Module 4 — Running the Deal · Lesson 4.3
Negotiation, Pricing and Discounting
Know your alternative, anchor deliberately, and trade rather than give
What you'll learn
- Define BATNA and prepare yours and an estimate of the buyer's before negotiating
- Explain the first-offer anchoring effect and how the receiving side can blunt it
- Avoid the behaviours that research links to average rather than skilled negotiators
- Calculate the profit effect of a discount and record discounts with their reasons
By the time a deal reaches negotiation, both sides want it. That is exactly why sellers give too much away: after months of work, the fear of losing the deal at the last step makes every concession feel cheap. It is not. A discount comes straight out of profit, a loosened term becomes the precedent for every future contract, and a buyer's procurement team, which Forrester's 2026 research found acts as a decision-maker in 53% of buying cycles, negotiates for a living. Negotiation deserves the same preparation as discovery.
Know your alternative, and theirs
The most useful single concept in negotiation comes from Roger Fisher, William Ury and Bruce Patton's Getting to Yes: the best alternative to a negotiated agreement, or BATNA. As Harvard's Program on Negotiation puts it, in plain terms your BATNA is what you will do if you do not reach a deal.
Your BATNA sets your walk-away point. A seller with a full pipeline of similar opportunities can afford to decline a deal on bad terms; a seller with one deal standing between them and quota cannot, and buyers can usually tell. That is the strongest argument for the pipeline discipline in Module 1: a healthy pipeline is negotiating power.
Estimate the buyer's BATNA as well. What happens if they do not buy from you: a competitor, building it themselves, or doing nothing? Lesson 2.3 showed that doing nothing is often the strongest alternative of all. The Program on Negotiation's advice is to identify realistic alternatives rather than hypothetical ones, compare them on genuinely equivalent terms, and reassess as new information arrives.
First offers anchor, unless the other side refocuses
Adam Galinsky and Thomas Mussweiler reported three experiments in the Journal of Personality and Social Psychology in 2001. Across all three, whichever party made the first offer, buyer or seller, obtained the better outcome, and first offers strongly predicted final settlement prices. The effect held in both face-to-face and email negotiations.
The same paper found the antidote. When the negotiator who did not make the first offer focused on information inconsistent with it, such as the other side's alternatives, the other side's reservation price, or their own target, the first-offer advantage disappeared.
For sellers, two practical rules follow. When you have a well-founded view of value, put a specific, defensible price on the table first, rather than inviting the buyer to name a budget that becomes the anchor. And when a buyer anchors low, do not negotiate from their number: restate your own target and the value it rests on, and talk about their alternatives.
How skilled negotiators behave
Huthwaite, the firm behind Neil Rackham's research, has long studied the observable behaviour of skilled and average negotiators. Its own 2015 summary of that original observational research highlights two measurable differences. Average negotiators used 'irritators', words and phrases that praise one's own offer, such as calling it 'fair', 'reasonable' or 'generous', at about 10 to 11 per hour of speaking time, against 2 to 3 for skilled negotiators; the other side, not you, gets to decide whether your offer is generous. And average negotiators spent 6.3% of their behaviour on defending and attacking, against 1.9% for skilled ones, avoiding the spiral in which one side's attack provokes the other's defence.
The working habits that follow are simple to state and hard to keep under pressure. Describe proposals plainly. Ask questions to understand the buyer's constraints. Do not respond to a hard line with a harder one.
A last principle, which we recommend as a working rule: trade, never give. Every concession should be exchanged for something of value, a longer term, a larger scope, a case study, faster payment, a reference. A discount given for nothing teaches the buyer that asking works.
What a discount really costs, and recording it
Michael Marn and Robert Rosiello of McKinsey argued in Harvard Business Review in 1992 that the right price can boost profit faster than increasing volume will. The arithmetic behind that is worth doing for your own business. Suppose a deal carries a 20% operating margin. A 10% discount does not cut profit by 10%; it removes half of it, because the discount comes entirely out of the margin while the cost of delivering stays the same. To earn the same profit at the discounted price you would need to sell twice as much.
Record discounts so they can be seen and governed. In the Deal Room, a deal's amount and revenue fields hold the figures, and update_deal accepts custom fields, for example list_price, discount_pct and discount_traded_for, plus a reason that is written to the deal's activity timeline. That gives a later review the evidence to answer 'what did we give, and what did we get for it?'
Kavanah does not have a built-in discount approval workflow. If you need one, an automation rule on the deal-stage-changed trigger can create a task for a manager whenever a deal enters your Committed stage, so every final price is looked at before paperwork goes out.
Prepare and record one negotiation
- 1
Before your next pricing conversation, add a note to the deal with your walk-away point and your best estimate of the buyer's alternatives, using record_deal_activity through the agent.
- 2
Ask the agent for get_pipeline_summary. A thin pipeline weakens your BATNA; know that before you negotiate, not during.
- 3
Record the discount and the trade
When terms are agreed, set list_price, discount_pct and discount_traded_for as custom fields with update_deal and a reason.
- 4
In Automations, create a rule on the deal-stage-changed trigger for your Committed stage that creates a pricing-review task for a manager.
Pricing discipline
- Average discount
- Mean discount_pct across won deals in the period, from the custom field.
- Healthy signal: Watch the trend and the spread. A rising average near quarter-end usually means discounts are buying timing, not value.
- Traded share of discounts
- Share of discounted deals where discount_traded_for is filled with something of value.
- Healthy signal: Our suggested target is 100%. A discount for nothing is a precedent.
- Profit effect of discounting
- For each discounted deal, discount amount divided by the deal's expected operating profit before discount. You compute it with your own margins.
- Healthy signal: Seeing this number next to each discount changes behaviour faster than any policy.
Key takeaways
- ·Your BATNA sets your walk-away point, and a healthy pipeline is what makes it strong.
- ·First offers anchor outcomes; make a defensible one, and when anchored, refocus on alternatives and your target.
- ·Skilled negotiators avoid self-praising 'irritators' and defend/attack spirals, and trade rather than give.
- ·A discount comes out of margin, so it costs far more profit than its percentage; record each one with what it bought.
Agreed terms still have to become a signed contract, and a buying group of a dozen has many ways to stall between 'yes' and a signature. The next lesson covers proposals, mutual action plans and closing.
Sources
- 1.First offers as anchors: The role of perspective-taking and negotiator focus
Adam D. Galinsky, Thomas Mussweiler · Journal of Personality and Social Psychology 81(4), 657–669 · 2001
Across three experiments the first offerer obtained better outcomes and first offers predicted settlements; focusing on the opponent's alternatives, reservation price or one's own target eliminated the effect; held face-to-face and by email.
- 2.Translate Your BATNA to the Current Deal
Program on Negotiation, Harvard Law School · PON Daily Blog, September 30, 2026 · 2026
BATNA is what you will do if you do not reach a deal; credits Fisher, Ury and Patton's Getting to Yes; identify realistic alternatives and reassess them.
- 3.Behaviours avoided by the skilled negotiator: irritators
Janet Curran, Huthwaite International · Huthwaite International blog, February 14, 2015 · 2015
Average negotiators use 10–11 irritators per hour vs 2–3 for skilled; defend/attack behaviour 6.3% vs 1.9%.
- 4.Managing Price, Gaining Profit
Michael V. Marn, Robert L. Rosiello · Harvard Business Review, September–October 1992 · 1992
'The right price can boost profit faster than increasing volume will.'
- 5.Forrester's 2026 Buyer Insights: The State Of Business Buying
Forrester · Forrester press release, January 21, 2026 · 2026
Procurement professionals are decision-makers in 53% of business buying cycles.