Written by Marijn Overvest | Reviewed by Sjoerd Goedhart | Fact Checked by Ruud Emonds | Our editorial policy
Negotiation Concessions — 5 Strategies to Maximize Deal Results
As taught in the Negotiation Course for Procurement Professionals / ★★★★★ 4.9 rating
What is a concession in negotiation?
- Negotiation concessions are give-and-take offers to bridge the gap and reach a deal.
- It helps you achieve a higher priority goal by giving up something less important and fostering trust toward a mutually beneficial agreement.
- One cannot use negotiation concessions anytime and anywhere rather, there is a perfect time when an individual can use it to achieve the best negotiation results.
Negotiation Concession– Explained
Simply put, you or the other party can make or suggest concessions to bring one or the other to a common ground. Think of it as something that can hold two minds into one temporarily to gauge each other.
Negotiation Concession– Example
In the realm of negotiations, concessions play a crucial role in bridging gaps between differing positions. They represent a negotiator’s willingness to yield on certain points in order to move toward a mutually beneficial agreement. By strategically making concessions, both parties can build trust, create value, and ultimately achieve a successful outcome. Below is a real-life example that illustrates how a well-timed negotiation concession can lead to a positive compromise.
Below are real-life examples of negotiation concessions:
1. IT Equipment Purchase
Randy, a procurement manager for an IT company, needed to buy 5 sets of new desktop computers for newly hired programmers. Although the local computer shop’s offerings were new, they weren’t the usual brand his company ordered.
Dialogue
- Randy: “Well, your computers are indeed new, but they’re not the same brand we’ve been ordering. Maybe if you can give me a 20% discount per unit, we can call it a deal?”
- Owner: “Um, that’s a bit too much, sir. You have to understand that I’m running a business here too. Sure, they’re not the same brand, but they are new. How about I’ll just give you a 10% discount instead? That works, yes?”
- Randy: “Hmm, that sounds tempting. But so does the idea of visiting that other computer shop a couple of blocks from here! It’ll just be a short walk…unless you don’t mind changing the discount to 15%?”
- Owner: (sighs) “Fine. You’ve made your point. Deal.”
In this example, Randy strategically uses a negotiation concession by adjusting his initial demand from a 20% discount to a compromise 15% discount, thereby facilitating a mutually beneficial agreement without completely sacrificing his position.
2. Salary Negotiation
A job candidate initially requests a salary of $80,000, but the employer offers $70,000. Instead of rejecting the offer outright, the candidate makes a concession by agreeing to a compromise salary of $75,000 in exchange for additional benefits—such as extra vacation days or a flexible work schedule. This willingness to adjust the initial demand in return for non-monetary perks illustrates a negotiation concession in a real-life scenario.
3. Car Purchase Negotiation
Consider a scenario during a car purchase negotiation. The vehicle is initially listed at $25,000, but the buyer aims to secure a lower price of $23,000. After several rounds of discussion, the dealer agrees to a compromise by lowering the price to $23,500 and, as an additional concession, includes a complimentary two-year maintenance package. This concession not only reduces the overall cost for the buyer but also helps the dealer finalize the sale, demonstrating how strategic concessions can create a mutually beneficial outcome.
Real-life Examples From My Experience in Using Negotiation Concessions
In my years as a negotiator, I always tried to make my proposals conditional. This is important for two reasons:
- By doing so, you will get something back for your offer
- By making variables conditional, you will never give something ‘away’ unintended
When considering a conditional proposal, try to avoid introducing more than three items at once. It can prove difficult for the other party to respond or calculate at once in a meaningful way. It also slows down any momentum created. If you factor in every conditional proposal prepared all at once, you are more likely to draw a delayed response from the other party for three reasons:
- Your negotiation counterpart may find it incredibly difficult under pressure to calculate what it all means. Thus, they are more likely to pick off the terms they do like while ignoring the conditions attached to them.
- They will have some ideas that you want to think about first before tabling your entire position.
- They are left without the task of working out links or connections between each conditional proposal, which will probably confuse them even further.
The approach of gradually tabling your proposals and allowing the deal to build requires a lot of patience and a certain degree of comfort with the early ambiguity. Before making any proposals check your and your counterparts’ priorities one last time. Priorities can change at the last minute, so always make sure that you update priorities when they need changing. Remember, where there is complexity, you’ll need to park elements and return to them later after examining some of the other agendas first. Having a record of proposals will help you negotiate more efficiently.
When to Make Concessions in Negotiation
In the hands of a master negotiator, the application of a concession strategy in negotiation provides great impact during the negotiation itself. When used properly, you will uncover important information about the other party.
Important information may include the interests of the other party, their resistance point, their budget allocation, and any costs associated with the negotiation.
As such, a good time to use concessions would be:
- When you want to gauge the other party’s negotiation strength.
- When you want to assess how much budget the other party has.
- When you don’t want to alienate the other party during the negotiation.
- When you want to bring back your position to the negotiation table.
Being able to handle a negotiation tradeoff without problems is a very powerful skill. This is why as a professional negotiator, it is one of the first few skills that you need to master before everything else.
Some of the advantages that a negotiation concession can bring during negotiations are as follows:
- A negotiation concession sets the tempo of the negotiation itself and can evoke or alter emotions or perceptions.
- A concession is sometimes seen as an act of good faith from one party to the next.
- Being able to understand a concession gives you an edge at times with the other party.
- Employing a negotiation concession can also calm down both parties when negotiations are heating up.
- A negotiator who handles concessions perfectly is seen as an expert in negotiations.
When Not to Make Concessions in Negotiation
Just like any strategy, there will be times when you have to use a negotiation concession sparingly.
- Giving out too few concessions during the negotiation table will present you as a hardball negotiator and this will ultimately alienate the other party.
- Meanwhile, giving out fewer but bigger demands for concessions will surely anger the other party.
- Lastly, avoid giving premature concessions during the negotiation. A good note about this is when you already gave a negotiation concession and then you give another one before the other party gives out their counter concession.
Because a negotiation concession is often used during a negotiation, there are also several disadvantages to its use. Some of its disadvantages are the following:
- Negotiators tend to over-rely on negotiation concessions.
- Sometimes, negotiation concessions are used as a means to end a negotiation swiftly.
- When used incorrectly, a negotiation concession can cause harm to your party especially if the concession is considered a loss.
- A negotiation concession must sound sincere so if you don’t have that particular tone of voice or stance, you may have a hard time using it.
Conclusion
Negotiation concessions are a nuanced art, requiring skill and finesse to master. The exploration of real-life examples from the founder of Procurement Tactics provides practical scenarios, emphasizing the importance of conditional proposals and a strategic, patient approach.
The advantages of negotiation concessions, such as setting the negotiation tempo and fostering goodwill, are highlighted, along with a cautionary note on potential drawbacks, including over-reliance and the risk of perceived losses.
By navigating through the comprehensive guide and examples, readers gain a valuable understanding of how negotiation concessions can be a powerful tool when wielded with precision and situational awareness.
I have created a free-to-download editable in-negotiation toolkit template. It’s a PowerPoint file that can help you create the best approach when negotiating with other parties. I even created a video where I’ll explain how you can use this template.
Frequently asked questions
What is a concession in negotiations?
Concession in negotiations is offering a compromise that helps both parties reach an agreement.
When to make a concession in negotiations?
Concession in negotiations is a strategic tactic used by skilled negotiators to gauge the other party’s capabilities and gain important insights, often serving as bait.
Why should you make a concession in a negotiation?
Concession in negotiations is a tactic that allows a negotiator to test the waters—gauging whether the other side is prepared to engage when negotiations begin.
About the author
My name is Marijn Overvest, I’m the founder of Procurement Tactics. I have a deep passion for procurement, and I’ve upskilled over 200 procurement teams from all over the world. When I’m not working, I love running and cycling.
