put the ball in the aggressive person’s court and make them state their first offer along with the counter-doubt they’ve now seeded in the aggressive person’s mind about what is exactly a ‘sensible valuation’. It’ll also ultimately create an adversarial, untrusting and negative negotiating environment and increase the risk of an impasse. Therefore, aggressive anchors, or aggressive responses to anchors, don’t just anchor a value but also anchor the tone of the negotiation. And starting off on the wrong tone can be hard to reverse out of. One can far less easily turn distrust into trust than the other way around, thus a hardball initial tone can be difficult to undo.

 

In general, hardball tactics don’t work on some individuals – better to be friendly, open-minded and cooperative, whilst remaining firm on positions. This can better elicit information, increase credibility and lead to successful outcomes. Post No.: 0541 discussed how cooperation can be far more productive than competition because there’s a big difference between winning and succeeding. Woof!

 

In a fixed pie situation i.e. when the pie can no longer be expanded – each party then makes concessions towards the other party’s position (assuming that an overlapping area of agreement is believed to exist by both parties). But again be aware of your and your counterpart’s concession patterns.

 

From an opening offer, which will act as an anchor – one could either stand firm on the anchor (if the market value is extremely clear), make concessions closer towards the other party’s anchor (the usual case), accept the other party’s anchor (very unlikely), or walk away from making any deal (if one doesn’t feel an area of agreement exists, if one has better alternatives elsewhere, or if one is riskily bluffing).

 

In general, make them work for every concession you give, even if you don’t mind giving something away – as if they’re bleeding you dry (without acting overdramatically!) This will make the other party feel like they’re getting the most out from you. Hard-fought gains feel more valuable and more satisfying when obtained. This is the same in sports, where the hard-fought victories go down in history greater than the easy ones.

 

If one party reads an increasing incremental concession pattern from the other party then they could hold firm on their last position (or even better just stay silent) and wait for this other party to possibly offer them even more concessions. But a pattern can be easily misread. For example, one party makes a medium concession, the other party makes a big concession, the first party misreads this as desperation from the second party so makes only a small subsequent concession, but the second party actually makes a tiny subsequent concession to now suggest a rapidly decreasing increment size. The first party thus may respond with a medium concession to suggest an increasing increment size, for which the second party can then exploit (because they’ll now know it’s actually the first party who’s the most desperate to make a deal) and so they hold firm on their last position, thus pulling the first party towards the second party’s position.

 

Woof! Like anchors – concession patterns matter greatly. Whilst anchoring sets the initial boundaries of the negotiation – with concessions and concession patterns, both sides are continually redefining the boundaries of the possible area of agreement. Your counterpart will be trying to signal a false ceiling (if they are the buyer) or false floor (if they are the seller) some distance away from their true absolute bottom line, but the forces of anchoring and concession patterns are so strong that even bottom lines can be made to dynamically change.

 

Comment on this post by replying to this tweet:

 

Share this post