Updated: Dec 28, 2021
Negotiation doesn't happen that often and when it does, it's not hard to sort out.
If you're selling something, negotiation usually means someone wants the price dropped.
Let's work with and example.
You sell pens for $10 each, that have 10 great features. Your competitors sell pens for $7 with 7 features. If someone wants a discount, explain this to them, then explain why you're different. If they persist they should go elsewhere, simple.
Real problems arise when
you don't know about your competitors (i.e. you can't justify your price)
the $7 pen has 10 great features
the $7 pen has 10 great features but you offer far superior service-that is not clearly explained
These 3 problems can be fixed. So fix them.
Most people that ask for a price reduction are not looking for a relationship with you. Meaning they will smash you every chance they get. These customers are not worth having.
The tricky part is not having new GOOD customers to replace them with. This is why you need to be proactive and constantly reach out to find new customers (see step 4 of the '4 step method').
If someone asks for a price reduction simply ask them why. They won't be able to justify their request. Then just let them fade away. However if they can justify it, then ask to call them back, then research it.
If they are 'wrong' call them and explain why you represent greater 'value'. Do not get emotional, it's business. You can agree to disagree and walk away.
If they are right, they're smart, and have done you a favor. Thank them and keep them close.