Chapter 12 Formal Negotiating

The Nature Of Negotiating Negotiation- the bargaining process through which buyers and sellers resolve areas of conflict and arrive at agreements Win-lose negotiating- the negotiator attempts to win all the important concessions and thus triumph over the opponent Win-win negotiating- the negotiator attempts to secure an agreement that satisfies both parties Negotiation Versus Non-Negotiation Selling Salespeople have price books and procedural manuals With negotiations, buyers expect policies, procedures, and prices to be negotiable Formal negotiations generally are for large or important prospective buyers

Continued What Can Be Negotiated? (See Exhibit 12.1, P. 321) Customers which are large or important enough can negotiate almost anything Lists of prioritized issues help determine where disagreements exist Are You A Good Negotiator? A good negotiator must have patience, endurance, take risks and the ability to tolerate ambiguity Successful salespeople do not always make great negotiators Must not fear conflict Different cultures, different emphasis on skills

Planning For The Negotiation Session Location Choose a neutral site free from distraction Preferences generally are the morning and the middle of the week Time Allocation Time pressures tend to have negative outcomes With a win-win perspective, high outcomes are achieved regardless of time pressures Negotiation Objectives Power is a critical element when developing objectives The seller will almost certainly have to make concessions in the negotiation session

Continued Negotiation Objectives (Contd.) Target position- what your company hopes to achieve at the negotiation session Minimum position- the absolute minimum level you will accept Opening position- the initial proposal The opening position should reflect higher expectations than the target position Mini-max strategy- helps sellers understand and prepare for the trade-offs that will undoubtedly occur in the negotiations Adaptive planning- development of alternative paths to the same goal Brainstorming session- meeting in which people are allowed to creatively explore various methods of achieving goals

Continued Team Selection and Management Positive sides of teams: tend to be more creative and avoid mistakes Negative sides of teams: more timely or address an issue outside their area of expertise Generally, teams should be the same size Each member should have a defined role The leader will manage negotiations and delegate who will answer what Practice

Individual Behavior Patterns (See P. 328-320 – Exhibit 12.5) Competing mode- resolving conflict in an assertive and uncooperative manner (win-loose agreement) Accommodating mode- resolving conflict by being unassertive and highly cooperative; often neglect their own needs and desires to satisfy the concerns of the other party Avoiding mode- resolving conflict in an unassertive and uncooperative manner; no attempt to solve their own needs or the needs of others Compromising mode- resolving conflict by being somewhat cooperative and somewhat assertive; quick mutually acceptable solution, partially satisfying both parties Collaborating mode- resolving conflict by seeking to maximize the satisfaction of both parties, reaching a win-win solution

Continued Information Control Don’t give everyone access to all the information Keeping certain details from the buyer could be very beneficial

The Negotiation Meeting Ambush negotiating (sneak attack)- a win-lose tactic used by a buyer at the beginning of, or prior to, negotiations when the seller does not expect this approach Discuss the important topics and eventually arrive at a decision Preliminaries Break the ice and ensure a comfortable environment The selling team should establish a win-win environment Agenda- listing of what will be discussed and in what sequence

Continued General Guidelines Deadline With Win-Lose Negotiators It is important for the team leader to keep track of what has and has not been discussed Negotiators must understand cultural issues (Translator ?) Negotiators need to save face if not strengthen their identity Deadline With Win-Lose Negotiators Good Guy-Bad Guy Routine Strategy where one team member acts as a “good guy” and another team member acts as a “bad guy” Goal is to accept the good guy’s proposal; avoid the consequences of the bad guy’s proposal

Continued Emotional Outbursts Budget Limitation Tactic Lowballing Definition: strategy in which one party voices agreement and then raises the cost of that agreement in some way Nibbling- the buyer requests a small extra or add-on after the deal has been closed Emotional Outbursts Definition: strategy in which one party attempts to gain concessions by resorting to a display of strong emotion Budget Limitation Tactic Definition: (a.k.a.-budget bogey) strategy in which one side claims that the budget does not allow for the solution proposed

Continued Browbeating Definition: strategy in which buyers attempt to alter the selling team’s enthusiasm and self-respect by making unflattering comments Negotiation jujitsu- response in which the attacked person or team steps away from the opponent’s attack and then directs the opponent back to the issues being discussed

Other Win-Lose Tactics Limited authority True or not? Get decision maker into the room! Red herring Small problem or minor point to distract conversation away from the bigger issues Trial balloons Floating an idea without really offering it as a concession

Continued Making Concessions Concession- when a party agrees to change a position in some fashion Guidelines To Making Concessions Effectively Never make concessions before probing the buyer Never make concessions unless you get one in return Concessions should gradually decrease in size Don’t be afraid to say no if objectives aren’t met All concessions are tentative until finalization Don’t give concessions carelessly Don’t accept first concessions Help buyer see value of concessions

Making Concessions What will be the result if you don’t come to an agreement? Best Alternative to a negotiated agreement BATNA Consequences of no agreement – CAN Can take months or years

Continued Recap Of A Successful Negotiation Meeting Set the proper environment Develop an agenda Work for win-win negotiations Get agreements in writing Summarize agreements Be friendly, levelheaded, courteous, and honest (Beneficial for long-term partnerships)

Questions?