Concessions in Negotiation: Definitions, Strategies, and Examples

A concession in negotiation is a deliberate trade of value made to move a deal forward, not a giveaway, not a compromise, and not a reaction to pressure. Negotiation is an art that requires skill, knowledge, and patience. It is a procedure in which two parties work together to find a solution to a problem or come to an agreement on something. Negotiation concessions are an integral part of this process. They entail yielding, compromising, or conceding to the requests, demands, or offers of the other party. In this article, we will define negotiation concessions and discuss how to handle them effectively in order to close more deals.

Key Takeaways:

• ​​A concession in negotiation is a deliberate trade of value made to move a deal forward, not a giveaway, not a compromise, and not a reaction to pressure.
• Example of a concession: you reduce price by 3% only in exchange for a 2-year term, faster signature, or increased volume.
• Plan your concessions before the negotiation begins by identifying what you’re willing to trade and what you must receive in return.
• Concede strategically by trading non-price terms first and making concessions gradually instead of giving away value upfront.
• Never make a concession without linking it to a clear reciprocal movement that advances the agreement.

What are Concessions in Negotiation?

A negotiation concession, also known as a “trade-off,” is the act of yielding or compromising to reach a mutually beneficial agreement. It can include a variety of factors such as price, quantity, quality, delivery time, and deal terms. Concessions are essential in the negotiation process because they help to move the discussion forward and build trust among the parties involved. When making concessions in a negotiation, it is critical to remain composed and relaxed. You should also try to understand why the other party is pushing back and what their priorities are. This can help you make moreinformed decisions and increase your chances of reaching a mutually beneficial agreement. It’s important to understand that concessions are not one-sided. To be successful in negotiations, both parties must be willing to make concessions. It is a two-way street in which both parties strive to find a solution that meets their needs. Knowing your own limits is another critical aspect of making concessions in negotiation. It is essential that you recognize what you are willing to compromise on and what is non-negotiable. This will allow you to make more informed decisions during the negotiation process and avoid making concessions that will jeopardize your interests. Finally, concessions can be used strategically to build trust and rapport with the other party. Small concessions can help to build momentum and create a favorable negotiating environment. It also demonstrates to the other party that you are willing to collaborate in order to find a solution that meets both of your needs.

Examples of Concessions in Business Negotiations

Concessions are not limited to price. In fact, the most effective negotiators look beyond price first. Sales example:

• Extending contract length in exchange for price protection
• Including onboarding support in exchange for a multi-year commitment

Procurement example:

• Adjusting payment terms in exchange for volume guarantees
• Agreeing to phased implementation in exchange for improved service levels

Executive / partnership example:

• Offering market exclusivity in exchange for minimum performance targets
• Sharing data insights in exchange for marketing collaboration

 

Strategies for Concessions in Negotiations

To make effective negotiation concessions, three key rules must be followed: move slowly, move painfully, and get something in return. Let’s take a closer look at these strategies.

Move Slowly:

When making concessions, it’s important to move slowly and gradually. Instead of going from $10 to $5, for example, you could start at $9. This not only demonstrates to the other party that you are willing to compromise, but it also establishes a precedent for future negotiations.

Move Painfully:

When making a concession, it’s important to communicate that you’re not looking forward to doing so. “That’s going to be difficult for me,” you could say, “but I understand where you’re coming from.” This demonstrates to the other party that you are not simply giving in, but are making a concession because you recognize the value in the deal.

Get Something in Return:

Always try to get something in return when making a concession. You could, for example, say, “If I can do that, could you also consider…” This helps to balance the concessions and ensures that both parties benefit from the deal.

Label Your Concessions:

Counterparts regularly overlook, ignore, or minimize your concessions. It is critical to avoid this by explicitly labeling and communicating your concessions to the other party. This ensures that both parties are aware of what is being traded and can evaluate the value of the concessions made. Concession patterns in negotiation are common tactics used by negotiators to close deals or gain an advantage. Being aware of these patterns can assist you in strategizing and responding appropriately. Here are some common negotiation concession patterns and how to deal with them effectively:

1.Take It or Leave It:

This pattern is common for overly eager counterparts who want to close the deal as soon as possible. They may make an offer and insist that it be accepted or rejected. In this case, keep in mind that there is always room for negotiation. You can try to learn about the other party’s needs and priorities and then present a counteroffer that meets both of your requirements. These kinds of negotiators can be extremely frustrating since they may concede to the negotiation requests, but they are not willing to offer or accept anything in return. This can give the negotiation a sense of imbalance and unfairness. To deal with this pattern, try to understand their priorities and offer a mutually beneficial solution. You can also use creative problem-solving techniques to come up with a win-win solution that meets both of your requirements.

2. Higher Authority:

In this pattern, the negotiator appears to want to close the deal, but someone else who is not present is preventing it. In this case, it is critical to identify the higher authority and their priorities. You can try to meet directly with the higher authority, or you can give the negotiator a chance to save face by asking what the other person would and would not accept. This can aid in addressing the underlying issue and progressing the negotiation.

3. Good Cop, Bad Cop:

One negotiator is friendly and helpful, while the other is difficult and unyielding. This can put pressure on you to accept whatever trades are on the table. To deal with this pattern, stay focused on your highest goals and be prepared to walk away if necessary. Accept nothing or make any trades that are not in your best interests. You can also try to establish rapport with both negotiators and present counteroffers that satisfy both of your requirements. Concession in negotiation is an important part of the process. They entail yielding, compromising, or conceding to the requests or demands of the other party. To make effective concessions, it is necessary to move slowly, painfully, and in exchange for something. You should also label your concessions and be aware of common negotiation concession patterns. You can handle concessions effectively and close more deals if you follow these strategies.  

Frequently Asked Questions:

What is an example of a concession in negotiation?

– A common example is offering a small price reduction only in exchange for a longer contract term or higher volume.

What is an example of concession bargaining?

– An example is agreeing to a wage increase in exchange for changes to scheduling, productivity targets, or job security commitments.

What is a concession strategy?

– Concession strategy is a pre-planned map of what you can trade, in what order, and what you must get back each time.

What is the biggest mistake people make with concessions?

– The biggest mistake is conceding without tying it to a clear, specific reciprocal move from the other party.  

Improve your Negotiations Skills with SNI

Shapiro Negotiations Institute SNI is a leading negotiation training and coaching firm that provides a variety of programs to assist individuals and organizations in improving their negotiation skills. With over 25 years of experience, SNI has assisted thousands of professionals all over the world in becoming better negotiators. If you want to improve your negotiating skills, we invite you to learn more about SNI and the services we provide. We are confident that we can assist you in achieving your objectives and becoming a more effective negotiator.