Negotiation: The Art of Communicating with Results

Written by Parag Mehta

On a busy Monday morning, as I was catching up on the emails piled up during the weekend, my cell phone rang. Since the call was from an unknown number, I answered the call with a soft hello. A stern voice at the other end of the phone introduced himself;

Hello, I am John from Spark Pharmaceuticals. I got your proposal for the training program, and I have called you to discuss the commercials. Is it a good time to talk?

Me (PM): Yes. Sure.

John: I can see that you will be doing a 4-hour session, and the price you have quoted is $500. Based on my experience and research, this amount is way higher than the market rates. I would like to know the details of what you are offering and how do you justify this premium price?

PM: (Realizing the fact that this call was a price negotiation call) Yes. The quotation amount is a fair price. The reasons are............

He kept cutting me out multiple times as I tried listing the pros of my training program. It went on for about 5 minutes.

John (interrupting me): Hello PM. Let me tell you that I don't understand many of the things you just mentioned. I am no expert in this area. I am a procurement guy, and as per my research, the fair price for this session is $200.

This low-ball offer infuriated me. I guess I was angrier at the fact that a person who didn't understand the technical details of the training program was trying to undervalue my offering.

PM (Perturbed): I cannot do it for $200. The best I can do is $450. You are free to explore other options.

The quibbling went on for about another 5 minutes with no consensus. We dropped the call agreeing that this deal wasn't going to go through. And it didn't. I knew that price was not the problem and there were players charging twice my quotation.

While I wish this conversation would be a one-off case, similar engagements happened multiple times, and many such deals fell through. I remember this one specifically since it was my first negotiation experience as a freelance trainer, and it sure wasn't pleasant. It was not that I had no negotiation experience in the past. Before I started working as a freelance trainer, I worked as a salaried employee for many years. I have been a part of many salary negotiations, and I think I did a pretty good job. I always got a good deal on my rental agreements (rental negotiation) and never got ripped off buying something at tourist spots (price negotiation). Well, these negotiations were likely successful due to the following reasons.

1. These events mentioned above were less frequent.

2. I was the decision-maker with many choices.

3. I worked hard enough to ensure that the salary offers I received did commensurate with my work quality. My past performance gave me positive leverage to justify my ask (at least this is what I tell myself).

Now, as a freelance professional:

1. I had to engage in negotiations more often.

2. I was one of the choices at the other end of the table.

3. It was difficult to prove credibility to new clients based on mere testimonials.

This recently acquired angst of not being good at negotiations led me to reading the best-selling book "Never Split the Difference" by Chris Voss. I believed that many of these self-help books were propaganda, but this one was indeed insightful. Beyond academic theories, this book takes real-life hostage situations handled by the author, a former FBI negotiator, and translates them to systematic processes for driving business negotiations. While the book discusses many techniques for effective negotiation, my personal favorite is the use of calibrated questions.

I realized many mistakes I was making and techniques to avoid them. Let me explain a few with a hypothetical conversation with John (If I could go back in time without creating a paradox).

John: I can see that you will be doing a 4-hour session, and the price you have quoted is $500. Based on my experience and research, this amount is way higher than the market rates. I would like to know the details of what you are offering and how do you justify this premium price?

Me: Great! I see that you have done your research. I would like to know about the options you researched and the details of their offerings for the quoted price.

This technique is called the use of calibrated questions. If John was bluffing about the research, I would have caught him and not gone into the intricate technicalities of my offer. Also, this would give me an upper hand over him for the rest of the discussion. If John was due diligent in his research, I would have enlisted what he was getting from the other deals and made effective counter-offers to justify my price. Maybe throw in something which the other parties were not offering. Of course, this is all in my head, and John is a rational guy at the other end of the phone :). I am going to try it, and I am very confident this will work. At least better than what I previously did.

Another technique the book mentions is not to use the word "NO" explicitly anytime during a negotiation. Remember my conversation "I cannot do it for $200. I will not do it for a penny less than $500. You are free to explore other options." As per the book, a good answer would have been;

PM (Not perturbed from an extreme anchor price): Thank you for the offer. That's very generous of you. I am afraid the best I can do is $472. Again, I wish you all the best to explore other options.

Using arbitrary numbers like $472 over a rounded-off number like $500 gives an impression that the number comes from sound calculations. Another trick from the book :)

I don't want this blog to be a spoiler for the book. Rather, I want to emphasize on how important it is to hone your negotiation skills. I always thought I was late to learn about personal finance. Reading this book made me change my mind. I wish I had read about the art of negotiation much earlier. I feel more empowered today, and not afraid of negotiations anymore. As Chris Voss says, "Negotiation is not an act of battle, it is a process of discovery".

Below are my 10 favorite excerpts from the book:

1. We have to accept the universally accepted premise that people want to be understood and accepted. Listening is the cheapest yet most effective concession we can make to get there. By listening intensely, a negotiator demonstrates empathy and shows a sincere desire to better understand what the other side is experiencing.

2. Listening is not a passive activity. It is the most active thing you can do.

3. One must engage in negotiation with a mindset of discovery (extract as much information as possible). Really smart people often have trouble negotiating because they don't think they have anything to discover.

4. Our minds act on a cognitive bias for consistency rather than truth.

5. Persuasion is not about how bright or smooth or forceful you are, it is about the other party convincing themselves that the solution you want is their idea. Negotiation is the art of letting someone else have your way!

6. We are all irrational. We are all emotional. Emotion is a necessary element to decision-making that we ignore at our own peril. While we may use logic to reason ourselves towards a decision, actual decision-making is governed by emotions.

7. The best way to ride a horse is in the direction in which it is going.

8. He who has learned to disagree without being disagreeable has discovered the most valuable secret of negotiation.

9. Never look at your counterpart as an enemy. The person across the table is never the problem, the unsolved issue is. The adversary is the situation and the person you appear to be in conflict with is actually your partner.

10. When the pressure is high, you don't rise to the occasion, you fall to your highest level of preparation.

P.S.: I have closed one deal successfully, where I used many of the techniques in the book. Another one is in the pipeline and beyond the price negotiation stage :)

About the author:

Parag Mehta is a senior business excellence consultant and a Lean Six Sigma trainer. He completed his Masters in Drug Delivery Technology from ICT Mumbai in 2012. Parag started his career as a formulation scientist at Dr. Reddy's Laboratories and later shifted to project management and management consulting in 2014. He loves reading books on money, finance, business, careers, etc., and periodically summarizes his learnings on LinkedIn.