Business is full of conversations in which both sides try to get the most of what they want from the other. If you're buying -- a product, a company, an employee, raw materials, or business services -- you aim to pay the lowest possible price; whereas the seller wants you to pay the highest price for it.
Is there a winning strategy for such negotiations? A recent Harvard Business Review article argues that the popular wisdom -- approaching negotiations with a warm, friendly manner -- is wrong. The article explains four studies with over 1,500 participants which concluded that you'll get what you want by being tough, clear, and firm, rather than warm and friendly, in a negotiation with someone who does not hold your future career in their hands.
To help illustrate the five steps you should take to negotiate successfully in such situations, I'll use the example of about five years ago, when a tough, clear, firm approach to negotiation helped me get a good price for a new car. One morning, I was sitting in traffic when a Jeep slammed into the rear of my Lexus at about 40 miles per hour. While nobody was seriously hurt, my car was totaled -- meaning that I expected to receive a check from my insurance company.
A few weeks later, I was the owner of a new Audi at a price that was so low that the dealer could not hide his frustration when I handed over my check. Here's how you can do the same.
1. Research the specific product you want to buy.
Before you begin to consider negotiating over price, you should decide on the criteria that matter most to you in selecting a new product. Use these criteria to conduct research to find the product that best meets them.
When my Lexus was totaled, I knew from visiting Lexus dealers before the accident that the same model that I had enjoyed for years was no longer offered. Instead Lexus was then selling what I thought were underpowered, over-priced, and poorly styled models.
So I considered new vendors and models by looking for a sedan with a powerful engine that handled well in snow and protected passengers well in crashes. This search led me to a specific Audi sedan model.
2. Seek out multiple suppliers who can offer a price online.
Once you know what you want to buy, tap a reputable online selling service -- rather than negotiating price in a series of in-person meetings. Online negotiations are a better way to practice the tough, clear, firm style of negotiating that HBR advocates.
I used a service that was started in the 1990s called Autobytel to find dealers near my home that would offer price quotes via e-mail. If I were doing such a search today I would look into whether there are better options online for purchasing cars. The point is to use a reliable online venue that will give you suppliers of the product you want to buy.
3. Find a negotiation expert to advise you.
If you're afraid of negotiating and don't do it often, you should get help from someone who is good at it. I was fortunate to get great tactical advice from an experienced banker before I began negotiations for my future car.
4. Contact suppliers and make your offer.
You should then contact potential suppliers and begin negotiations -- with clear, unemotional language..
To that end, I contacted two or three such dealers within 30 minutes of my house via Autobytel. I used such language in my emails to the dealers and received price quotes from all of them.
5. Once the supplier responds with a price, make and stick with a lower counteroffer.
This is the crucial step in the price negotiation -- which works best if you reply to the initial offers with a firm request for a lower price.
My negotiation advisor suggested I reply to each of the dealers with an email saying that I was willing to pay 10 percent below their price in cash. Only one of the dealers responded -- offering a five percent discount. I repeated my insistence on a 10 percent discount and and said it was my final offer. The dealer ultimately agreed.
While I could not have done this without help, such a tough, clear, and firm approach to negotiating may work for you. Try it and see.