In negotiation, leverage is the ability to influence the other side to move closer to one's negotiating position.
Types of leverage include positive leverage, negative leverage, and normative leverage.
Normative leverage is the application of general norms or the other party's standards and norms to advance one's own arguments for one's own good. For example, you have normative leverage when your negotiating opponent says that he only pays Blue Book value for cars and you show him that the Blue Book value is the amount you are charging.
Positive leverage is a negotiator's ability to provide things that his opponent wants. For example, you have positive leverage when your negotiating opponent says, "I want to buy your car".
Negative leverage is a negotiator's ability to make his opponent suffer. For example, you have negative leverage if you can threaten your negotiating opponent: "If you don't fulfill your commitment to me, I will ruin your reputation."
Buyer leverage is the amount of bargaining power that buyers have when purchasing goods and services.
The amount of buyer leverage relative to the bargaining power and leverage of the seller depends on the information that seller and buyer have about the product, the relative scarcity or abundance of the product, the availability of product substitutes, and many other factors. The relative leverage of buyers and sellers determines the price and terms of transactions and the nature of business relationships.
For instance, business procurement managers often use their past purchase histories to get better deals from sellers vying for their business.
Creating and Claiming Value
Creating and maintaining leverage depends on creating and claiming value. Negotiation centers on this so as to influence people. Creating value comes from “listening very carefully to” other peoples’ “needs and interests” (McRae 13) and claiming value is simply “when we get our needs and interests met” (McRae 14). The only way to truly claim value is to be “well prepared and assertive” (McRae 14).
- McRae, Brad. Negotiating and Influencing Skills: The Art of Creating and Claiming Value. Thousand Oaks: SAGE Publications, 1998.
- Improving Negotiation Skills: Rules for Master Negotiators – Techniques for applying leverage in a negotiation
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