The Science of Successful Negotiation

Everyone must negotiate at some point.

A new hire must negotiate her starting salary. A sales professional must negotiate the best price with a customer. A business owner must negotiate the best buyout cost.

At some point, you're going to enter into negotiations, and you should know the best tips for winning.

It used to be that successful negotiations were left up for grabs to whoever could be angrier or louder. Today, scientists have discovered surprising psychological insights regarding negotiation. Here are three that you can use the next time you enter into a negotiation of any kind.

1. Framing Effect: True negotiation is a win-win.

Most of the time, we go into negotiations with the wrong viewpoint. We frame the negotiation as a win/lose instead of a win/win.

Here's why this is important. If you view the negotiation as a win/lose, then you have a 50% chance of losing. If, on the other hand, you view the negotiation as a win/win, then you will definitely come out as a winner. Plus, the other party will win, too.

The win-win mindset is part of the framing effect in psychology. The framing effect states that a person responds to a given choice based on how it is framed--either as a gain or a loss.

We create our own internal framing when we view a negotiation as a win or lose proposition. By doing so, we predispose ourselves to the likelihood of a loss. If we view the event instead as an opportunity for two wins, then we increase our odds of getting what we want

2. Anchoring: Be the first to say a number.

When it comes to a negotiation, you should be the first to state a number.

Why? Because when you say a number, you are setting the starting point for the negotiation. Even if your number is absurdly high or low, it will still have the desired outcome of shaping the remainder of the negotiation.

Daniel Kahneman explained how this works,

If I ask you, "Is the average price of a German car more or less than $150,000," you know that's too high. And then I ask you, "What's the average price of a German car?" Now compare that to what happens to you if I ask you, "Is the average price of a German car more or less than $15,000? What's the average?"

Using this example, Kahneman explains how the first question biased the conversation in favor of high-price, high-end German cars such as a luxury Mercedes. On the other hand, the low price of $15,000 would introduce a thought process regarding low-end cars.

The idea is called anchoring, and according to Kahneman, is "the most robust phenomena we've discovered in psychology."

To use this technique in negotiation, you must be the first to say a number. If you want the outcome of the negotiation to be a low price, then you should state an absurdly low price. If you want the outcome of the negotiation to be a higher price, then you should state an absurdly high price.

You know that your initial number will be quickly disregarded. But that's okay. You're not angling for your first number; you're angling for a better number.

3. Prospect Theory: Bargain using certainty

Let's pretend that you're a hiring a new developer. In negotiation, the developer is trying to obtain a far higher salary than you are prepared to pay.

Instead of playing a numbers game, try a different approach. You say, "What I can offer you is a guarantee. You can be certain of your employment here for a minimum of six months, no questions asked. Your position is absolutely safe as long as you accept this salary."

This negotiation tactic comes from prospect theory. Prospect theory is a method of understanding how people make choices, especially when the choices involve a degree of risk. In any negotiation, there is some level of risk.

When you offer certainty instead of money, you are alleviating one form of risk. According to Morris Altman, "People have a strong preference for certainty, and are willing to sacrifice income to achieve more certainty."

Final thoughts...

Science and psychological insight can revolutionize the way that you negotiate. Instead of fearing loss, you can sit down at the table, confident that the outcome will be a double win. Then, open boldly, by stating a number that will permanently turn the negotiation in your favor. Finally, if the price can't be adjusted, begin bargaining with degrees of certainty.

By strategically unleashing these psychological insights, you will invariably go into negotiations stronger, and come out more successful.