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When Negotiations Are All About Price – How to Achieve an Optimal Result in Six Steps

When Negotiations Are All About Price - How to Achieve an Optimal Result in Six Steps

What do you do if a negotiation has become only about a price? Haven’t the positions already become completely hardened? Is an analysis even still possible? Is there any room for negotiation?

Even if it seems otherwise, there are ways even in price negotiations for you to achieve an optimal result. When we talk about price in a negotiation, a subjective evaluation always takes place. Every client has an individual idea of what a product, an object, a service, etc. should cost, and how much they are willing to spend on it. This conviction is based on their own evaluation of the product and how they arrived at the result, based on material, production, delivery, and other costs.

But what if, for once, it really is all about pure “haggling”? When price is only exchanged for price?
In that case, you need a concept of controlled action, an effective system with which to break through the usual, transparent haggling dynamics familiar, for example, from Asian markets. With such a strategy, you avoid falling into the dilemma of offer and counter-offer compromises, where you meet in the middle.
After all, you do not want to reach the middle, but rather the optimal result for you. In order to proceed in a targeted manner here, tactically influencing so-called judgment heuristics and working with perception distortions (biases) is a proven method from the practice of negotiations.

Tactical Influence in Six Steps

The mathematician, game theorist, and Harvard professor Howard Raiffa developed an approach to thisi, which was further developed by former CIA negotiator Mike Ackerman specifically for ransom negotiationsii. I would like to offer a modified version for economic price negotiations. This system has proven to be extremely effective in negotiations. It is simple to apply and, on the psychological level, uses a variety of distorting effects on our perception: fear of loss, reciprocity and the anchor concept all find in it their application.

The systematic and easy-to-remember system consists of a few steps:

  1. Determine your target price (your goal).
  2. Quote 65 percent of your targeted price as your first offer.
  3. Allow for three follow-up offers in increasing amounts (to 85, 95, and 100 percent).
  4. Show as much empathy as possible and use different methods to say “no” to get your counterpart to make a counteroffer before you raise your offer.
  5. When calculating the final sum, give precise figures without rounding up, for example 9,836 Euros instead of 10,000 Euros.
  6. Link this last step with an additional demand.

The first step you should prepare well: Define your realistic goal. This sounds simple but is often forgotten in negotiations. Negotiators sometimes only have a “vague” idea of what price they would optimally like to achieve. Therefore, define the target amount that you would ideally like to achieve based on your current negotiation environment.
Any form of professional price negotiation from both the buying and selling perspective could serve as an example. For the sake of clarity, I’ll use the case of purchasing a car. Imagine you would like to buy a car from a private individual for 10,000 euros. You set your opening offer — called an anchor in the jargon — at 65 percent of this target sum, i.e. at 6,500 euros. This extreme anchor will trigger a flight-or-fight reaction, even in experienced negotiators, that will temporarily impair your counterpart’s cognitive abilities, push them into hasty action, and throw off their entire judgment heuristic: This processing will result in a risk assessment that includes an expectation of loss to the seller’s self-determined price. Quite clearly, the other party will not accept this sum and they will rush to put their own “limit” on the table.

This is the moment when you can use tactics from negotiation rhetoric. With the help of open but targeted questions, you now check whether you can get them to undercut themself further (you can learn more about negotiation rhetoric here or here). You ask questions about a further reduction as well as a rejection, and ask for justifications, for the definition of terms. In doing so, you’re building the subjective value of a subsequent outcome in your counterpart’s brain. The more energy and resources we invest in achieving a goal, the more it seems worth to us. In this way, you create this effect in the brain of your counterpart and use it to suit your own objectives.

Now you take another step towards your counterpart: you improve your offer to 85 percent, in this case 8,500 Euros. With this step, you’re now using the reciprocity principle to build up a debt of gratitude. It is now up to the other party to react, because you have triggered the so-called reciprocity principle. When someone gives us something, we feel inclined to give something back. Additionally, you use the aforementioned time factor to “artificially” charge the result. This creates the sense in your counterpart that they have achieved something. The seller will now meet you in the middle a bit, and you have grown closer on the relationship level.

After that, the same cycle begins as after the first offer. You question their second offer once again with open questions. In doing so, it is again important to approach and respond with tactical empathy (More about “tactical empathy” can be found here) before reaching the next stage.

Now you go to 95 percent of your target amount, which is 9,500 euros. Again, repeat the cycle of the previous offers. Additionally, at this point, ask a “HOW question” and ask your counterpart for advice. “How should I do this?” In their perception, you have now gone a long way toward meeting them. You have alleviated their fear of loss, subjectively charged the value of the approaching outcome, generated sympathy by means of ingratiation tactics and the reciprocity principle, and repeatedly shown yourself willing to negotiate. Perhaps you do not need another step. However, if so, here comes your final offer. And this one must also look like a precisely calculated one in their perception, like an offer that’s really taken everything out of you. That’s why you make sure you quote an exact number. So not the 10,000 Euros you were aiming for, for example, but 9,836 Euros. An exact number looks more credible. It appears to be precisely calculated. In addition, provide this last concession with your own demand, for example: “9,836 Euros, but only with a full tank”.

It appears as if this is your last possible offer. A consequence of the previous steps and the influence on the judgment heuristic of your counterpart. Moreover, this approach is a balm for your counterpart’s self-esteem. In his research, Robert Raiffa found that people who obtain concessions experience the negotiation process as more positive than people who receive only a single, “fair” offer. In fact, they feel even better about paying more or receiving less in the end than they would have if they had not obtained any concessions. This method of negotiating price is therefore worthwhile for both your own bottom line and your relationship with the opposite negotiating party.


iRaiffa, Howard & Keeney, Ralph L. (1993), Decisions with Multiple Objectives: Preferences and Value Tradeoffs, New York: Cambridge UP (original edition 1976); Raiffa, Howard (1982), The Art and Science of Negotiation, Cambridge, MA: Harvard UP; Raiffa, Howard, Richardson J. & Metcalfe, D. (2003), Negotiation Analysis: The Science and Art of Collaborative Decision, Cambridge, MA: Harvard UP.
iiAckerman, Mike (2008), Counterterrorism Strategies for Corporations: The Ackerman Principles, Amherst, NY: Prometheus Books.

Thorsten Hofmann, C4 Institute, Quadriga University Berlin

Thorsten Hofmann leads the CfN (Center for Negotiation) at the Quadriga University Berlin’s Institute for Crisis, Change and Conflict Communication C4. He is an internationally certified Negotiation Trainer and advises corporations and organisations in complex negotiation processes.