What Is BATNA in Negotiation? Definition, Steps, and Examples

Sometimes, the worst scenario occurs: a negotiation breaks down and an agreement may fall apart between the parties involved. This is where BATNA in negotiation, your Best Alternative to a Negotiated Agreement, becomes essential. When all else fails, having a prepared BATNA keeps the negotiation from shutting down completely and gives you a last resort for resolving conflict. If a salesperson is careful enough, they can still have control of the deal.

Key Takeaways

• The best procurement cost savings strategies combine supplier collaboration, total cost analysis, and skilled negotiation, not price cuts alone.
• Quick wins like reviewing stale contracts and cutting maverick spend can lower costs within ninety days.
• Total cost of ownership matters more than unit price when evaluating supplier value.
• Strong negotiation tactics like BATNA preparation protect savings without damaging supplier trust.

Definition of BATNA

You might be wondering, what is BATNA? BATNA is the acronym for Best Alternative to a Negotiated Agreement. According to the Business Dictionary, BATNA is defined as “a term used by negotiators to describe options available to their side if negotiations fail.” The entry continues and points out that, “negotiators who have a strong, well-defined BATNA have an advantage because they have a clear benchmark to which they can compare any negotiated settlement.” In plain terms, your BATNA is simply your best backup plan, the option you fall back on if this particular negotiation does not work out. The stronger that backup plan is, the less pressure you feel to accept a bad deal.

Importance of BATNA in Negotiation

Before you even schedule a business meeting or agree to see your negotiating partner, you should have a BATNA in mind. Preparing a BATNA ahead of the meeting yields numerous rewards for you, such as:

• Giving you an alternative when the negotiations fall through
• Giving you negotiation power over your negotiation partner
• Considering the lowest point that you are willing to offer

In contrast, by having a weak BATNA or no BATNA at all, your partner can take advantage of your flaws, it will reduce your bargaining options, and will leave you in agreement for something lower in value than what you expected.

How to Determine Your BATNA

Building a strong BATNA does not happen by accident. It takes a deliberate look at your options before you ever sit down at the table. Use this process to determine your BATNA before your next negotiation:

1. List every alternative you have if this negotiation falls apart, including other vendors, other buyers, other candidates, or simply walking away.
2. Evaluate each alternative honestly. Weigh cost, timing, quality, and risk the same way you would judge any other business decision.
3. Select your strongest alternative. This becomes your BATNA, the option you compare every offer against.
4. Strengthen that alternative before you negotiate. Get a competing quote, line up a backup supplier, or keep another opportunity warm so your BATNA has real weight behind it.

The stronger your BATNA, the more leverage you carry into the room, and the less likely you are to accept an agreement that is worse than simply walking away.

 Know Your Partner’s BATNA

As you develop your BATNA, it is just as important to learn as much of your partner’s BATNA as possible. For one, it will leave you less vulnerable in case your partner is just as savvy as you. Also, you need to figure out your partner’s business needs and position in order to meet them. If you can understand what your partner wants, you will come up with a deal that will benefit both parties involved.

In general, to create the ideal BATNA, assess your business needs and make a list of everything you would do to meet a solution with the negotiating The most balanced approach is to meet the Zone of Possible Agreement (ZOPA), which is the compromise range that lies between the highest amount a buyer will pay and the lowest a seller will go for before both parties walk away. Your BATNA is what sets the outer edge of that range, so the two concepts work together every time you negotiate.

Approaching BATNA

Once you have your BATNA set, proceed with the negotiations. If you and your partner come to an agreement immediately, then the bargaining went well and there is no need to reach that next stage. If the conflict escalates to the point of ending the negotiation, then offer your BATNA. However, when you set up the BATNA, make the impression that you are ready to get up and leave if the other party doesn’t consider it. This action communicates to your partner that they are acting like an opponent, and that you are better off not doing any business with them. In addition, you can avoid the other party taking advantage of you and forcing you to settle for less, or no deal.

At the same time, ensure that both of you ultimately reach a mutually beneficial result. Every time you agree to a concession, ask one for yourself as well. Ultimately, negotiations are about maintaining a power balance between the involved parties when reaching an agreement. If you remain both insistent in your bargaining and fair when reaching out to the other negotiator, it will boost your reputation as a negotiator and potentially bring further business to you.

 Examples of BATNA

Though BATNA is a last resort when it comes to negotiation, it manifests in plenty of scenarios where any amount of negotiation is present. The following are examples of how BATNA operates in different negotiation scenarios:

• Customer needs. A customer needs a product that has no alternative, and his BATNA is to live with it, while the salesperson can offer the product for a discount, but nothing lower than that.
• Customer preference. A salesperson can tell if a customer prefers their products to the competition. The customer’s BATNA is choosing the competition, while the salesperson will hope to complete the deal with a discount.
• Sales target. A customer notices that a salesperson has not hit a sales target. The salesperson’s BATNA is missing their sales quota. The customer is willing to persuade the salesperson for some discounts, so the salesperson can close the deal and meet the target.
• The employer knows that the economy is in danger and jobs are hard to find. The employer has the negotiating power, since the candidates have no other options besides unemployment.
• In the reverse of the employment scenario, an employee is talented and in high demand, while the employer needs the employee’s talent for their business and has much to lose if the negotiation fails. Therefore, the candidate can demand more, and the employer’s best interest is to accommodate.
• A customer in the process of buying a product declares a specific brand superior to the others. His or her BATNA is to end up buying an inferior brand instead, which motivates them to buy. However, the customer may use bluffing to hide their interest and deal with the salesperson.
• A product is in short supply because the industry cannot keep up with the high demand. The customers have the BATNA of not buying a product at all or to cut back, while the manufacturer is able to offer the highest price available.
• Supplier negotiation. A procurement manager is negotiating pricing with a key supplier. If the supplier will not move, the manager’s BATNA might be an alternate vendor who can deliver similar quality at a comparable price, which keeps the manager from accepting unfavorable terms out of fear of disruption.

Frequently Asked Questions