How to Develop Strong Negotiation Skills: Understanding the Eight Different Kinds of Leverage
Thanks to Martin Hill, from Sandler West Midlands, for this guest blog post on negotiation skills for your business.
Martin Hill, Sandler West Midlands
Photo courtesy of Martin Hill
Understanding the Eight Different Kinds of Leverage
Have you ever entered a negotiation and felt you just didn’t have a leg to stand on?
What about the other side of the table? Have you ever been in such a strong position that if your counterpart made objections, or asked for something, you knew you didn’t have to give in?
Either way, what you’ve experienced was that remarkable negotiating force known as “leverage.” Leverage in negotiating is like the undercurrent close to the beach. We can’t see it on the surface, but it’s pulling powerfully beneath us.
We can gain or lose negotiating leverage in various ways. But if we’re not aware of areas where we can gain leverage in the negotiation, we miss opportunities.
There are eight possible sources of leverage that are present in every negotiating situation. We want to understand and maximise all eight sources.
1. Time
My personal choice to consider for the first kind of leverage is always time. Time encompasses both the question of when something happens in your world and the question of how what’s happening in your world can be coordinated with things that are happening in your negotiating partner’s world.
Time controls everything in business. The more you understand how time and timing affect you and your negotiating partner, the better you’ll be able to strategise the frequency of your discussions. In turn, this will enhance their impact overall. I’ve seen managers and salespeople fall into the trap of making time a liability because they put too much pressure on themselves to get the deal done by the end of the month/quarter. As the end of the allotted period of time gets closer, they start to make discount offers—and all too often, come across as desperate.
In order to strengthen your position regarding time, downplay any concerns about when the deal is done no matter what pressures you may be under personally. In addition to that, start asking better questions about the buyer’s timeframes. For example:
“When would you like to have this [system, project, etc.] completed?”
“Why by then?”
“What happens if it’s not done by then?”
It never ceases to amaze me how many people fail to ask these kinds of questions early in the process – and thereby miss an important opportunity to create leverage.
2. Belief
Would you buy your own product or service at the rate you’re charging? Do you believe, in your gut, that your own time, attention, and expertise is worth the amount you’re asking for it?
If you aren’t sure, then your belief system is going to get in the way of your ability to stand firm in a negotiation situation.
Your belief system is either an asset or a liability. If it’s a liability, you may want to take a closer look at both the reality on the ground, and the thoughts circulating between your ears. Until your belief system has been upgraded to where it needs to be, you will likely falter in negotiating situations.
As David Sandler famously put it: “you are, at this moment, earning exactly what you believe you’re worth, not a penny more or a penny less.”
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3. Need
Need is a powerful factor in negotiation that is closely linked to the pain you are able to uncover—the emotional distance between where the buyer is now and where they want to be.
If your boiler breaks down in the middle of winter so you don’t have any heat or hot water your need to get it fixed is great—and therefore, your ability to negotiate on rates are limited.
How badly does your prospect or counterpart need what you have to offer? If the person you’re negotiating with decides not to work with you, what is their next best alternative? Do you know?
Let’s pretend that in order to hit your numbers, keep your job, stay in business, whatever, you must close this sale—and, from your behaviour, your negotiating partner learns that. Congratulations: You’ve created a liability. Naturally, an experienced negotiator will take advantage of this dynamic if they have leverage in terms of need.
4. Emotion
People buy emotionally and then justify their decisions logically.
This pattern is evident in any and every case of buyer’s remorse. People are drawn in emotionally, and then once the emotions recede a bit, the intellectual side of their brain kicks in and they decide they’ve made an unwise decision.
Your ability to control your emotions during any negotiation is potentially a huge area of leverage. Knowing when and how to step away from impulsive, emotional responses—especially when that’s the kind of reaction an experienced negotiator is hoping to elicit—will help you think straight, put things in the proper perspective, and respond with the right tactics and strategies.
5. Relationship
Would you be likely to negotiate harder or easier with someone you knew really, really well?
Naturally, some people will make choices that prove to be the exception, but the reliable rule that I have seen play out is that the more I know and trust someone, and the more they know and trust me, the less likely they are to expect major concessions from me. They are far more likely to feel they are already receiving a fair deal from a person they know and trust. They want to support and sustain the relationship with me over time.
6. Understanding
You might not have thought of ‘understanding’ as a source of leverage, but it is a powerful one.
Are you able to put yourself in your counterpart’s world and understand their point of view, their business, their industry, their market, their motives? When they take a certain negotiating position, do you understand what made them take that position? Do you understand the kinds of chess moves that their leadership is trying to make? Do you understand their mission?
Yes, all of this is easier said than done. Gaining leverage in this area requires you to do some research and spend some time being an investigator. But you will find, I believe, that it is an investment that can pay huge dividends.
It all comes down to effective questioning. Questions that help you and the other person to “monetise” the problem as it stands— that is, figure out how much leaving it unsolved actually costs—are particularly important here.
7. Ownership
Ownership means personal, emotional investment in the specific solution that is being proposed or discussed. You gain leverage in any negotiation situation whenever the other side puts their fingerprints on the solution being developed—by them making a suggestion or revision, by asking others in their organisation to provide feedback, or by adding an idea of their own to one of your ideas. Effective negotiators are good at soliciting fingerprints.
Before you make a formal recommendation, stop and ask yourself: is any part of what you are about to propose co-created by you and the prospect in order to involve ownership on both sides? If the answer is no, you are giving up leverage.
8. Skill
Your own level of skill, familiarity, and comfort in the realm of negotiation is a huge potential area of leverage. When you are negotiating with a negotiator who has a great deal of experience, your best-case scenario is probably going to be establishing equal leverage in this area. Consider that a victory of sorts—at least you’re not playing at a disadvantage.
Negotiation is a skill. It takes time, practice and persistence to reach a stage of mastery with it. Like anything else you’ve ever become good at, you will have to put in the time if you want to maximise your skill level. So, ask yourself this: when was the last time you practiced negotiation? There may be many more opportunities to practice than you are now taking advantage of.
If you enjoy playing golf when you go to check-in at the golf-pro shop before the round ask the person behind the counter, “what kind of discounts are available?” Then you’re not only practicing the art of the negotiating conversation…you may well save yourself some money!
Here’s the bottom line:
The more you know about the eight areas of leverage, and the clearer you are on where you actually possess leverage, the better your negotiating outcomes will be.
If you would like to know more about all things sales related, please get in touch with Martin.