Skip to Content

The Art of Business Negotiation

In markets and stores worldwide, buyers and sellers negotiate over prices. Sometimes they succeed and a deal is struck. Other times, the buyer walks away empty-handed.

Here in the United States, haggling over a purchase is often limited to flea markets and garage sales, with the occasional attempt when buying a house or car. In the business world, some buyers are reluctant to negotiate prices with a vendor. We forget that the initial price offered by a seller often isn’t carved in stone. Until it’s agreed upon by both buyer and seller, a price is merely a proposition offered by one party. The buyer has a voice, too, but only if they bargain.

Here are some simple guidelines for haggling, from this article by Jacob Harper for The OPEN Forum:

  • NegotiationEverything is negotiable ... except the address. This saying from the real estate industry means that almost every detail can be haggled.
  • Get the small stuff thrown in. Signing a yearlong lease? Ask to have a couple days free to move in. With big purchases in general, you get more leeway.
  • The bigger the deal, the more bargaining you can do. “Big ticket” items are often open to lots of negotiation. You probably need to draw up a contract on anything big, and contracts aren’t carved in stone.
  • Don’t lowball. Overzealous haggling will turn off the seller. A good rule of thumb is any offer below 25 percent of the ticket price is a slap in the face (although this isn’t true everywhere).
  • Do your homework. You should have a fair market idea of what the going rate for an item or service is. Don’t be afraid to bring this up and see what the seller has to say.
  • Be willing to walk away. Walking away from a seller can be a great motivator. Often they will make one last offer.
  • Don’t let the seller know how bad you want something. A desperate buyer has few tools to motivate the seller.
  • Don’t let them make you feel bad for bargaining. Don't succumb to a guilt trip from the seller.
  • Respect the seller. You can negotiate, but be wary of being disrespectful. Negotiating a deal is one thing. It shows you know what you’re doing. But bargaining in bad faith will do irreperable damage.

For a more academic look at negotiating, try this article on "The Art of Haggling" by Katie Johnston for the Harvard Business School. It outlines two styles of negotiation: "integrative bargaining", a mutual-interest-based approach to negotiation, and "distributive bargaining", an approach in which one party's gain usually results in the other party's loss. Many B-schools focus on integrative bargaining where both parties openly collaborate to find a mutually satisfying solution. HBS Professor Mike Wheeler believes a truly effective negotiator must be skilled at both styles - and realize when each approach makes the most sense. This requires being prepared to deal with other people intent on dominating, and who refuse to engage in problem solving. To quote from the article:

"Skillful negotiation starts with having a clear sense of when to walk away, in order to avoid being browbeaten into accepting unreasonable terms, he explains. It also involves having a keen sense of where the other party will be left if you hold firm on your terms. Careful analysis may reveal that the other party needs the deal as much or more than you do. Then there are psychological factors to consider, like the power of working from one's own ideal number rather than getting anchored by the other side's demands."

"In class, Wheeler reminds students of a core strategic choice: assessing when to focus on dividing the pie and when to focus on growing it. 'Sometimes getting 70 percent of the small pie might be better than getting 50 percent of a marginally larger one,' he says."

"Real-world negotiators face strategic and moral issues every time they go to the bargaining table. 'In the long run, reputations matter,' Wheeler says. 'And what we think of ourselves when we look in the mirror may matter even more. When parties can get beyond mere haggling and are able to create tangible value, they may also be more inclined to reach outcomes that square with one another's personal values.'"

The Harvard Law School also has a wealth of free online resources relating to business negotiation, including articles on who should make the first offer, negotiating with "chameleons", bringing a deal back from the brink of failure, and many other topics.

Connect with Tribute on Social Media

Talk with Tribute

Subscribe to our Newsletter

Sign Up Now

Stay up to date on the latest industry trends & learn more about industrial distribution & Tribute’s ERP software solutions. Check out our blog today!