We're in our office being interviewed by a prospective parent.
The mother is well-dressed, well-groomed and well-spoken. She has three preschool children, aged from six months to four years. The family has recently moved to the area and is looking to place their children in permanent full-time childcare. Dad is at work.
Mum has had her tour and appears to like what she sees. She has been quick to tell us she is both planning another child and looking at other centres. She is asking about a discount for bringing three new children to our centre (and another child later).
The children will be picked up at 4:00pm each day, but Mum wants to be able to arrive up to 4:30pm without incurring any extra fees.
While we are weighing up our reply, she asks: “Can my children start next Monday?”
Relieved to be able to give her something she wants before getting to the hard subject of money (and because we are down on child numbers), we reply with a smile: “Absolutely!” 🙂
We've just been out-negotiated (and have cost our centre money)...
Negotiation is not just the domain of white-shirted, grey-templed, black-suited men sitting at mahogany board tables, toing and froing over multi-million dollar contracts. Negotiation happens everywhere, every day.
With staff. With parents. With the local car dealer. With your own children!
Becoming good at negotiating will improve your own outcomes (and your centre’s). It doesn’t mean you need to become a dishonest, driven, crush-your-opponent type of person. In fact, you can learn simple, gentle techniques that will swing negotiations in your favour. Knowing these techniques will help protect you from other skilled negotiators too.
But before we start, let's be clear on what a negotiation is.
1. You're Not Negotiating Until Someone says “No”
You’re not negotiating if you’re asking for something that your bargaining partner also wants, or offering them something they can’t refuse or can’t do without.
Negotiation is a conversation in which the goal is to reach an agreement with someone whose interests are not perfectly aligned with yours.
Someone has to say ‘no’, before there can be a negotiation (which means that saying 'no' to Mum is not something to back away from - it's just the start of a negotiation.)
2. You're Not Negotiating Unless You Let the Other Side Win Too
Notice the above definition says reach an agreement, not force an agreement. If you force an agreement (win), and the other side capitulates (loses), you’ve won a battle, not a negotiation.
And of course, you leave the other party unhappy. They will either be looking for a way to back out, a way to sabotage the agreement, or a way to never work with you again!
For most people (and centres), this is not a desirable long-term outcome.
3. You're Not Negotiating Unless You Know You Can Walk Away
If you have no alternative but to reach an agreement, you are not negotiating. If you cannot opt out (walk away), you are pleading your case.
You are begging! 🙂
Simple Negotiating Strategies
Do Your Homework
What does the other party need from the negotiation?
They are not likely to tell you, at least not honestly, so you need to find out. The more you know, the more likely you can capitalise on your own strengths. So ask questions (see Listen More Than You Speak, below).
You will fare better in a negotiation if you have done your homework on yourself too. Know your own bottom lines and set clear policies beforehand on things you are likely to have to decide in a negotiation. Decide on what and when discounts are allowed, and when late fees can be waived.
Then you'll know when to stop...
Know When to Stop
Know your clear exit position ahead of time AND STOP WHEN THAT POINT IS REACHED. Finish the negotiation. No ifs. No buts. Finish.
Come back after a suitable deliberation period, but always stick to your pre-determined walk-away position.
Walk away or you’ll make concessions you’ll later regret.
(Remember, if you want something so badly that you cannot walk away, you are no longer negotiating.)
Make Sure You’re Negotiating with the Decision Maker
Before you start, make sure the other party can actually make the decision. Don't find yourself striking a deal, only to discover that your agreement must be approved by someone else. Your negotiated settlement will become the starting point for your second negotiation.
(Of course, it can be a good tactic for you to state you need to check on final decisions with a higher authority. This lets you buy time to think over a decision and it gives you a way out!)
Will you be able to make the decision today, or will you want to talk with your partner?
Listen More Than You Talk
Whether it’s by asking questions or by staying silent, let the other person talk. What the other person shares is valuable information for you. Allowing the other person to do more of the talking also puts them at ease. As the other person talks, they may even come up with suggestions you can build on.
You’re new in town, then? What made you decide to move here?
And when it’s your turn to talk…
…a discount for enrolling three children. Hmmm…
So pause, use silence, and take time to think.
Don’t be afraid to stay quiet.
Many people aren’t comfortable with silence and will move to fill it. They may even adjust their offer without you saying anything. They will negotiate with themselves!
Never Give Away Anything without Getting Something in Return
This is the Golden Rule of negotiating. Use: "If we… will you…"
It’s called packaging: making sure that any offer you make has a corresponding request of the other person.
If we can take your children next Monday, will you agree to pay the late fee?
You are making an offer that is conditional on them agreeing to something too. If they don’t agree, you can withdraw your offer in total. You haven’t been ‘cherry-picked’.
(Cherry-picking is a common negotiation tactic. The aim is to break down a negotiation into the separate issues and push for an agreement item-by-item. Someone who is cherry-picked is very likely to lose sight of their overall position, concede on each issue and wind up with a poor outcome.)
And Now a Little Psychology
Here are a few negotiating tips rooted in psychology.
Be the First to Say a Number
It’s called anchoring. If you are the first to state a number, you are setting the starting point for the negotiation. Even if your number is way off, it will still have the desired outcome of shaping the rest of the negotiation.
It’s reportedly the most robust phenomena discovered in psychology.
So instead of:
What sort of discount are you thinking about? Oh! 15%!
Get in first with:
If we offer you a discount of 2%, will you pay each month up front?
You have set the expectation (that 2% is the level up for negotiation), and you’ve asked for something in return. If they don’t agree to pay up front, you don’t have to give the discount.
Get away from numbers and offer certainty or a guarantee.
This negotiation tactic comes from prospect theory. Prospect theory describes the way people choose between alternatives that involve risk. In any negotiation, there is some level of risk.
When you offer certainty instead of money, you are alleviating one form of risk.
If you accept our regular fee, we will guarantee a place for your next child.
Counter Offers Make Both Parties More Satisfied
Everyone in a negotiation wants to feel that they got a good deal. And everyone is more satisfied if there is some back and forth before an agreement is reached (if their bargaining partner says “no” a couple of times before saying “yes”).
It’s human nature.
If you make an offer on a house and the seller says “yes” without hesitation, its very likely that you will suffer from buyer’s remorse. You’ll forever wonder if you could have bought the house for less.
No, we don’t give discounts because that would be unfair to other families paying full fees.
No, we don’t waive our fees for late pickup as we have to keep staff to cover.
If we give you a 2% discount, will you agree to pay your additional fees for late pickup?
Back to Our Mum
Mum has been transferred and promoted, and is eager to start her new job on the following Monday (as a corporate negotiator!). She is desperate to find placements for her children before then. She wants them in a centre en route to her office, with great staff ratios. She needs one that remains open between Christmas and New Year (her busiest time).
But her most pressing need is immediate enrolment for all of her children.
We meet all the requirements, and no other centre does. We are in a strong negotiating position but don’t know it.
As an expert negotiator, Mum cherry-picked her most important requirement (immediate enrolment), and got it for nothing.
IT WAS WORTH A LOT TO HER.
We gave it away for free.
And now we have to negotiate the discount and late fees…
It really is worth asking all those questions during our centre tour.
Food for Thought…
- Being able to negotiate well is a key management skill.
- We are only negotiating if someone says 'no', we let the other side win something, and we are able to walk away.
- There are many simple negotiating strategies we can use.
- We can even bring a little psychology into our negotiations.
- But nothing beats doing our homework first.