Posted in General, Management, Productivity, Retail Operations

How to negotiate

Traditional wisdom states that you should always wait for the other party to make the first offer/ move. The thinking is that they may come up with a starting offer that is better than you would have hoped for and from there on you can only improve.

Retailers ask vendors for quotes and negotiate from there – that is the usual way.

We have been teaching negotiation skills differently and now the latest research (by Stanford Graduate School of Business Professor Margaret Neale, quoted in Supply Chain Research) supports this view.

 Her advice is: “Rather than waiting for a price quote from a potential vendor and then negotiating off of that price point, it may make sense to begin with a very low ball, perhaps unrealistic price point that changes the dynamics about where the ultimate price will go.”

We teach negotiation accordingly: A cornerstone principle of the psychology of persuasion is that of ‘FRAMING’. (Those of you who attended the recent breakfast seminar hosted by Cumberland Newspapers will have heard me talk about this.) Framing is all about ‘perspective’ and by taking the lead in the negotiation process; you are able to ‘frame’ your price expectancy and force the other party to adjust their view of what is acceptable. Of course, as Prof Neale observes: “The trick is to pick a point that gives you this advantage without being so ridiculous from the vendor’s viewpoint that they decide the business isn’t worth pursuing.”

If you ask for a quote, you effectively ask the other party to dictate terms. With a bit knowledge of the underlying psychological principles, you could turn this conventional wisdom on it head.

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