Negotiations Training

The Art of Making Concessions:
Proper Use of Concessions

One of the areas where many business professionals truly fail when negotiating is during the bargaining phase - that time when each side focuses on various proposals and concessions to come to an outcome that they will find mutually beneficial. Too many people fail to follow some simple guidelines when making concessions:

Jimmy: "We really enjoy working with your company and we're excited about extending the contract. Although, times are tight for us right now. Can you waive the shipping fees?"

Donnie: "Well, yeah, I think we can do that."

Jimmy: "Greeeeat. Oh, and we won't have to worry about the restocking fees will we?"

Donnie: "No, I suppose not."

Jimmy: "Excellent... if you can provide us with expedited shipping, I'd say we have a deal!"

Donnie: "Deal!"

Too bad Donnie gave away the farm. First off, he violated the cardinal rules on concessions:

1. Never give a concession unless you get one in return

But this is only the first rule... there are four others to always keep in mind when negotiating, no matter the deal.

2. What you perceive as having low value, the other party may perceive as having high value
3. What you perceive as having high value, the other party may perceive as having low value
4. Whoever gives a large first concession without getting one in return usually loses the most in a negotiation
5. By focusing on interests and increasing the "size of the pie", concessions become the means to reach a mutually beneficial outcome

The first rule is the most important one. You should never give a concession to the other party without asking for one in return. When the other party asks you to give them something to close out a negotiation, the smart negotiation asks for a concession.

Donnie: "I can waive the shipping fees if you upgrade your order from Gold Level technical support to Platinum Level technical support."

Also, it helps to have a good understanding of what each part finds to be of high or low value. You may be able to give a concession that is of very low value to you (inexpensive and easy to give up) that the other party might find of very high value (difficult to normally get or expensive).

Donnie: "I can waive the shipping fees if you will also pay for our crew to install the product. You'll also benefit by not having to use your resources to handle the installation."

Shipping may be perceived as high value to the customer but may realistically be a very low margin and inexpensive item for Donnie. However, installation may be a very high margin service. By waiving the shipping fees, Donnie eliminates something he can normally "throw in" by asking the customer to pay for higher value installation.

In regards to concession, when you give a large concession and don't ask for something in return, you are waving a flag that the other party can ask for more. Don't fall into this trap. It's always important to lean on the first rule - never give a concession unless you get one in return. Furthermore, by focusing on the interests of each side and choosing to increase what might be of interest to each side, you increase the size of the pie.

Spend some time prior to your negotiations understanding what concessions you can give or request during your discussions.