BLOG

October 11, 2019

Negotiation tactics, strategies, and skills to win you a better deal.

Andres Lares

0

Negotiation is a balance between the science of preparation and strategy development and the art of connecting with the other side’s needs and wants. The trick is to know just how much you have to ‘give’ in order to get all of your needs met (and with solid negotiation habits… some or most of your ‘wants’ as well). 

 

Better habits will lead to better results in all of your negotiations whether it is a business deal, a personal purchase or even ‘Where are we going for dinner?’ decisions made under the stress of being hungry and in a hurry with family and friends!

 

SNI has a proven method for maximizing your objectives in a negotiation while maintaining a careful eye toward improving relationships. We firmly believe in using a system for negotiation not only because it improves performance, but also because it makes it repeatable and sustainable across an organization. 

 

Our relationship based approach to negotiation is based around the core principle – the best way to get what you want in a negotiation is to help them get at least some of what they want.

 

Below are a host of negotiation tactics, strategies, and skills based on our negotiation training that will surely positively impact your negotiations. 

 

Negotiation Strategies for Getting What You Want and Need

 

Don’t ever overestimate your weakness, nor underestimate the other side’s. 

Many negotiators give in too easily when they believe they are weaker than the other side. One aspect of preparation is to identify the strengths and weaknesses for both sides. 

You need reliable transportation, and you want a car that is $2000 over your budget. It is not unreasonably priced, but it is $2000 over your budget. 

  • Experts don’t haggle here. They weigh the other side’s needs (to move cars) and wants (to make commission) and with that leverage, they walk in and make a reasonable offer below their target price (leaving room to move).  
  • When faced with options to maximize the price (or switch to a less desirable car), the experts stick to their initial offer for a specific car. 
  • The experts point out how their offer meets the salesperson’s need to sell a car today. 
  • When the price starts to drop, the expert sticks to their offer and asks if the desired price is possible. 
  • If/when an expert does need to make a concession, they remember the three keys to making concessions- move slowly ($100 up), show pain (“my wife won’t be happy”), and ask for something in return (“but I’ll need free oil changes for the first year”). 

And so on until they reach their target price. Sticking to your first reasonable offer and using the laws of concession forces the other side to start conceding in an attempt to get you to ‘trade’ with them. Resist the temptation to change your offer until you get your primary goal(s) met. 

 

Scripting Your Exchanges

It is always a good idea to write out your needs and wants, along with their relative values, to plan for the exchange of value in a negotiation. 

You are in the final stages of a salary negotiation with a great candidate for your team, and the candidate asks you for $5000 more than your budget for the position. 

Experts:

  • Already know what they are going to say when this situation arises. They plan to:
    • Ask the candidate to reconsider the offer. 
    • If that is rejected, the next ‘offer’ should be worth far less than $5000 but should still be a move in the right direction. Ideally it’s a combination of moving in salary along with other variables. 
    • Trades such as an extra week of vacation, a 1% bump in 401(k) contributions or stock, ability to telework, flexibility in schedule and subsidized parking cost you less than the hard cost of that $5000 that is not in your hiring budget. These solutions will have less impact on your cash flow.  

Writing out your strategy is the science and knowing when/how to offer these exchanges is an art. Fortunately, it is a strategy that you can learn and practice to get better. Here is another technique to help you practice this strategy and close difficult deals. 

 

Offering 3 Options

An excellent closing strategy is to offer three options. Buyers like to feel in control. By presenting three choices: a premium package, an enhanced package and a basic package, you can usually influence the other side to choose your preferred option by simply offering it as the last choice. Three options balances people having a feeling of choice with not being overwhelmed by too many choices (paralysis by analysis). 

You are selling a subscription service and the other side is asking for your most expensive package at a 20% discount. 

Let’s assume that you have a basic service at $1200, enhanced service at $1500 and premium service at $2000. Your customer is trying to get you to offer premium service at $1600. You can’t mix and match components of your services a la carte, so:

  • Offer the premium service hard at full price. Set the bar high. 
  • Next compare it to the basic service. They don’t want that. 
  • Ask questions and listen to their needs/objections. 
  • Make an offer to meet most of their needs and wants with the enhanced service at the price of $1500 saving the customer more than the 20% discount they requested while meeting most of their needs and wants. 

Most negotiations will end with the other side choosing their price point (the enhanced service) or your value (enhanced at $1500 or the premium service at $2000). A nice win-win. 

 

Negotiation Tactics for Dealing with Difficult People

Some negotiators bargain in a difficult way because they are in a bad spot, while others use power, tricks and tactics because they often work! In either scenario, you can counter the positional or argumentative negotiator by changing your mindset about these difficult deals, and utilizing some of their own tactics to neutralize them. 

Here are some quick tips for dealing with tactical negotiators.

 

Neutralize your own emotions. 

Take a deep breath. This isn’t about you. You have prepared well and you are negotiating in good faith. 

Your customer says “I thought the customer is your first priority!? You have to help me out with a discount on this job so I can win US BOTH more business.”

Count to ten and stay in your ‘safe harbor’ of asking questions in the face of objections and power plays. 

Ask questions:

  • Tell me about your agreement with your client? 
  • Do you have a contract ready for this future work? 
  • Can I help you with the response to this RFP?

Use hypotheticals:

  • Hypothetically, could we approach this customer together? With our combined buying power, we might be able to offer more value if we can win a bigger order.
  • If we agree on X can we talk about Y?

 

If your gut tells you it’s a tactic, name it and neutralize it. 

Sometimes you think the deal is done, and then someone new enters the deal for ‘final approval’. You suspect something (we call it “Higher Authority” or the “Nibble” if they ask for something last minute), but you’re not sure. Your gut says this is a tactic. 

You’re probably right. 

Here’s one way to handle it…

Your longtime customer Jenny says you have to meet her new budget manager to get your agreement approved. 

“This is Bruce. We want to give you the business, but you have to lower the price to get his buy-in.”

The expert greets Bruce and asks him what he needs to make a decision. Bruce replies “Lower your price.” 

The expert responds with a prepared response: 

  • “I believe you’re negotiating in good faith, but having you come in now with only one need – ‘Lower price’…this makes me feel like you’re using a ‘good cop-bad cop’ tactic. 
  • “Jenny and I have had many discussions. Can we catch you up on some points before we talk about price?” 

Whether they confess or deny it, you have blocked the good cop/bad cop strategy because:

  • You named it. They have to adopt another approach. 
  • Be polite, but know that you are on moral high ground. 
  • Protest (gently) and take the opportunity to restate your offer (or an alternative).

You cannot be wrong when you tell someone how their behavior makes you feel. When you feel it, name it and neutralize it. Try to get back to having a two-way dialogue. 

 

Silence is a great tactic when combined with active listening.

Your negotiation has reached a moment when there seems to be an impasse. Try staying quiet. A pleasant, unworried and perfectly calm expression while your last offer is considered can be powerful. 

A customer says the following at the last minute: “Thank you for your revised proposal, we like everything about it but need it for 5% less.” 

Expert response: Let there be silence. It may feel uncomfortable but it’s ok to take a few seconds to think and put pressure on them. Then, eventually, if you need to break the silence, ask a question such as “What if that is the best I can do?”

As long as you stick to your offer and stay quiet, you cannot concede. 

  • Encourage the other side to state their objection(s) precisely and simply listen.
  • Let them talk. Take notes, and ask them to clarify. 
  • Make the other side work hard to justify their position (objection) by simply staying silent or using a probing encourager (such as “Tell me more”). 

Use silence and thoughtful probing to break the impasse. The other side may start sweetening the deal to move toward a resolution. It is now your decision whether to move from your last offer if you decide it is worthwhile. 

 

Use time to your advantage. 

Have you ever noticed how many deadlocks (strikes, Congress, bedtime) come down to a flurry of negotiating right before the deadline? There’s a reason why people believe it’s smart to buy cars at the end of the month (or at year-end). They believe that these deals might go away. Now is the time to buy. 

We often react to perceived scarcity and allow the pressure of a deadline to drive bad decisions.   

A new client sends an email stating: “If you cannot meet our conditions by midnight, then we have no choice but to select your competitor.”

Slow down. Nothing about your deal has changed, or needs to change, simply because the hands of the clock change or the calendar flips. The product or service costs nearly the same tomorrow as it does today. Deadlines are usually a power play, pure and simple. 

To fight it:

  • Ask the other side “What’s changing? Why can’t we continue to negotiate?”
  • Use a hypothetical: “If, hypothetically, we decide to continue negotiating, we might be able to enhance our offer.”

On the other hand, most people seem to fall for it. Use it whenever you can. ”This offer is good until Tuesday” works as well as any other tactic. 

 

Negotiation Skills for Winning More Deals, Faster and Getting Better Results

We teach a systematic approach to negotiating based on 4 primary skills – Preparation, Probing, Listening and Proposing. By using these skills in a systematic way, you can negotiate more confidently and minimize your emotional reactions to the other side’s positions, tactics and strategies. 

 

Preparation is the only aspect of a negotiation under your complete control. 

Our Preparation Checklist helps negotiators capture, organize and prioritize the information you gather prior to a negotiation. Your level of effort in preparation directly correlates to your results when the negotiation concludes.

Even with little or no time to formally prepare, the Checklist will help you focus your questions on issues that are relevant to finding a mutually acceptable solution. 

If you want to get paid, use P.A.I.D. to remember these 4 crucial components of every negotiation. 

  • Precedents – Past deals that could affect this deal for both sides. 
  • Alternatives – What options are available from a highest goal down to a walkaway?
  • Interests – Beyond positions, what does each side really need and want?
  • Deadlines – When does a deal have to be done to satisfy each side? 

Additionally, you should prepare strengths and weaknesses for both sides, a list of your needs and wants, a situation summary, information on the other side’s style, and a script for exchanging value in the negotiation. The more you prepare, the more successful you will be. 

 

Probing is a safe harbor when under pressure. 

Ask questions instead of taking positions or making offers too early in a negotiation. The other side might use tactics to make you concede. Rather than reacting to the tactics, probe to find precedents, alternatives, interests, deadlines as well as their goals and priorities. Your objective is to find leverage for your side. 

Ask these questions to do your preparation on the fly. 

  • Precedents – “How did you come to that price? What are you basing that on?”
  • Alternatives – “What options are you considering?”
  • Interests – “What is important to you? What else? What else?”
  • Prioritizing Interests – “Which is most important? Why is that important to you?”
  • Deadlines – “Is there a deadline? When? Why is that deadline important?”

Notice that we are trying to flush out all of the important factors for the other side before we address each. 

Here is a sample exchange: 

What is important to you?  Price

What else is important to you? On time delivery

What else?  A strong warranty

What else? Those are the top 3

Great. Of those top 3, what is most important and why?

…

Now you have a list of the decision-making factors and can address each carefully and strategically, with a sense of how they rank in importance to the other side.

 

Active listening is harder than it looks. 

In a negotiation between two or more parties, everyone involved wants to be heard but the parties often spend too much time talking instead of listening. The Greek philosopher Epictetus stated, “Nature gave man two ears but only one mouth so he might listen twice as often as he speaks.” 

You can increase your active listening skills by connecting with the speaker. 

  • Eliminate distractions. Put the phone away. Find a quiet place to negotiate. 
  • Make a point of being ‘present in the moment’ and consciously focus all of your attention on the speaker. 
  • Encourage the other side to continue speaking. “Tell me more about that.”
  • Take notes. When a great idea comes to you and you don’t want to forget, do not blurt it out, write it down so that you can continue to listen without the distraction of trying to remember.

You should also consider your response before replying. 

  • Listen to hear instead of waiting for your turn to speak. When we listen to reply, we tend to miss critical information.
  • Pause for a moment to check your preparation checklist before responding to an offer or position. Don’t ‘wing it’. Use your preparation to full advantage. 
  • If you are asked a tough question which puts pressure on you, answer their question with a question of your own. “I’m interested in why you asked that question? Help me understand.”

Last, you should confirm what was said and agreed to. 

  • Restate, paraphrase and summarize the agreements at the end of a negotiating session. Focus on creating mutual understanding and a clear path to a full agreement. 
  • Follow up in writing to solidify agreements. Sending a short memo of understanding after a session in a negotiation creates a stronger commitment to those agreements. 
  • Deliver on your commitments. Nothing erodes trust and confidence faster than a missed commitment during a negotiation. 

 

Proposing rules to maximize your wins. 

When it comes to proposing, there are four critical skills to use when coming to a final agreement. It is where the results of your hard work and strategy come to fruition. 

  • Be strategic about the first offer. If you both know the market very well, go first in order to ‘anchor’ the negotiation at the best reasonable first offer you can make. If you get the sense that the other side does not know the market very well, let them go first. You ever know what they will say or share. At best you have an offer better than you expected, at worst you know where they stand and can educate them with precedents on the market. 
  • Aim reasonably high (or low). When you do make an offer, whether it is the first or not, make the best (for you) reasonable offer you can based on precedents and other information you have prepared. Reasonable is key here – if your offer is too high (or low), the other side may elect to move on to other options. 
  • Avoid using (or responding to) ranges. A recruiter asks you for a ‘ballpark figure’ for your salary requirements. Experts never reply with “I’m looking for something between $60 – 70,000.” The only number the recruiter heard was $60,000 and you will probably end up slightly south of that low end of your range. Why do we use ranges? Because we are not confident in our ask. Get rid of that crutch. Ask for $70,000 and let them respond. 
  • Don’t accept the other side’s first offer too quickly. If you immediately accept their first offer, they will feel as if they left money on the table. Even if it is a really fair deal for you, pause at least, and counteroffer if it makes sense. Often the other side will feel better about the deal because they will believe they worked for it. 
  • Don’t settle for ‘splitting the difference.’ It is a lazy way to end a negotiation, and the only benefit is a perceived sense of fairness and getting the deal done quickly. Splitting the difference rarely satisfies each side completely and can become a ritual of haggling to meet in the middle on future deals. Use a ‘nibble’ tactic to get something ‘extra’ so you get the bigger ‘win’. 

By combining negotiation strategies with tactics and skill, you can win more deals while also developing long-term relationships. The approach above has helped organizations maximize their results since 1995 and proven that negotiation is a skill anyone can learn to improve outcomes. 

If you are interested in learning more take a look at our various programs (sales training, negotiation training, influence training), give us a call (410-662-4764), or fill out the form below to schedule a call.  

 

October 2, 2019

Dealing with Difficult Situations: The Bargaining and Negotiation Tactics That Work

Jeff Cochran

0

Sales negotiations are ideally supposed to flow in a mutually beneficial direction. But that’s not always the case. We sometimes run into negotiation counterparts who are downright difficult. In such a challenging negotiation, strong emotions and feelings of desperation may easily set in, increasing the odds of losing the deal.

It is not easy to manage such difficult negotiations, but with the right tactics, you can turn the challenge into an opportunity each time. Here are the tactics to employ if your find yourself in a difficult negotiation situation.

 

Don’t react, stay calm

Being faced with an adversarial or even abusive negotiation counterpart can make you lose your cool. But that will not benefit the negotiation. To keep your emotions in check, start by taking a deep breath.

A deep breath helps you retain your composure by stopping you from plunging into a fight-or-flight response. With your heartbeat and breathing in check, your mind can work optimally to figure out the next smart move.

Even though an unexpected display of anger can frighten some people into making concessions that benefit your interests, this approach can be counterproductive. In most cases, the anger will only convey desperation and not strength on your part. Also, strong emotions tend to cloud your judgment, keeping you from thinking clearly. This could lead you into giving in prematurely.

It helps to retain your composure, take a step back from the hard line, take an objective look at the dispute, and plan your comeback. In all cases, always remain professional as you approach the negotiation.

 

Disarm the other party by acknowledging their points of view

Because everyone wishes to get the advantage in a bargain, the last thing a person will expect is for you to cross over to their side. For a particularly difficult person, this should be one effective way to make them lower their guard.

Start by acknowledging the disagreement as you express the willingness to understand the person’s point of view. Consider acknowledging their position and make it clear that you realize the position is important to them.

Such a concession will go a long way in calming the adversarial negotiator down. What this does is show the person that you are willing to hear them out – people like to be heard and their points recognized.

Take a moment to play along. It doesn’t mean you are drifting away from your standpoint, it’s just a necessary break to create a conducive atmosphere where everyone can be adequately heard.

Encourage the person to talk by asking them solicitous, open-ended questions that help clarify the nature of their hardline position. You’ll notice that this also helps you understand the interests behind the other party’s position. Such understanding also normally helps open your eyes to vistas of alternative ways to resolve the sticking point.

With this, the atmosphere should slowly change from one of conflict into one of collaboration. Ultimately, you’ll be able to respond more accurately to the actual points of concern, rather than just offering general responses to things that you have assumed in your head. Done properly, this tactic should indicate genuine interest to your negotiation counterpart and completely shift the nature of the conversation for the better.

 

Transfer the focus to the less contentious aspects of discussion

Once you have sufficiently understood the nature of the adversarial situation, it is sometimes a good idea to shift attention away from the most contentious item of discussion. This is basically a tactical move to diffuse the tension before you can return to the topic from a less contentious angle.

Reframe the dialog around some items of collaboration. What are the shared interests that you both have? What constitutes the foundation of your working together? Is there a way this deal can help the customer save face? How getting this deal done will be a win for them?

Once you find answers to these questions in your head, it should be easier to remind the other party as to why they should see the deal through. Make them sober up and climb down from their high ground. Make them see why you are on the negotiation table in the first place and it will be easier to get them to say “yes”.

Pointing out the shared interests, helping the customer see why they need the services or product under discussion can be a great way to lead them into making a concession. Then, you can reintroduce the more difficult issue(s) in a more relaxed way once the tension has eased down.

 

Wrap up

As a salesperson, you will sometimes have to deal with a difficult customer. Sometimes the bargaining session may shift in the other party’s direction, and without good preparation, this can easily throw you off balance. However, arming yourself with these tactics should ensure that you survive (and increase your chances of winning) just about any sales situation.

September 26, 2019

Key Challenges for Effective Procurement Negotiation

Andres Lares

0

The art of negotiation is not rocket science, but it’s not a breeze either—at least not with every supplier you’ll sit across. Some are sharks and the only secret to winning against them is having negotiation skills twice as good as the strongest shark you’ll ever encounter.

Mastering procurement negotiation might be a process but you’ve probably heard the saying ‘train hard, fight easy’.

Good thing is, it’s not always like that… The best-case scenario for a procurement negotiation is concluding with two smiles—yours and the supplier’s, having sealed a deal that favors both parties.

Knowing how to negotiate when decks are stacked against you and when factors are constant, is important. For an effective procurement negotiation, avoid these pitfalls:

 

1. Rushing

You need enough time to negotiate effectively. Sealing a deal in a hurry is a cardinal sin in procurement. Analyze the product and its value, hear the supplier out, make an offer and justify it to the supplier’s satisfaction. Never rush to buy or to seal a deal.

 

2. Lack of information and proper planning

You win half the battle in the preparation stage. Conduct thorough background research on the product and the supplier, have all important details at your fingertips including the supplier’s operational facilities, company history, management profile, their major clients, development plans, and history of performance; and prepare answers for all hard questions the supplier might have.

Suppliers do their homework. Don’t be caught flatfooted. Like Abraham Lincoln, if you have eight hours to chop down a tree, spend six sharpening your ax.

 

3. Closed mind

Remembering both of you want a favorable deal is key in effective procurement negotiation. Flexibility begets the same. Have your non-negotiable demands but don’t be so rigid with other things that you’re only looking at the extra dollar a product will cost, without paying attention to any unique properties or value the product might have or a special deal that’s tied to it. Listen, think, and ask questions.

 

4. Poor communication

Communication is a three-step process: encoding, decoding, reply. You speak, supplier understands, and then responds, and the wheel keeps rolling. If either of you does not listen, or understand, negotiation will stall.

You might have little to no control over how the supplier communicates, but be clear on your end to save the situation.

 

5. Overthinking the power dynamics

As a rule of thumb, never be in awe of the supplier, however big they are. You have what they want however small it is. You might not even know what’s important to them—it might NOT be money. If they didn’t want to have you on their list of clients, they would not be at the negotiating table with you.

Be well versed with the product, understand the market, and stick to your non-negotiable demands, your company’s bottom line, and the walk-away figure. Ask questions too and shoot for the best deal. If the offer on the table doesn’t work for you, it is what it is. Move on.

 

6. Using short-term negotiation tactics with long-term suppliers

It is one thing to want a product real fast and cheap, and another to want the same—great—product for a long-term supply, at the same price. Giving a supplier a thin margin when you have to, is okay, but if you’re looking to establish a cordial long-term relationship, make better offers. Your supplier will stay in business and you’ll be on the priority list.

 

Bottom line

A procurement negotiation is like a tug of war. The savvy supplier is pulling from one end, to squeeze the best deal out of you, and you are on the other side pulling harder to save your company every dollar possible. Avoid these pitfalls and you’ll not be the one crossing the line in defeat.

 

September 18, 2019

Top 5 Essential Negotiation Skills for Salespeople

Jeff Cochran

0

Successful sales are what makes businesses grow. But every so often, a customer will want to discuss the details of your contract with them before signing. Regardless of how well the sales process appears to have gone, your one-one-one interaction with the customer can always make or break the deal.

This is where effective negotiation skills come in. For a deal to survive past the negotiation table, certain skills come handy. So, here are five negotiation sills that a salesperson must possess to succeed in closing deals with customers.

 

Active listening

People want to feel that your product or service is going to solve their problem or satisfy their need. Oftentimes, the prospect wants to see how this is going to happen, and will ask questions that directly link your solution to their need(s).

It is only through active listening that you’ll be able to understand what the customer really wants. Don’t just fix your mind on closing the sale, pay attention to the customer – listen to both their spoken and unspoken messages and provide them with the answers.

When the customer is speaking, allow them to finish. Then, take a brief moment to evaluate the response in your head before you speak it out. The pause not only lets you refine your response but also shows the customer that you truly are thoughtful and interested in what they are saying.

It helps to speak slowly in a composed manner, articulating your words clearly to get the message across.

Whether it’s a face to face or phone conversation, you should be able to get the non-verbal cues that tell you more than the person says. Pay attention to these emotions and respond to them.

This way, you will create an atmosphere of trust and easily build a rapport with your leads. You’ll overcome the assumption that you are simply after the person’s money, and create the indication that you care for their needs.

Active listening enables you to properly address your prospect’s questions and match their focus. This makes it much easier to close sales.

 

Quick decision making

Negotiation is always about give and take. A customer will come with a set of demands, or the acceptable minimums. And you need to know just what concessions you can make and which ones you cannot take without hurting your business.

Since you won’t always know all the angles to expect before reaching the negotiation table, you should be able to make a proper decision in the heat of the moment.

It could be a huge discount that the customer is proposing, or even some extra support. A prospect could ask for premium features or even a bigger package. In any case, being able to evaluate the proposition and making up your mind quickly will be instrumental in letting you close sales before the prospect withdraws their business.

 

Knowledge of the product or service

Persuasion is inherent to any sales negotiation. Unless you are truly knowledgeable about the brand, product or service you are representing, you can easily lose a lead.

The customer simply isn’t looking to hear some unfounded justifications supporting the deal. Rather, they want to know how they’re going to benefit from buying what you are offering. This way, knowledge of the product is an essential sales skill. Demonstrate clear understanding of the products’ features so you can accurately present their benefits to the customer – that’s what persuades the customer to buy.

Also, even though most customers are likely to ask the same questions, there are cases where a customer will ask something particularly new or different. As long as you know your product in and out, you should have no problem navigating your way through any question that arises.

 

Assertiveness

Clear confidence in your brand can go a long way in assuring the potential customer about the value of your solution.

Customers generally respond well to enthusiastic reps who are passionate about their offerings, especially when they’re eager to clearly articulate the benefits.

What this means is, be willing and able to quantify the value of your product or service and share it with the prospect. A prospective client will be much likely willing to pay what a solution is worth if they clearly understand the value of that solution.

It is your job as a sales rep to establish that value and show confidence in your solution in terms of how it will benefit the customer. You will need to be assertive to be able to instil that confidence in the customer and give them a reason to buy.

 

Eloquence

You could have all the great ideas about your solution, but unless you can articulate it, you’ll have difficulty communicating it to the customer.

Though they usually need the solution, most prospects are often undecided whether or not to buy (from you). As a salesperson, it is your role to drive the prospect from their state of indecision to decision and be able to close the sale. Sometimes all you have is only few minutes with the customer. This is where some eloquence, coupled with sufficient knowledge of the product will guarantee a successful pitch.

Use a clear voice to explain the product detail by detail, enunciating all the useful features and linking them to the needs of the customer.  Done correctly, closing a sale will be a near guarantee.

 

Bottom line

Sales negotiations can feel intimidating to salespeople as no one wants to lose a well-qualified prospect. Nonetheless, while every negotiation can go in any number of directions, sales reps with these negotiation skills will be well-equipped to roll with the punches.

July 24, 2019

User’s Guide to Being the Best Negotiator

Jeff Cochran

0

User Guide NegotiationNegotiations are important for any aspect of life. Sometimes you have to negotiate business deals, what’s for dinner at home, or a sale for a product. Being such a large part of life, it’s important to understand what negotiations are and how to do them well.

 

Negotiations

A negotiation is an agreement among more than one party in regards to a specific topic. People use negotiation in business transactions to find a price or terms to settle on, with family to decide what’s for dinner or how to resolve an issue, or even in sales to find an agreeable price for a product or a home.

Almost everyone uses negotiations on a daily basis, whether at work or at home, and should be able to negotiate well. How do you know if you’re negotiating well? Based on how many time you negotiate and get what you want from it determines whether you negotiate well.

 

Negotiating With Family

Negotiations with family are more difficult than any business negotiations you could face. It’s much easier to stand firm in a business negotiation than it is with a loved one. How do you negotiate with family? Understanding these difficulties can help:

  • Expectations are exponentially higher
  • Logic is more difficult to tolerate
  • Quicker to react
  • More focused on yourself
  • Get ahead of yourself

Having these concerns in mind can make negotiations easier. You can address these issues in advance and understand what your loved one is thinking or feeling while you’re trying to negotiate.

Focusing on expectations can be difficult. It’s important to focus on the things you already know about them and work from there to discuss the problem and reach an understanding and agreement. From there, you can move forward with negotiations to find a solution to the problem.

Working with logic from a loved one is harder than working with logic from a coworker. It’s best to try avoiding logic in any negotiations with a loved one. Hearing logic from someone you care for is usually harder to handle than having them yell at you. It’s important to try focusing on empathy and labels instead of logic when trying to provide answers and explanations.

Negotiating with loved ones raises our reaction time. It’s easier to be sensitive to tone and words from a loved one than a coworker. Focus on understanding that can help avoid an argument during a negotiation. It’s important not to assume certain meanings based on words or tones when your loved one is speaking. Remembering to keep your calm can help you stay focused on the negotiation at hand.

Focusing on yourself during a negotiation with a loved one is similar to playing cards: focusing on your hand causes you to miss what someone else might play. It’s important to pay attention to what your loved one is telling you. Don’t let your own thoughts and feelings keep you from understanding their needs.

Getting ahead of yourself can cause issues for negotiating later. If you’re already set that an outcome will occur or you’ve stopped trying to resolve the outcome, you’re breaking the connection you gained from communication and understanding. You’ll need to mend this connection before you can move forward in negotiating to resolve the issue.

 

Buyer Negotiations

As a buyer, you strive to purchase products at the best prices available. Sometimes this can mean having special negotiation skills to get a top price for the product or service. These skills can help you negotiate top prices:

  • Anchoring
  • Whack back
  • Sticker shock
  • Cherry picking
  • Pencil sharpening
  • Going, going, gone

Anchoring provides a price range for negotiation. For example, telling the seller you want to spend no more than $100,000 for a product or service caps the negotiations at that price. The seller now understands he or she can’t go higher than this price or they’ll lose the sale. It’s an important tactic to keep negotiations in a price range you’re comfortable with.

The whack back is a tactic used by many buyers to push the seller down. It’s a simple “your price is too high” comment to try forcing the seller to lower the price. Most sellers will ask why and try to refute your reasons.

Faking, or seriously having, sticker shock is another buyer tactic. This shock over the price is a hard hit to the seller to make them question their pricing. They might ask why it seems high and try to refute your reasons to keep the price at their level.

Cherry picking is a buyer tactic that can offend the seller. It’s the buyer’s way of getting less product at the same bulk cost. For example, if they ordered 50 shirts and the price came to $2.00 per shirt because of the bulk order, they might try to take 20 shirts at the same bulk price, still paying $2.00 per shirt.

Sometimes negotiators use a tactic called pencil sharpening to try forcing the seller to drop the price by using phrases such as “You need to do better” or “We need this for less.” It’s a way to make the seller feel as though they have no choice but to lower the cost or ask the buyer where the price should be in an attempt to keep them happy and sell.

A final, and harsh, negotiating tactic is the going, going, gone test. It’s the buyer’s way of pushing the seller into a corner with a time crunch. In this tactic, the buyer informs the seller they will be going with a competitor for the product or service if the seller doesn’t agree with the buyer’s price by a specific time and/or day.

People use these tactics in price negotiations on a regular basis and they can sometimes make them tougher to agree on.

 

Business Negotiations

Negotiating in business can mean a lot of things. Maybe you’re negotiating a deal or a job offer. The tougher of the two is generally a job offer and can mean the difference between having the job you deserve and having the job you took. There are ten main rules to follow when negotiating for a job:

  • Get it in writing
  • Keep the door open
  • Information is power
  • Be positive
  • Don’t make decisions
  • Have options
  • Have reasons for everything
  • Be motivated by more than money
  • Understand their values
  • Be winnable

Rule number one says everything should be in writing. In today’s society, people are continuously changing their minds or forgetting what they said. When negotiating for a job, that’s a bad thing. It’s imperative to write everything down as you go. This is a promise to remember every detail in case you need to reference it later.

The second rule is to keep the door open. This one isn’t quite as self-explanatory. It means to hold on to your negotiation power. Don’t give up your power to negotiate the best terms until you’re 100% ready to make a final decision.

Information is the key to the third rule. Don’t give up too much information until you’re ready to agree. If you’ve negotiated every aspect of the job and decided this is what you want and you’re ready to say yes, then go ahead and provide all the information they want.

Positivity makes rule four an important one. Being positive is your most valuable asset. Never seem like you’re getting angry or losing your temper. It’s important to keep a level head and stay positive in order to have the best negotiations. If the person you’re working with feels you’re losing your positive attitude, he or she may feel they’re winning and you’ll settle for whatever they want to give you.

Being the decision maker is what brings rule five into play. It’s important not to be the decision maker in a job negotiation. Be sure to confirm all the details and make it seem like they have the final say in your decision to accept the job. It’s also an option to confirm details and compare this with other offers before making a choice.

Options are important for job negotiations. If you have more than one job offer, you can play this to your advantage to negotiate a better offer for the job you truly want.

Options are also a good way to have reasons for everything, as rule seven tells you. It’s important to have a reason to back up every answer you provide. Without reasons, they believe they can force you into the job terms they want instead of the ones you want.

Money isn’t everything. While it helps to have money, that shouldn’t be your primary focus in choosing a job. Focus on the important benefits or the work environment and worry about the lowest amount of money you’ll settle for if everything else fits.

The values of the company can help you negotiate a better deal. Understanding what they strive for can give you a few selling points to negotiate yourself better terms if you can prove you have those values as well.

Make them want to win you over. Being winnable is about more than just winning the negotiation. It’s always a great feeling when the company feels they have to win you from the competition and they try to do just that.

 

Conclusion

Still unsure about your negotiation skills? Shapiro Negotiations has a team of experts waiting to help. Their knowledge and training allows them to help you become the best negotiator you can be. Contact them now for more information.

 

May 29, 2019

Why Empathy Is Necessary in Negotiation

Jeff Cochran

0

Empathy is often both the most misunderstood, and least utilized tactic when it comes to business negotiations. However, successful negotiators who understand empathy and how it relates to negotiation, and can put it into practice, can experience a significant difference in their sales. Read on to find out more about empathy and how you can use it to your benefit in your negotiation tactics.

 

What Is Empathy?

Often confused or lumped in together with sympathy, empathy is all about relating to how others feel. Most of us have at one time sent a sympathy card to express feeling sorry for another’s misfortune or loss. Sympathy is what we say we feel for another person’s situation, and while empathy is similar, it goes a little deeper than that.

When you feel and express empathy, it means you truly consider what the other person is going through and understand the range of emotions that they feel as a result. Being empathetic involves being more compassionate, listening more, and imagining yourself “walking around in someone else’s shoes.” It’s often easy to tell the difference between sympathy and empathy because true empathy feels more genuine. It is felt on a deeper emotional level and helps to build trust in relationships.

 

Empathy in Negotiation

In any negotiation, the goal is a compromise or agreement between two parties. It can be very intimidating, especially if dealing with contentious topics. Arguments, discussion, and bargaining can all be part of the process of negotiating. You may feel inclined to rush through a negotiation quickly just to get it over with. But those who are most successful in negotiations know how to listen to the other party so as to understand their side of the negotiation and what their wants and needs are. Taking the time to listen and understand can defuse the tension, and lead to more satisfying results for both sides.

Negotiation usually involves some type of relationship building, and the process of listening and learning about the other party’s views. Empathy is a natural fit for this process, and when utilized can lead to much greater success in getting the other party to agree to your terms and compromises. Try to understand the other point of view by listening more. Vocalize your understanding of their feelings to let them know that you relate to their ideas or needs.

 

How to Be More Empathetic

Using and expressing empathy isn’t always easy, and it’s more than just “being nice” to others. In fact, to be empathetic, you don’t even have to like the other person or their viewpoints, or agree with them. You just need to genuinely understand their side of the negotiation. Some people are naturally better at using empathy, but it is a skill that can be learned, practiced, and honed over time. Here are some steps you can take to practice more empathy in any relationship:

1. Identify your own emotions. Make a mental note of your own feelings whenever you feel happy, sad, angry, or excited. Notice your facial expressions and body language and how they correlate to your inner feelings. When you understand and recognize your own emotions, you’ll be able to identify them in others more easily.

2.Watch for body language. Nonverbal cues include tone of voice, body language, and other hints. These hints can often give more information about emotions than what the other person is saying, and sometimes even contradict the spoken words to reveal true feelings.

3. Listen intently. Ask lots of insightful, open-ended questions of your opponent, but sit back and let them speak. Be open and show genuine interest in their answers.

4.Find common ground. Often called “building a bridge,” this involves discovering shared interests and ideas. Find out especially if there are any shared goals in your negotiation resolution. This can lead to compromise quickly and efficiently.

5. Do not express disagreement, judgment, or get defensive. Even if you disagree on the inside, try to remain as neutral as possible and continue to listen. Judging or attacking ideas can lead to the other person shutting down and delaying resolution.

6. Show you are listening. Encourage the other person to share, smile at them, and use your own body language to express interest, instead of appearing closed off. Relax, don’t cross your arms, and watch your tone of voice to show that you are open.

Practicing these steps in conversations, and in negotiations will demonstrate to the other party that you have empathy. You will find that others will then be able to trust you more easily and open up to you more.

 

Why Empathy Is Necessary

Without empathy in the negotiation process, it can be easy to come to an impasse. Those on either side of the table can just dig in their heels and be less willing to budge. However, when empathy is utilized, the opposing side feels understood, and that their feelings are heard. They may be more willing to understand your side as well, and it may be easier to reach an agreement.

Some people may fear that they can be too empathetic, taking it too far and getting so overwhelmed by the other person’s feelings that they forget their own needs. This can be tricky, but take a step back and remind yourself of your goals in negotiating. Use the insights you’ve gained from listening to the other person and come back to the table ready to reach an agreement. When you understand the other person’s needs and motivations, you can use this information to suggest bargains that will appeal to what they want, ultimately leading you to negotiating success.

Negotiation is an important business skill to master, and practicing empathy can make you a better negotiator. If you want to learn more about negotiation in general and find resources for negotiation training, contact Shapiro Negotiations. We have the necessary experience and tools to help you improve your negotiation skills or train your team through classroom training, consulting, keynote speeches, and virtual options.

 

April 17, 2019

How to Use Any Negotiation Location to Your Advantage

Jeff Cochran

0

When it comes to negotiating, everyone wants a leg up on the competition. How can we get the best deal for ourselves? There is an abundance of books on achieving an advantage through every conceivable angle in bargaining. One that gets a fair amount of scrutiny is location.

While most experts agree that location can affect the proceedings, not everyone agrees on just how location affects things and what sort of location is best. It seems that different sites offer different advantages and disadvantages. The one you choose may depend on your own skill set.

 

Negotiating at Their Place

While your first instinct might be to avoid playing an away game, there are several reasons why it can be to your advantage. If you feel comfortable with the idea, taking a trip to the other party’s home base can provide you with a few subjective as well as objective advantages.

• Confidence. A willingness to visit the other side’s turf can be a keen demonstration of confidence. Confidence is always a good thing to demonstrate during negotiations and can elicit concessions that otherwise would not have been forthcoming.

• Opportunity. Going to the other side’s place is a chance to demonstrate respect for them. A good negotiation is usually more of a partnership than a battle, and visiting them can set the right tone to achieve that partnership. It also tells the other side that you don’t fear them either.

• Comfort Zone. By allowing the other party to remain in his or her comfort zone, you might make them more amenable to a partnership-based negotiation rather than a more hostile encounter. You may increase the chance of cooperation rather than competition.

• Intelligence gathering. By visiting their site, you afford yourself the opportunity to learn more about them. You might discover what drives them, or where they are weak. Knowledge like that can be an advantage in a critical moment.

• Information. When you go to their place, you deprive them of the excuse that they don’t have certain information on hand. Their files are right there, ready for perusal. It also gives you that same excuse you have just taken away from them.

 

Negotiating on Home Turf

If negotiating on the road can be advantageous, then for the same reasons negotiating at home can give the other party those same advantages. Nevertheless, there are ways to make a home field negotiation work for you.

• Impress. When they come to your home turf, you can put on a display of your strengths. You can show your prowess and influence the way they see you. If they come to the bargaining table properly impressed, you may have an easier time getting concessions from them.

• The Ego Wall. In your office, you can build your own personal Hall of Fame. You can fill it with awards and newspaper clippings and anything else that portrays you in the light you want to convey.

 

Neutral Location Negotiations

A neutral site is often seen as a fair way for both parties to meet in the middle. No one will have the benefit or detriment of a meeting in their own territory. However, even in neutral space, the playing field may not be entirely level.

The site chosen is still likely to be in the orbit of one of the two parties. It can still be a way for one party to be ostentatious about how they do things, or miserly if that is the tactic they have chosen. They can choose a noisy site where communication is difficult, or a place where business negotiations are prohibited. Every choice sends a message of some sort.

 

A Few More Tips for That Extra Advantage

If you can choose the site of the negotiation, you may be able to manipulate things to your advantage. There are a few psychological tricks which studies indicate can be helpful for you at the bargaining table.

• A hot drink. Studies indicate that the temperature of an object we hold in our hand affects the way we perceive the world and other people in it. According to research, when we hold a warm object in our hands, we tend to have “warmer” thoughts about other people. Likewise, a cold object makes us more negative about those around us. If your negotiating partner views you more warmly, you may be able to get better concessions from him or her. The next time you negotiate, you may want to offer the other party a warm beverage.

• A soft surface. Psychologists believe that in our childhood we develop associations with the hardness and softness of objects, and with their smoothness and roughness. Smooth and soft objects are associated with comfort and security, while rough and hard objects the opposite. If you want the other party to drop his or her guard and relax during the negotiations, you might consider providing them with a chair with a soft cushion. Make sure the negotiating table is smooth to the touch. You can combine this with a warm drink for extra effect.

• Seating arrangements. The seating arrangements can have a subtle yet significant effect on how the negotiations turn out. According to some experts, you should arrange the seats based on your strategy. If you plan on establishing a warm rapport with the other party and have a friendly negotiation, it might be better to put the seats closer together. On the other hand, if you want to establish a logical, formal negotiation, it might be better to separate the chairs more. More distance allows for more dispassion and can avoid emotional reactions to objective information.

• The environment. Contrary to what some suppose, an active background with ambient noise and the activity of other people can promote good negotiations. Background activity keeps us alert and aware of the surroundings, which aids in the negotiation process. If your negotiations seem to have reached a stalemate, changing the location might be an emotional cue that gets things going again. If you choose a vibrant background, this can aid your cause even more.

 

Sometimes, even a small advantage can make a big difference. Negotiators are always on the lookout for that small aspect that makes them more competitive as negotiators. Choosing the right location can give you that edge, but be sure you know yourself and your opposing party. Each location comes with drawbacks along with advantages.

April 3, 2019

15 Factors to Consider Before You Start Negotiating

Andres Lares

0

Negotiating is a part of life. It doesn’t always have to involve money, but sometimes another party has what we want and we want to make a deal. Naturally, we want to make the best deal for ourselves that we can.

There are important factors to consider before you enter into negotiations with another party. Preparation is essential and can make the difference between coming out of a deal with excellent terms or leaving the negotiating table with no deal at all. This preparation involves knowing yourself and your own goals, knowing the other party and understanding the field in which you are negotiating.

Before you sit at the negotiator’s table, consider these factors and what they mean for you when it comes time to trying to convince the other party:

 

1. Have a goal. The goal of a negotiation is not merely to negotiate. Negotiation is a means to an end. What is that end for you? What is it you want? If you go into a negotiation without a firm sense of what it is you are after, you are unlikely to come out satisfied. Always clearly define your ideal outcome before you start to negotiate.

 

2. Form a plan. A plan is not just imagining how you want the process to go. A plan is about contingencies. You must picture the hypothetical scenarios, to expect the unexpected and figure out how best to react to each scenario. If you are prepared for all the likely responses to your entreaties, you can transition smoothly and confidently into a new tactic because you already prepared for it beforehand.

 

3. Know your disadvantages. You need to be honest with yourself. In what aspects of the talks is your position weak? If you are asking for a pay raise, for example, you may be hampered by the fact that you use a lot of sick days. Anticipating possible objections beforehand allows you to counter with your strengths at the right time.

 

4. Know what you are willing to part with. In a negotiation, each party sacrifices something in exchange for getting something else that they want. You have a goal, you know what you want to achieve with the bargaining. But do you know what you are willing to give up? Some things are off limits; have a firm idea of what this means for you before negotiating.

 

5. Know what the other party wants. You have a goal, but so does the other party. They want something if they are going to give up something else. This ties in with the previous point. What is the other party going to ask for, and are you willing to give that up? If so, under what conditions?

 

6. Know when to say when. Sometimes you must walk away. If you go to the negotiator’s table unwilling to just say, “No thank you,” you put yourself at a disadvantage. Being willing to walk away gives you a certain power in the proceedings, and the other person will sense that. After you walk away, you may find that they reopen the negotiations with you on terms that are more favorable to you.

 

7. Know your limits. How experienced are you as a negotiator? How experienced is the other party? Is it reasonable to think you will be able to walk in and smooth-talk the other side until they give you what you ask for? The more practice you get as a negotiator, the better idea you will have of what you can achieve and how far the other side is willing to bend to your ideas.

 

8. Gather background information. Don’t just study the other party. Learn about the field you are negotiating in. What are the typical salaries? What are the trends? What is hot and what is on its way out? No matter what it is that you want, external factors can play a decisive role in the outcome of any bargaining talks. Know which way the wind is blowing before you even set your goals for the process.

Preparing yourself along these lines will set you up for a strong negotiation. However, you still have to do the actual bargaining before you can achieve your goal. Even the best preparation is no cure for weak technique. After you have prepared, make sure you put your best foot forward when the time comes to go after what you seek.

 

9. Confidence. Confidence at the negotiating table gives you more bargaining power. If the other side senses hesitancy or uncertainty, they will become emboldened and demand more.

 

10. Self-Interest. There is nothing wrong with looking out for yourself. The other party is going to take care of their own interests. You need to take care of yours.

 

11. Objectivity. Don’t be carried along by undue optimism nor held back by pessimism. Make a realistic assessment of the situation before you start, and revisit your assessment at key points during the process.

 

12. Creativity. Price is not the only aspect of a negotiation. Is there something else you would be satisfied with if the other party cannot agree to a price? Are there other concessions you are willing to make if the other side asks for too much?

Finally, after you prepare yourself beforehand and enter the process with good technique, there are three maxims to keep in mind. These ideas can help put everything into perspective.

 

13. Everything is negotiable. It all depends on the price.

 

14. No one is going to give you their last dollar. If they are at the negotiating table, it’s because they are willing to bargain. Don’t let them tell you that they are down to their last dollar.

 

15. Ask for more to get more. The first step to getting more for yourself is to ask for it.

Negotiation is a delicate process. It is part willpower and part social agility. There are many factors to consider and if you come ill-prepared you are likely to be disappointed with the result. The more important the result of a negotiation is to you, the more time you should spend preparing for the process. It’s about getting the best deal for yourself that you can, and that means adequate preparation.

February 20, 2019

What Is BATNA?

Jeff Cochran

0

Sometimes, the worst scenario occurs: a negotiation breaks down and an agreement may fall apart between the parties involved. When all else fails, having a prepared BATNA is essential in keeping the negotiation from shutting down and a last resort at resolving conflict. If a salesperson is careful enough, they can still have control of the deal.

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.”

 

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.

 

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 of a list of everything you would do to meet a solution with the negotiating partner. Then, pick the lowest option that is only better than not working with the partner at all. 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.

 

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 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.

 

Improve Your Negotiation Skills

Despite the importance of having a best alternative to your negotiating agreement ready for every negotiation, it is always best to avoid that situation in the first place. Shapiro Negotiations’ training course can prepare you to become a better negotiator. The course is available in different methods, from classroom and virtual training, to keynotes and consulting, and will bring you benefits such as developing better business partnerships and increasing confidence and results in negotiations. Contact us for more information and improve your negotiation skills today.

December 4, 2018

What Is ZOPA Negotiation?

Chip Tames

0

A key element to mastering the art of negotiation is knowing the value of a deal and the limits of your interests. Going into an agreement, you should know how much you’re willing to sell a product for and the optimal terms that will benefit you or your company the most.

Negotiation science has developed several terms that define key concepts in determining the worth of the agreement and the ability of a negotiator to walk away from the table satisfied. One of these tools is known as the zone of possible agreement, or ZOPA. These negotiations are critical to the practice of negotiation, because they express the financial range in which the terms of an agreement can be reached.

 

The Definition of ZOPA Negotiation

ZOPA negotiation is concerned with the range in which deals can be made so both negotiating parties can leave the agreement satisfied. ZOPA is also referred to as the “bargaining range.”

For example, imagine you are selling your used car. You purchased your car for $25,000. You hope to sell your car for $18,000 but will go as low as $15,000. A buyer contacts you and explains that they have a budget of $17,000 to purchase a new car. The ZOPA would be between $15,000 and $17,000, as this range is above the seller’s lowest selling price and below the buyer’s highest purchasing price. Both parties will leave the deal satisfied if the car is sold within this range.

 

ZOPA Versus BATNA and Reservation Price

ZOPA can be easily confused with two other terms that describe the possible outcomes of a negotiation: BATNA and reservation price.

A reservation price is the lowest possible price a negotiator would feel comfortable selling goods and services for. It can also be the highest possible price a buyer would feel comfortable paying for a product or service. The reservation price is also known as the “walk away” point and is always expressed by a number. In the same example, if you are selling your car for $18,000 and you are willing to sell it for as low as $15,000, your reservation price would be $15,000. It is unlikely that you will sell your car to a buyer below that amount.

BATNA stands for the “best alternative to a negotiated agreement.” Unlike the reservation price, it is not expressed as a number but rather a scenario in which you settle for a “plan B.” Again, imagine that you are selling your car for $18,000, but will go as low as $15,000. Your younger sister has recently gotten her driver’s license and your parents are looking for a cheap used car to give her for her birthday.

Your parents tell you if you are unable to find a buyer, they could give you $10,000 for your car – lower than your reservation price and much lower than your selling price. If you are unable to find a buyer, your parents become your BATNA.

ZOPA is a different concept entirely. It explains the financial range at which an agreement can be met, and both parties can leave happy, neither a worst-case scenario nor absolute lowest selling point. ZOPA can work in tandem with these concepts, however. The reservation point can be the low or high end of the ZOPA range and can be used when determining if a BATNA is the best option to pursue.

 

Why Are ZOPA Negotiations Important?

ZOPA negotiations are not always as simple as the used car example. When entering a business negotiation, the reservation price of the opposite party is not always explicitly stated or shared beforehand.

A negotiator should always enter a deal knowing their own reservation price and the BATNA. That way, when a negotiator learns the reservation price of the opposite party, they can quickly calculate the ZOPA. From there, the negotiator can begin to sketch out the preliminary terms of the agreement and use collaborative techniques to close a deal.

However, it is possible that no ZOPA is present. For example, a negotiator can enter an agreement with a reservation price for selling their product is $15,000. During the negotiation, the negotiator can discover that the reservation price at which the opposite party would feel comfortable purchasing the product is only $10,000.

From there, the negotiator can try to negotiate with the opposite party to raise the price limit to $15,000. The opposite party will attempt to persuade the negotiator to drop the price to $10,000. Both parties are attempting to create a ZOPA, so they can reach a satisfactory negotiation.

ZOPA, BATNA, and reservation prices are all key concepts to mastering the art of negotiation. To hone these skills, a novice negotiator must familiarize him or herself with the terminology and best practices necessary to effectively close major deals.

 

To learn more about this practice, contact Shapiro Negotiations today to enroll in our negotiations training program.