BHMH2160 (lecture notes)

2021/22

Chapter 7 - Managing concession in negotiations

At the end of this chapter, you will be able to make effective plan for:
1. GIVING concession to the other party
2. GETTING concession from the other party
3. Closing the deal

The management of concession are essential bargaining techniques which could be

applied in both Distributive (win-lose) negotiation and Integrative (win-win) negotiation.

Part I: Planning for “GIVING” concessions to the other party

Concessions are the reductions that a negotiator makes during the course of a negotiation.
Good negotiators will not begin negotiations with an opening offer too close to their own
resistance point, but rather will ensure that there is enough room in the bargaining range
to make some concessions. There is ample data to show that parties feel better about
a settlement when the negotiation involved a progression of concessions than when it
didn’t. Bargainers want to believe they are capable of shaping the other’s behavior, of
causing the other to choose as he or she does.

Negotiators should create room for making concession through a bargaining range by
defining clearly the target point and resistance point. The bargaining range - the distance
between the target point and resistance point is the area that allows you to make
concession.

Note: Any settlement that falls within the distance between the target point and resistance
point is acceptable to you. The closer the settlement to your target point, the more you
are satisfied. In opposite, any settlement your make which is close to your resistance
point is still acceptable to you but with MINIMUM level of satisfaction.
Golden Rule of managing concession
1. Never accept the first offer!
2. Create room for making concession through a bargaining range.

How to manage the movement of concessions

The pattern of concession should signal to the other party about our degree of firmness.

1. Make fewer and smaller concessions are more effective than making larger and
more frequent concessions.
2. Never offer more than a single concession at a time to an opponent. Wait for a
concession on the opponent’s part before making further concessions unless you feel
that the opponent’s offer is truly near his or her resistance point.

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3. Each concession should also be in decreasing size. When successive concessions get
smaller, the most obvious message is that the concession’s position is getting firmer
and that the resistance point is being approached.

Golden Rule of Negotiation

 Small concessions give the impression that the bottom line is not far
off.
 Large concessions indicate that a lot more can still be conceded
before the bottom line is reached.
 Rapid or large concessions undermine the credibility of the initial
offer.

4. Make sure you always get something in return for a concession, even if it doesn’t cost
you anything. To achieve this, you have to use “If… Then….”Statement

“If you give A and B, I will give C and D.

“If you reduce the rental, I will move in earlier”
“If you reduce the printing cost, I will ask my classmate to use your service”
“Never give anything away for nothing!!!

5. Do not make concessions under pressure or too rapidly. Making one concession from a
position of weakness can result in your being forced to make a host of other concessions
later.

6. Do not fall for the “Even Split” Ploy

Even split is the half-way between the differences of two divergent positions. Consider a
car-buying situation. Suppose you initially offered $33,000 for the car, then 35,000 and
then finally $36,200. Suppose the sales initially requested $40,000, then reduced it to
$39,000, and then to $38,200. The salesperson then suggests that you split the difference
at $37,200. Arguing that an even split of the difference would be “fair”. However, the
pattern of offers up until that point was not “even” in any sense. You made concessions
of $4,200; the salesperson made concession of $2,800. Often the person who suggests the
even split is in an advantageous position.

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Part II. Planning for “GETTING” concession from the other party

1. Keep silent
As mentioned above, the ideal offer of the negotiators is to push for settlement close to
seller’s resistance point. Information is the life force of negotiation. The more you can
learn about the other party’s resistance point, motives, feelings, the more able you will
be to strike a favorable agreement. On the other hand, you do not want the other party
to have certain information that reveals your resistance point, values, and weak
strategic position.

The simplest way to protect you from revealing important information is to say and do
as little as possible. Silence is golden when answering questions; words should be
invested in asking questions instead. Silence reduces the likelihood of making verbal
clues that the other side could use to draw conclusions.

Even in integrative negotiation, the information you can share should be selective. Good
integrative negotiators only reveal the information about their own interests or priorities
and preferences for different issues. Distributive negotiators would not reveal any
information. They only invest their time in asking questions. (More details about the
essential skills in asking questions have been covered in the chapter – Effective
communication skills for negotiations.)

Do not interpret silence on the other person’s part to be a rejection of your offer. Many
negotiators make what we called “premature concessions” – they make more than one
concession in a row before the party responds or counteroffers. Always wait for a
response before making a further concession.

2. Direct action to alter impressions

Negotiations can take many actions to present facts that will directly enhance their
position. Present a rationale that appears to be objective and invites the opponent to
buy into your rationale. In fact, people simply want to hear that you have a rationale
and don’t even bother to assess the details of it.

One of the most obvious methods is selective presentation, in which negotiators reveal
only the facts necessary to support their case. Negotiators can explain or interpret
known facts to present a logical argument that shows the costs or risks to oneself if the
other party’s proposals were implemented. For example, the house seller would
convince the buyer to abandon the search of swimming pool by saying, “it’s great to
have swimming pool for your kids. But the maintenance cost of the swimming pool is
very high. You have to do daily clean-up…….”

In addition, these arguments are most convincing when you have gathered the fact from a
neutral source because the other party will not see them as biased by your preferred
outcome.

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3. Know the other party’s cost of delay or aborting the negotiation

The more a person needs a settlement, the more concession he or she should give.
Therefore the more you can convince the other party that delay or aborting negotiations
will be costly, the more likely the other party will make more concession.

Part III. Techniques for closing the deal

After negotiating for a period of time, learning about the other party’s needs or positions,
the next challenge for a negotiator is to close the deal.
(Note: the following technique can also be used for integrative negotiation, not only limited
to distributive negotiation!)

1. Provide alternatives
Rather than making single final offer, negotiators can provide two or three
alternative packages for the other party. People like to have choices, and providing
the other party with alternative packages can be a very effective technique for
closing a negotiation.
2. Assume the close
Salespeople use this technique frequently. Negotiators do not ask the other party if
he or she would like to make a purchase. Rather, they act as if the decision to
purchase something has already made.
For example, seller assumes the other party agrees to make the purchase. e.g.
salesman simply say “what is your payment method?” or “let me wrap it up for you”.
3. Split the difference/Even split
Splitting the difference (the mid-point of the difference between two positions) is
perhaps the most popular closing tactic. For example, assume the position of seller is
$100 and that of the buyer is $50. After both parties agree to split the difference, the
deal will be settled at $75. Why this strategy is always successful? Because it seems
to be fair to both parties! A negotiator who uses an exaggerated opening offer and
then suggests a split-the-difference close will get the most.

4. Exploding offers
An exploding offer contains an extremely tight deadline in order to pressure the other
party to agree quickly. For example, a person who has interviewed for a job may be
offered a very attractive salary and benefits package. He or she is required to reply
within 24 hours as this offer will expire in 24 hours!
The purpose of the exploding offer is to convince the other party to accept the
settlement and to stop considering alternatives.
seller 主動提出
5. Sweeteners
Another closing tactic is to save a special concession for the close. The other
negotiator is told, “I’ll give you X if you agree to the deal.”

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Reference Book:
1. The Mind and Heart of the Negotiator.(2022). By Leigh L. Thompson. Prentice Hall.
Chapter 3.
2. Essentials of Negotiation (2021). By Lewicki, R.J., Saunders D.M., Barry, B., &
Minton J.W. McGraw Hill. Chapter 3.