#6 - Master the 65-85-95 negotiation tactic
Even the CIA use it.
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#6 - Master the 65-85-95 negotiation tactic
As an event-organiser it hasn't been uncommon for me to have to make deals with more than a 100 different suppliers a year to facilitate the production of an event.
Usually the longer-term nature of these collaborations mean both parties are willing to take time to build up a relationship, establish rapport and create some form of mutual trust before entering price negotiations. I prefer this way of working because it allows you to leverage that relationship to arrive at a price that is acceptable for both.
However, sometimes in life you get forced into some real streetfight-type bargaining with a hard-ass haggler.
The worst of these I've ever encountered are moms selling second-hand baby products on Marktplaats. These stone-cold women stick to their game plan, jump straight into negotiations and tell you to take the deal or stop wasting their time.
It's these situations where I like to deploy the Ackerman bargaining strategy for navigating the conversation. The strategy was coined by Chris Voss based on CIA-operative Bill Ackerman's bargaining strategy during ransom negotiations.
Here's how and why it works.
#1 - Set your price target
Do research before the start of the negotiation and decide for yourself what your price target is. Consider asking yourself some of the following questions:
What is the product worth to me? What is a reasonable market rate for it? How in demand is the product? At what price is the product no longer desirable to me?
#2 - Set your first offer at 65 percent of your price target
By setting your first offer at 65 percent of your price target you're hoping to accomplish two psychological effects to help you further negotiate:
you will set what is called an extreme anchor; establishing an imaginary range between your anchor and the asking price that will define the bandwidth between which further negotiations will take place.
the shock of an extreme anchor will induce a fight-or-flight reaction in most people, limiting their cognitive abilities and making it easier for you to get them to divert from their own negotiation game plan.
I've been playing around with different opening percentage offers depending on the situation. For example, I recently bought a used car and felt 65 percent was too low of a first offer for this type of product. I encourage experimenting, but keep in mind not to start too close to your price target or you'll lose the advantage of the psychological effect it's trying to accomplish.
#3 - Calculate three raises of decreasing increments
Here's where it gets interesting.
Your next offers should be structured at 85, 95 and ultimately 100 percent of your price target, but you have to make sure not to drop them in too soon.
In an ideal flow you should be asking questions (see point #4) while you wait for your counterpart to make another offer. Structuring your next offers at these progressive intervals works to your advantage on a few different levels:
they work on the norm of reciprocity; since you've just made a concession, you are now inspiring your counterpart to do the same for you.
by cutting the amount of your increases in half each time, you are convincing your counterpart that he or she is squeezing every last bloody drop out of you.
#4 - Use empathy to unlock a counteroffer
As you're navigating through this process of haggling there's two tactics that can help you unlock a counteroffer: tactical empathy and open-ended questions.
An example of tactical empathy in my battle for second-hand baby products would be:
“I'm sorry that my budget-issue is holding us up. I realise you must have a hundred other things to do being a mom yourself.”
The purpose of tactical empathy is, on a human-to-human level, to make your counterpart feel heard and understood. Your goal by doing so is that showing empathy should lead to receiving empathy (in the form of a lower counteroffer please).
When it comes to open-ended questions, the best type to throw into the conversation are those that have no real answer but give off the illusion that you're asking your counterpart for help and that they are in control of this negotiation:
“How will I be able to get everything I need for my baby if I spend almost all of my remaining budget on this Baby Björn rocking chair?”
How do you even answer that question? Nobody knows, which is why a good question like that has a tendency to bait your counterpart into a making you a lower offer.
#5 - Use non-round numbers in the final amount
When you share your final offer (your price target), make sure it's a precise non-round number like, for example, €14.893 rather than €15.000.
It gives the number so much more credibility and weight, because it literally looks like you ran your numbers twice and scraped the last cent out of your bank account to be able to make this final offer.
#6 - Add a non-monetary item on the final amount
On your final precise non-round offer, add in a non-monetary item to show that you're at your absolute limit. I prefer adding items that I know my counterpart doesn't want, because the point of this strategy is simply to show that they've now bled you dry.
When I was negotiating the price on the used-car we purchased last year I sent this final offer to the car owner. I don't think I've ever embarrassed my wife more than I have with this email, but ... the magic of the Ackerman bargaining strategy worked.
Thank you for this generous offer and for thinking along with us so far.
Unfortunately it's still above our budget, but Lotte and I have been able to scrape together all of our savings to get to €13.489.
I know it’s below your offer but I'm hoping I can convince you to let us cover the difference by giving you an 18-year old special edition Scottish whiskey that I received as a gift from a client last year.
We really love the car and want to make this work!
#7 - One more thing
All of this works in reverse too, so if you're on the selling side of the equation you now know with which increments to structure your offers.