Skilled negotiators know that making strategic concessions at the right time can be an effective tactic in negotiation. But concessions don’t automatically create goodwill—or progress. If they’re poorly timed, poorly framed, or poorly understood, they can be ignored or even exploited.
In this article, Deepak Malhotra, a professor at Harvard Business School and Program on Negotiation–affiliated faculty member, outlines four ways to make your concessions work to your best advantage.
1. Label Your Concessions
In negotiation, don’t assume that your actions will speak for themselves. Your counterparts are often motivated to overlook, minimize, or downplay your concessions. Why? Because doing so helps them avoid the powerful social obligation to reciprocate.
As a result, it is your responsibility to label your concessions and make them salient to the other party—a responsibility the manufacturer in the introductory example failed to meet.
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When labeling concessions, there are several important rules to follow.
First, make it clear that what you’ve given up—or stopped demanding—is costly to you. This clarifies that a real concession has been made. For example, the manufacturer could have explained how a 3 percent wage increase would affect his firm’s bottom line or how difficult it would be to justify the increase to his board of directors.
Second, emphasize the benefits to the other side. Research consistently shows that negotiators tend to reciprocate based on the benefits they receive, not on how much pain the other party has endured. One effective way for the manufacturer to highlight the value of his offer would have been to compare it with wage increases offered by similar firms—assuming those offers were lower.
Third, resist the urge to abandon your original demands too quickly. If your counterpart views your first offer as frivolous, your willingness to move away from it won’t be perceived as a concession at all. By contrast, concessions are far more powerful when your initial demands are seen as reasonable and well grounded.
This means taking time to legitimate your opening position and using it as a reference point when labeling concessions. The manufacturer, for instance, would have been wise to move more slowly and later point out that his final offer ended up closer to the union’s original demands than to his own.
2. Demand—and Define—Reciprocity
Labeling concessions can trigger an obligation to reciprocate, but sometimes your counterpart will be slow—or selective—in acting on that obligation. To increase the likelihood that you receive something in return, try to explicitly—but diplomatically—demand reciprocity.
Consider a negotiation between an IT services firm and a client. The client claims the firm’s cost estimates are unreasonably high. The firm’s project manager believes the estimates are fair, given the project’s complexity and tight deadlines. If she chooses to make a concession, she might say:
“This isn’t easy for us, but we’ve made some adjustments on price to address your concerns. We expect that this puts you in a better position to make some changes to the project timeline. An extra month for each milestone would help us immeasurably.”
This statement accomplishes three things at once. First, it labels the concession (“This isn’t easy for us…”). Second, it tactfully demands reciprocity (“We expect that this puts you in a better position…”). Third—and most critically—it defines what reciprocity should look like (“An extra month for each milestone…”).
Too often, negotiators neglect this final step. But no one understands what you value better than you do. If you don’t speak up, you’re likely to receive what your counterpart assumes you value—or what is easiest for them to give.
This strategy plays out across many contexts. Consultants and contractors use it effectively when they respond to praise by pointing out that the person who would most appreciate hearing it is the client’s boss or other potential customers. In doing so, they clearly define how best to reciprocate.
3. Make Contingent Concessions
One hallmark of a strong working relationship is mutual trust—parties don’t nickel-and-dime each other, but instead focus on understanding interests and creating joint gains.
Unfortunately, such norms aren’t always present. In an executive education class, one student explained that while he welcomed mutual give-and-take in negotiations, he often struggled to do so with contractors and customers who appeared self-interested or untrustworthy. In these situations, goodwill was frequently met with silence rather than reciprocity.
My advice: when trust is low or when you’re in a one-shot negotiation, consider making contingent concessions. A concession is contingent when you explicitly link it to a specific concession from the other side.
For example, the executive might say:
- “We can provide additional support, but only if you agree to purchase some of these additional services,” or
- “This is the best price we can offer right now. However, if you’re willing to adjust some of your demands, we may be able to revisit pricing.”
Contingent concessions are nearly risk-free. They signal flexibility while protecting you from being exploited. That said, relying on them too heavily can undermine trust. If every concession requires immediate compensation, your behavior may appear self-serving rather than cooperative.
4. Make Concessions In Installments
Which of these scenarios would make you happier?
Scenario A:
You find a $20 bill on the street.
Scenario B:
You find a $10 bill on the street. The next day, on a different street, you find another $10 bill.
Most people prefer Scenario B—even though the total gain is identical. Decades of research, beginning with the work of Amos Tversky and Nobel laureate Daniel Kahneman in the 1970s, show that while people prefer bad news all at once, they prefer good news in installments.
This insight applies directly to negotiation. A concession is often received more positively when broken into smaller parts.
Imagine you’re negotiating to buy a house. The gap between your offer and the seller’s asking price is large, and you’re willing to increase your offer by up to $40,000. You’ll often be more effective making two concessions—say $30,000 followed by $10,000—than making a single $40,000 move.
There are additional benefits to installment concessions. Negotiators typically expect multiple rounds of back-and-forth. If you give away everything at once, the other party may assume you’re holding something back—even if you aren’t. The manufacturer who offered a 3 percent wage increase upfront encountered exactly this problem.
Installments also allow you to discover that you may not need to concede as much as you thought. You might reach agreement before exhausting your concession limit. In the housing example, the initial $30,000 increase may have been enough to close the deal—leaving the remaining $10,000 in your pocket.
Finally, multiple concessions give you repeated opportunities to label your flexibility and generate goodwill. Each installment reinforces your willingness to listen and adapt.
All of these strategies are designed to ensure that your concessions are neither ignored nor exploited. It’s worth noting, however, that a refusal to reciprocate often harms the party who withholds as much as the one who concedes. Nonreciprocity erodes trust and makes future cooperation risky.
Effective negotiators therefore focus not only on securing reciprocity for their own concessions, but also on acknowledging—and reciprocating—the concessions of others.
How do you make concessions in a negotiation? Leave a comment.
Claim your FREE copy: Negotiation Skills
Build powerful negotiation skills and become a better dealmaker and leader. Download our FREE special report, Negotiation Skills: Negotiation Strategies and Negotiation Techniques to Help You Become a Better Negotiator, from the Program on Negotiation at Harvard Law School.
When one ventures into the arena of negotiations, knowing the strategies of other side is always a tough challenge. Minds of negotiators are just like black boxes (that are actually orange coloured). How to decode minds of negotiators is a Herculean task. The four measures or methods suggested by Professor Gupta are quite helpful in this context. Label Your Concessions, Demand—and Define—Reciprocity , Make Contingent Concessions, and Make Concessions In Installments – are four extremely important strategies to move towards a meaningful and fruitful negotiation process.
Concession can be used as a tool to restart a broken negotiation. it can even be used as a strategy to break and restart again. depending upon the circumstances, and BATNA of both sides.
Great insights on negotiation strategies. Labeling concessions effectively communicates their significance, while demanding and defining reciprocity ensures a fair exchange. The concept of contingent concessions adds a layer of protection in situations where trust is low, preventing exploitation. Making concessions in installments aligns with human psychology, making them more positively received and allowing for flexibility in negotiations. It’s crucial to reciprocate concessions to build trust and maintain a positive relationship. Valuable tips for anyone navigating negotiations.
Truly a Golden Nugget.
While the information contained in the Daily Blog is valuable,
as a Realtor, this information provides excellent stepping stones in Getting to Yes.
Excellent advice to reaching better understandings, agreements and win-win outcomes.
Thank you for this post, this is an insightful and comprehensive article on the topic of concessions.