How to Negotiate a Counter Offer | Simple Framework

You've invested a ton of time, effort, and resources into your negotiation strategy, but then the counterpart didn't go for it.

So now what?

In this episode, I'm going to teach you how to effectively counter offer and get them to meet you exactly at the price and terms you originally wanted.

Hey everybody, and welcome back to my channel. I'm Doug Howard, and for those of you who don't know me, I'm a leadership coach and consultant, and I focus on the people side of management. Here on this channel, we share weekly insights, tools, and stories to help you level up your leadership skills. If you find value in these episodes, don't forget to hit that subscribe button and ring the bell to stay updated on all the latest episodes. And if you enjoyed this episode, make sure you give it a thumbs up.

In today's episode, you're going to learn how to effectively counteroffer using the Ackerman model. We're going to cover the basics of the Ackerman model. The step by step process of implementing the Ackerman model. We're also going to cover real life examples of counteroffers in action. And at the end, you're going to get some tips and strategies to maximize your negotiation success. Now let's start by taking a look at the Ackerman model.

The Ackerman Model

The Ackerman model is a tactical negotiation method that helps you reach the best possible deal through a calculated approach. This model is divided into several key stages, and we're going to cover each of them in more detail.

To give you a high level understanding right now, the first step is setting your target price. The second step is establishing your first offer. The third step is planning your counter offers. The fourth step is using empathy and tactical techniques. The fifth and final step is closing the deal with the final offer.

Step 1 - Set Your Target Price

Let's start by taking a closer look at the first step, which is setting your target price. Now this is the ideal price or terms that you want to achieve. Starting here is important because having a clear target helps guide your negotiation strategy and keeps you focused on the ultimate goal.

There's plenty of ways to do this, but obviously you're going to want to research the market value. You're going to want to consider your minimum acceptable terms, and then you're going to want to set an ambitious, but realistic target.

Be specific about your target and actually write it down. This clarity will help you stay firm and focused during the negotiation. The reason this is so important is because setting a specific target creates a cognitive anchor for you. It makes your precise target seem more calculated and less arbitrary.

Step 2 - Establish Your First Offer

The second step is establishing your first offer. Your first offer should be higher or lower than your target to leave room for negotiation. Now the reason this is important is because it sets the stage for the negotiation and it gives you the ultimate leverage.

What you want to do is you want to make an initial offer that is assertive but within a reasonable range. For example, if you're targeting a salary increase and the target is a 10 percent raise, you might start with a 15 percent increase instead. Whatever you do, ensure that your first offer is well justified.

Use data and examples to support why your offer is reasonable. Don't just throw a crazy number out there that's a pipe dream because you're going to lose all credibility. But by starting high, you actually create more room to make concessions later on, which can make the other party feel like they're gaining something and like they're winning in the process.

It also sets the anchoring bias higher. If possible, try to get the other party to make the first offer to set their anchor. You can do this by asking open ended questions like, What range were you considering for this position?

Step 3 - Plan Your Counteroffers

The third step is planning your counteroffers. Plan a series of counteroffers that gradually move closer to your target. Doing this shows flexibility and willingness to compromise, and it makes your counterpart more likely to meet you in the middle. The way to do this is, in advance of the negotiation, you need to decide on a sequence of counteroffers before the negotiation begins, typically reducing in smaller increments. For example, if your first offer is a 15 percent increase, your next offer might be a 12. 5 percent increase.

When you're giving the counter offers, maintain a calm and steady tone with each counter offer. Avoid showing any frustration or impatience.

There's a human psychology element at play here with this technique. By gradually reducing your offers, it's leveraging the principle of reciprocity and it's encouraging the other party to also make concessions for you.

Step 4 - Use Empathy and Tactical Techniques

The fourth step is using empathy and tactical techniques. Use empathy, mirroring, and labeling to build rapport and understand the other party's perspective. This is important because building rapport can make the other party more willing to negotiate and reach a mutually beneficial agreement with you.

The way to apply this is to listen actively, acknowledge the other party's concerns, and use tactical empathy to create a connection with them. For example, you could say something like, it sounds like you're concerned about budget constraints. How can we work together to find a solution?

Some additional tips on this step. Practice active listening and repeat back what you hear to ensure that you understood them. Show genuine concern for the other party's needs as well. Empathy builds trust and rapport, which can lower the other party's defenses and make them more willing to accept your proposals.

Step 5 - Close The Deal With Your Final Offer

The final step in this process is obviously closing the deal with a final offer. Make your final offer slightly better than your previous one to show goodwill and to show willingness to close the deal. This final move can help seal the deal and ensure both parties feel satisfied with the outcome.

Present your final offer confidently and explain why it's the best option for both parties. For example, if you were negotiating a salary raise and your last offer was a 12.5 percent increase, your final offer might be a 10.25 percent increase.

Some additional considerations here. You want to use positive body language and also have a confident tone when you're presenting your final offer. Express your desire to reach an agreement and emphasize mutual benefits for both parties,

The final slight improvement that you offer can create a perception of compromise and mutual benefit, which is going to satisfy the need for fairness from the other person.

Real Life Examples of the Ackerman Model in Action

Let's take a look at some real life scenarios where you can use the Ackerman model to negotiate and to get success when you're counter offering.

The first scenario I want to look at is salary negotiation. So let's say you're trying to negotiate a higher salary with your employer, and your current salary is 80,000 a year, but you're aiming for a 10 percent increase, which would take you to 88,000 a year.

The first thing you want to do is set your target. Your target salary increase is going to be 10 percent or 88,000. The first offer you're going to make and that initial offer is 15 percent increase, which is much higher than 10%. But remember, we want to create room for bargaining and concessions later on to create that compromise effect. So instead of asking for 10%, we're going to ask for 15%, which puts you at 92,000.

Now, when you do this, your boss might respond with something like, that's a bit higher than we were expecting given our current budget constraints. With this in mind, you want to respond using empathy, and you could say something like, I understand that budget constraints are challenging right now, but can we discuss how my contributions to the recent projects justify this increase? Doing that keeps the conversation open versus making it yes or no.

From there you want to plan your counteroffers. So a good place to go from 15 percent would be offering a 12.5 percent increase, which takes it down from 92,000 to 90,000. When you do that, you could do it by saying something like, considering the budget constraints, how about we settle for a 12.5 percent increase at 90, 000? Now your boss might say we're closer, but it's still a bit high.

From here, you'd want to use tactical techniques. This would be a great time to use mirroring. You could simply respond by saying, a bit high? And then label it by saying, it sounds like the budget is the main issue here.

From there, you can counter offer with an 11 percent increase, which brings it down from 90,000 to 88,800 salary. You can do that just by saying, what if we met in the middle at an 11% increase, which brings it down to 88,800.

If he doesn't accept the 11 percent increase, then what you want to do is you want to close the deal with a slight improvement on there. So let's say 10.25 percent increase, which is slightly above the 10 percent you were actually shooting for. You can do this just by saying, to finalize, how about we agree on a 10.25 percent increase, which brings it to 88,200. I believe this dollar amount reflects my contributions and it fits within the budget.

As you're listening to me, you might be wondering why did I say 10.25 percent increase? That's actually really awkward to say, as I'm saying it now. But why did I say that instead of a clean 10%? That's because final offers should be precise. The more precise the number is, it shows your willingness to compromise slightly for mutual benefit. I'm going to share a little bit more about this tactic later in this episode.

Now I want to take a look at this framework for a different scenario. Let's say purchasing a car. Let's say you're negotiating the price of a car that's listed at 30,000 sell price.

First thing you want to do is set your target price. So let's say your target price is 27,000. You want your first offer to be lower than that because then there's room to negotiate and bargain. So I would make an initial offer of 24,000 instead. Now, when you make that offer, the salesperson is probably going to respond by saying hey, that's much lower than the asking price. We can't do that.

You want to respond by using empathy and acknowledging and validating the car salesman's perspective. You can do it by saying something like, I understand that the asking price reflects the car's value, so can we find a middle ground here?

Then you want to get into offering your counteroffer. So you could say, How about we settle at 25,000, which is 1000. Don't point this out to them, but I'm just pointing this out to where we're at. It's 1000 above what you were originally asking. It's still below your limit of 27,000 though.

Now the salesperson might say, I'm sorry, we can't go that low, but we can offer 29,000. This is a good sign because he hasn't said no to anything yet and he's moving. From here you want to keep the conversation going by mirroring their concern. You could say something like can't go that low?

From there you could either be silent and give him a chance to you know share more information or more perspective about why they can't go more low or you could label it by saying, it sounds like there's a bit of flexibility here. Which is then also going to provoke the salesman to say something. But again, the goal is to put the ball in their court with an open ended question that provokes them to either go lower or share more information about why they can't go lower or what their stance is.

Let's just say the salesman says he can't go any lower. Then your next counter offer could be 26,000 where you say, how about let's meet closer to the middle at 26,000.

Now he still might not move, but then what you want to do is get into your final offer and close with a slight improvement. So you could say something like, how about this? Let's finalize. Let's agree on a price of 26, 850. I believe this is a fair price for both of us and it's almost exactly in the middle of where we started.

Now, there's a reason I didn't say 27,000 and I'm going to explain that in a minute.

Tips for a Successful Negotiation

But before I do, here are some additional tips to help you succeed in your negotiations.

First, when you present your pricing, ask with precision. Giving a range and using precise numbers can create a perception of thorough research and firmness. In both of the examples I gave you, I used a price that sounded way more precise than the actual numbers.

In the salary negotiation, I said 10.25 percent instead of 10%. And in the car example, I said 26,850 instead of 27,000. I did this intentionally because precise numbers appear well researched and less arbitrary, which makes them seem more credible to your counterpart.

Instead of rounding your figures, make sure you use specific numbers and specific ranges. For example, instead of saying, I want a 10,000 raise, ask for a raise that's in the range of 10,250 to 14,000. What you're really doing here is you're using that precise number at the bottom limit, which is going to tell the other person that this is the limit you're willing to go. You're not willing to go any lower than that because it's an actual number.

Another tip on this is to use odd numbers because they tend to be perceived as more accurate and less negotiable. Precise numbers leverage the anchoring bias and they signal careful calculation, making them harder for your counterpart to dispute.

The next tip I want to give you is stay calm and confident. Maintaining a calm and confident demeanor can influence how your counteroffer is perceived. It demonstrates that you believe in your worth and it demonstrates that you believe in the proposal that you're offering them.

Now, how do you stay calm and confident? Some simple tricks are practice deep breathing and keep your tone steady and firm during negotiations. Another thing you can do is sit in a way that's more relaxed instead of in a way that's more alert. By sitting in a posture, that's more relaxed in your negotiation, it's going to trick your mind into being more relaxed, and it's going to trick your demeanor into being more relaxed.

Another way to boost your confidence is to prepare thoroughly for delivering your proposal. Make sure you get comfortable with saying the words and saying them in the right tone.

Another technique is visualizing successful outcomes to stay positive. If you're going to go into a situation where you're presenting a proposal to a team, or you're going to be negotiating with your boss, you're going to be negotiating a promotion or something like that, mentally play out, what is this meeting going to look like? What are you going to be wearing? Where is this meeting going to take place? Who's going to be there? What are you going to say? How are you going to say it? How are they going to react? By mentally playing these things out, you're going to feel more comfortable when the real scenario comes because as far as your brain is concerned, you've already experienced these things. There's nothing shocking about it. There's nothing new about it.

Confidence is key because your confidence can influence the other party's perception of your credibility and the value that you offer.

The third tip I want to give you is do your research. Knowing the market value and the industry standards to back up your offers is critical. Research provides a solid foundation for your counteroffer and it makes your position more persuasive. Depending on what you're negotiating for, make sure you're gathering data on market trends, or if it's a salary push, make sure you're learning industry data on salaries, or if it's a business deal, make sure you're doing your research on contract terms before entering the negotiation.

Cite specific resources and statistics during your negotiation to strengthen your case and your credibility with your counterpart. Providing data and evidence can shift the negotiation from subjective opinion to objective fact, which makes your arguments harder to refute.

The fourth tip I want to give you is be willing to walk away from the deal. Sometimes the best negotiation tactic is to be ready to walk away if the terms aren't favorable for you. Being willing to walk away shows that you value your worth and that you're not desperate to make a deal at any cost. Before your negotiation starts, set your own limit for when you're going to walk away and stick to it if necessary.

To make sure you're ready for that moment, practice saying no with confidence. Also, make sure that you understand your alternatives and that you have a backup plan. The willingness to walk away can increase your power in the negotiation as it shows that you have alternatives and that you're not dependent on this deal alone.

The sixth tip I want to give you is practice active listening. Show that you're genuinely interested in understanding the other party's needs and concerns. Active listening is the easiest way to build rapport and it can help you uncover valuable information that helps in the negotiation. Do this by paraphrasing what the other party says and by asking clarifying questions. When you're active listening, make sure you maintain eye contact, nod in agreement, and avoid interrupting the other person.

Active listening demonstrates empathy and respect, which can lower defenses and open the door to more cooperative problem solving.

To quickly recap everything we've covered. Using the Ackerman model involves setting your target price, making strategic offers, building rapport through empathy, and closing the deal with a final but slightly improved offer. By following these steps, you can effectively counteroffer and achieve the terms you want.

But remember, if you want to be a master at negotiation, you got to be a master at active listening. And if you want to dive deeper into developing this essential skill, you should check out my episode called Improve Your Listening Skills By The End Of This Video.

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