Jun 21, 2021

Normative leverage

Normative leverage is using the other party’s norms and standards to advance your position. If you can show inconsistencies between their beliefs and their actions, you have normative leverage. No one wants to look like a hypocrite.

For example, if your counterpart lets slip that they normally pay a certain multiple of cash flow when they buy a company, you can frame your desired price in a way that reflects that valuation. 

Or consider another example when selling a used car: if your counterpart says they only pay the Kelley Blue Book value for a car, then you can set your price at the Blue Book value and they will have no room to negotiate without breaking the norm they set.

Discovering normative leverage can be as easy as asking your counterpart what they believe and listening openly.