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Negotiation Skills – 2nd Session

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Business Negotiations 2: Preparation

2.1 Preparation

This section introduces the concept of uncertainty – which creates

the opening dilemma, the importance of preparation, and the need

to be aware of the prevailing market conditions.

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Negotiating Dilemmas

In negotiating, we don’t know what the other side will accept, and in

some cases, we don’t even know our interests properly. This

creates the following dilemmas:

When and how to open.

How far to move and when.

How long to hang on.

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Doing your Research

Preparation involves information gathering.

Know the market value of the deal.

Your information should be as good, if not better than the other side.

Don’t assume that the other side has this information.

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Question 4

You are about to meet with a client who places monthly orders with

your organisation. You have just become aware that one of your

leading competitors has launched a 25% across the board discount

as a special promotion to attract new business. Would this

information fundamentally change your approach at the meeting?

a) Yes

b) No

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Solution

Option B is correct. It is not in your interest to furnish the buyer with

information about the competitors discounts. You should not assume

that the buyer has the same information as you – they may not be

aware of this promotion.

Even if they are, they may have their own reasons for not changing

supplier. However, if the buyer raises your competitors promotion as

an issue, your should have prepared a contingency position.

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Preparing for the Negotiation

2.2 Knowing the Marketplace

This section deals with gaining commercial intelligence about your

leading competitors, and researching both the organisation and the

individual that you’ll be negotiating with.

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Preparing for the Negotiation

Commercial Intelligence should be gathered from as many sources

as possible.

Research can turn up information that can fundamentally change a

negotiating position.

Organizational and personal factors.

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Question 5

You are preparing to negotiate the sale and support contract for

some high value capital equipment. Which of the following is the

single most important factor to determine at the outset?

a) The other side’s negotiating style.

b) The other side’s credit rating.

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Solution

Option B is correct. Before committing you should establish that the

other side is in a position to pay and that their credit history is

satisfactory.

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Preparing for the Negotiation

Preparation is the most important stage of negotiation.

Too often, people go badly prepared and end up giving more

concessions.

Ask questions like:

What are my objectives?

What does the other side want?

What information is important?

More time spent on planning and preparation is more beneficial in

getting the outcome.

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Preparing for the Negotiation

Assessing your Objectives What exactly do I wish to achieve from this negotiation?

Which of my following objectives:

a) Must I achieve?

b) Do I intend to achieve?

c) Would I like to achieve?

What options or alterations would be acceptable to me?

What are the other sides’ objectives?

How does the other side see the negotiation?

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Preparing for the Negotiation

Information

Information is power.

In early phases, both sides spend time finding out more information.

What information do I have that the other side also has?

What information do I have that the other side does not have?

What information do I need to have before I negotiate?

What information do they need to have before they negotiate?

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Preparing the Negotiation

Concessions

In most negotiations have to be worked out where concessions are

given.

This is the area where the profitability of the outcome is decided.

Concessions have two elements: cost and value Concede on issues which have little cost to you, but more value to

the other.

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Preparing Concessions Determine a range of acceptable agreement terms – from least to

most desirable – for each of your objectives

List and then rank the concessions you're willing to make, based on

the ranges you identified

High point

Low point

Walk away point

Rank the concessions based on the objectives

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Preparing the Negotiation

Like, Intend and Must Positions

The Best deal, like The Acceptable deal, intend The Worst deal, must

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The Power Dimension The more sources from which you can obtain what you want, the

stronger your position; and fewer such options you have, the

weaker your position.

Most sellers are overly concerned with the power of the buyers and

the extent of competition.

Get the power dimension to work for you.

It is important that you feel confident while negotiating. This

confidence comes from power.

Power is not absolute. The power balance moves with time as

negotiation progresses.

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The Power Dimension

The critical question is not who is the buyer? And who is the seller?

– But who can get the power dimension to work for them.

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Key Points

Altering the other side’s view of the power relationship can

strengthen your position.

It is not an article of faith that the buyer holds the stronger

negotiating position.

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Question 6

When you turn up for a sales appointment you recognize one of

your leading competitors in the reception area. Would this lead you

to lower your expectations of the deal that you can secure?

a) Yes

b) No

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Solution

Option B is correct. Your preparation should make you confident

about the market value of your goods and services.

Would you really expect to be the only supplier in the frame? The

bottom line is that there is a deal to be done – be confident and

make sure that it is you that wins the contract.

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Planning Your Objectives

2.4 Planning your Objectives

This section introduces Negotiating Range which is similar to like,

must, and intend.

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Negotiating Range

This is similar to the exercise we did earlier to Like, Acceptable, and

Intended.

Ideal

Minimum

Target

Don’t forget the other side also has the same criteria.

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Negotiating Range

SETTLEMENTRANGE

Target

Minimum

Maximum

Target

Maximum

Minimum

Only when your target zones

overlap, a settlement can take

place.

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Business Negotiations 3: Opening

3.1 Opening

This section describes briefly the nuances of opening.

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Opening

Opening is the most important opportunity to influence the other

side.

It’s always in your best interest to adopt a tough opening position.

Careful preparation is a must for this.

Opening Dilemma

If you open first, you will reveal key information.

There is an old saying in Negotiation.

“The guy to quote the dollar first usually loses.”

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Opening

Ask questions.

Listen and talk less.

Think of different ways that you could put to use to get them to

reveal their opening position.

Analyze the opening statement.

Identify what is non negotiable.

Use positive body language (communication, posture, facial

expressions, tone of voice).

Make them speak longer, not you.

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Opening

Intelligent listening

Example: Usually, we don’t accept price cuts, under our standard

terms, this is not our usual practice.

Non Negotiable items can be a powerful bargaining lever.

The Power of Silence.

If you open first, reveal less, no more.

See if their opening is credible.

Shock Opening.

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Business Negotiations 4: Bargaining

4.1 The Bargaining Phase

This sections looks into the details of the Bargaining phase.

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Bargaining Guidelines

Don’t talk too much yourself.

Don’t just say “No”.

Don’t overstate your case.

Don’t highlight your own shortcomings.

Don’t deny obvious weaknesses in your position.

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Negotiating Behavior

3 types of behaviour that we can display and encounter

when in a negotiating situation

RED BLUE PURPLE

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RED Behaviour Manipulation Aggressive Intimidation Exploitation Always seeking the best for you No concern for person you are negotiating with Taking

People behave in this manner when they fear exploitation by the other party, but by behaving this way to protect themselves, they provoke the behaviour they are trying to avoid.

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BLUE Behaviour

Win win approach Cooperation Trusting Pacifying Relational Giving

Do you cooperate (blue) or defect (red)?

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PURPLE Behaviour Give me some of what I want (red) I’ll give you some of what you want (blue) Deal with people as they are not how you think they are Good intentions Two way exchange Tit for tat strategies

To the red behaviourist the message is loud and clear, ‘You will get nothing from me unless and until I get something from you’.

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Negotiation Tactics

No Deal Tactic

Force you to accept the worst deal

Can do better by walking away

Anchoring Tactic

Customer makes an extreme offer

Compromise is higher than seller expects

Hard bargaining

Concealing Information

Customers keep changing their stance

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Negotiation Tactics Contd…

Making Last Minute Demands

Vulnerable to accept

The Krunch

You’ve got to do better than that

Mostly used by buyers

Boulwarism

Named after Lemuel Boulware

Ultimate offer with no revisions

Refers to “Take-it or Leave-it”

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Types of Negotiation

Distributive• Involve win–lose, fixed-amount situations wherein

one party’s gain is another party’s loss

Integrative• Involve joint problem solving to achieve results

benefiting both parties

Positional• The more you clarify your position and defend it

against attack, the more committed you become to it

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Integrative Negotiation

Both sides work to increase the value of the solution

Goals are to:

• Create as much value for yourself and the other side• Claim value for yourself

Open about information and circumstances

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Thank You!!!