Hi All,
As we have had covered many details about Negotiation Skills, Strategies, Processes & Guidelines by the previous articles, Let's now continue talking in details about the strategies, that's will lead us to the Stage 3 of Negotiation,
Stage 3: Bargaining
“Know your limits.”
In Bargaining you will need to Derive specific values based on your negotiation variables and use them to bargain systematically over your settlement range.
In the previous step (Exploration) , you explored the negotiation domain and understood what the other party wants, what their limitations are, what you want and how each party is willing to move the negotiation forward with potential concessions.
The next step is to quantify these variables to know where you stand.
Both parties must be ready before they can move to the bargaining stage. This is absolutely critical, especially if you are dealing with particular cultures such as the Chinese who place a lot of value on building relationships.
A move to bargain executed at the wrong time may look incredibly cheap and you may lose ‘face’ as a result of it.
When you and the other party are ready to bargain, start the process by going through the negotiable variables discussed and state your positions.
Remember, you always need to go back and forth between the exploration and bargaining stages as not to end up discussing positions all the time.
In line with principled negotiation, stay away from specific positions as much as possible and think of satisfying each others’ needs, but at the same time you need to put values into variables in order to reach a specific measurable agreement.
1.Reading Others
At the heart of negotiation is access to information. If you know what you and the other party wants before starting the negotiation, you would have a better chance of getting positive results.
People usually have two fears when negotiating: One is that they will lose and look like an idiot, the other is that they will win a deal that is great for them but unfair to the other person. They feel worse about the latter. Hence, controlling fear is the key to success.
Every negotiation is a trade. You give something to get something in return. The trick is to simply ask.
Just go ahead and pop the question. If you get a ‘no’ or a ‘maybe’, then you can either negotiate to get better results or abandon the whole thing if it is not crucial. However, you will be surprised how often the answer is ‘yes’.
Asking is a lot like fishing. As long as you have got your line in the water, anything is possible. But if you do not have your line in the water, you will almost certainly get nothing.
What is the most effective way to get a fair deal?
First, you need to know what you want, what the other party wants and how strongly both of you feel about it.
- LAS and MSP
Once you know what you want, you need to find your Settlement Range. The Settlement Range is the range of all possible settlements you would be willing to make in any given negotiation, from the very best to the very worst.
The bottom end of the Settlement Range is called the Least Acceptable Settlement(LAS). This is the minimum point at which, when making a deal, you still think that the negotiation has been to your advantage.
The top end of the Settlement Range is called the Maximum Supportable Position(MSP). This is your opening position in the negotiation which the other person may not accept, but it is a position you think you can support and settle on. In other words, this is your desired position.
An example will clarify this. Suppose you want to sell a car. You comprehensively research and evaluate the car’s worth. Remember, this is not how much you would like it to be. This is a purely mechanical way of calculating what the value of the car is when converted to currency. Suppose your research showed that it is worth £4000. This will be your LAS. You would certainly not sell below this value. There is a distinction between your LAS and your wishes. You can also use the concept of Sure Offer(a guaranteed offer from someone) to set your LAS. However, you still need to calculate your LAS from scratch to know if the Sure Offer is actually worth it.
Your MSP, as the name suggests, is a value that you can support in a negotiation. This is the value you wish to get. For example, you may wish to get £6000 since the absolute top-notch car similar to yours is advertised as such and you do not think yours should be any less.
Remember, confusing what you want with your LAS can be fatal to the health of your negotiation. Keep your hopes and expectations out of the picture entirely when calculating your LAS. Your starting position is always with your MSP. In any negotiation, you get only one opportunity to state your opening position. After that there is no way to change it.
Now imagine that both parties have two pairs of numbers: a MSP and a LAS. A number of possibilities exist. A common likelihood is shown below.
In case A, the seller has selected his pair better than the buyer because they are higher than the buyer’s and therefore has a better chance of settling on a value that would benefit him. For example, the seller wants to sell his car at £6000 while the buyer does not want to pay anything more than £5000 for the car. The seller thinks it not worth selling the car for less than £4000, while the buyer hopes to buy the car for no more than £2500.
A number of other possibilities are shown below. In Case B, no settlement may be reached as the two ranges have no intersection. In Case C, the buyer has misplaced his MSP. He has basically overestimated the minimum value of the car. He can easily be pushed to pay more money for the car.
In Case D, the reverse is true. The seller has misplaced his MSP and so the buyer is well placed to push the price down. In Case E, the buyer has misplaced both the MSP and the LAS. He basically thinks the car is worth more. Obviously the seller will be very happy!
In short, if you bid behind the other person, you would only get as much as you asked for and would never be able to ask for more to match the other person’s LAS. All you need to do is to keep you LAS secret and aim to correctly guess the other person’s LAS.
How high should you go? The answer is that you should go as far as it is justifiable. Don’t be afraid to always ask for more. Because the simple fact in life is that if you do not ask, you will not get, and if you ask for a little, that is exactly what you will get: a little.
Extensive research has been carried out for a long time on the psychology of negotiation. All research points to one indisputable fact: People with higher aspirations reach better settlements more frequently than those with lower targets.In other words, always aim high.
In any negotiation there could be a certain amount of tension. There are two reasons behind this:
·One is that you may wonder if you can actually make a deal with the person; i.e. does your settlement ranges overlap?
·The other is that once you have moved the other person to somewhere in your range, you may speculate how good a deal you can get out of it? Greedafter all is a strong emotion.
Hence, before any negotiation you need to ask yourself two fundamental questions: “How is he likely to respond when I propose to negotiate?” and, “If I get what I want out of this deal, what kind of position he will be left in?”
-Managing Settlement Range
One important negotiation strategy is to look at your opponent’s BATNAor Best Alternative To a Negotiated Agreement.
This is the course of action that will be taken by a party if the current negotiation fails and an agreement cannot be reached. Hence, if the current negotiation is converging on something which is less valuable than your BATNA, there is no point carrying on with it. Remember, always think about the other player’s BATNA to see if you are pushing too far or too little. Sometimes, however, comparisons between different possibilities (or BATNAs) are not that easy since they are not always quantifiable or comparable.
Negotiating like any other acquired skill needs patience and practice. Here are a number of strategies to use:
Raise doubts about getting a better settlement:
·Build the credibility of your MSP. Seek to sell your position at MSP and make it as supportable as possible. You should indicate that your opening position is very close to your LAS and there is no point for the other party to try and push it further down. This also helps to cover your true LAS, which is of course your top secret.
·Conceal your need for the deal. A person who needs something badly does not have much ground to stand on. You probably won’t get what you want if you are unable to keep secrets. Nor would you have any chance if you show your fears and weaknesses, your need for the deal, your doubts, and worst of all the location of your LAS.
Increase their need to settle:
- Goodies. Add something to the deal at the right time to tilt the equation to your benefit. This is something that does not have to cost you much, but looks very attractive to the other party.
- Threats. A threat is usually used in those negotiations where the party wants to avoid you. Threats can be used to effectively change the balance of the negotiation by adding something negative to the other party’s equation. Use threats selectively and only as a last resort. The tougher you negotiate, the tougher the resistance will be.
Change circ*mstances:
- When new factors are added to the scene, negotiation can tilt towards you. Again you can initiate this change yourself. For example, if you approached your client for something, and he refused to deal with you, be patient. Wait some time and build up your position with more convincing facts, demonstration or, if applicable, prototypes. Then approach him again with a new offer and a new settlement range.
The key is that you are exerting pressure on the other party to settle where you want him to. The pressure, ultimately, is what is going to enable you to get what you want out of your negotiation.
Aim to increase the number of options you have. The more options available, the more leverage that can be used in the negotiations. The next best thing is to make the other person think you have options, even if you do not. Do your best to conceal your degree of the need for the deal. Give him the impression that you have no great stake in settling with him at all. Let him believe that you have other alternatives if he stops listening to you. Equally well, always think what his options are and determine if he is bluffing.
2.Managing Concessions
In the participation phase, you prepared a number of concessions. You might have discussed them in the exploration phase as well, but their true use is in the bargaining stage where you want to add value to your offer while reducing the value of the other party’s offer. Knowing how to manage your concessions is absolutely critical. Use the following guidelines:
- Never Give a Concession Voluntarily. Trade it Reluctantly.
Wait for the right moment. Let the pressure go up as the bargaining heats up. Then reluctantly suggest your concession and big it up as much as you can such as the example shown below. You must appear to be driving a hard bargain.
The examples that follow use the following scenario:
You are selling your car to a customer and you have considered your toolbox as a concession.
Example:
[after some bargaining]. “Ok, Ok! Look, listen we need to move forward. I might be able to do something for you. I will throw in the toolbox as well. You can get the car and the toolbox for X.”
- Big Up Your Concession
When bargaining, your objective is always to increase the perceived value of your concessions. Here is what you can do:
·Exaggerate. Exaggerate the effect of your concession on the other person. Support this by providing evidence.
·Emphasise the cost to you. Demonstrate that what you are offering takes something valuable away from you. Make sure that under no circ*mstances the other person feels that you are giving them something you don't need yourself. Otherwise it will be considered as charity with zero value!
·Make it exceptional. Show that it is something especial and not normally given away. If the other person assumes that they are entitled to receive the item, your concession will have no value.
·Demonstrate use. Show what your concession does for the other person. Make it as easy as possible for them to understand what they are getting. If they don’t think it is valuable to them, there is little point to go over other points.
·Check with others. Demonstrate that the concession you are offering is not something you can easily give away as part of the deal and you may even need to check this with your partners before giving away the concession.
Example:
“Let me show you the toolbox. It has a complete set [demonstrate use]. It is an absolute time saver when you want to fix something yourself. It saves you lots of money as you don’t have to take the car to a garage all the time [demonstrate use]. Most of the tools are not used even once [exaggerate]. If you want to buy this in shops these days, it could easily cost you £400, if not more [cost to you]. I really like this toolbox and I am going to miss it [exceptional]. It is well worth the £400 to me [cost to you]. No one really gives their tool box away with their car anyway [exceptional]. In fact I probably need to check with my partner before I can give it to you [check with others]. But I like to bundle it in for you, subject to checking with my partner, so we can finish off the deal. Agreed?”
- Minimise Their Concessions
When bargaining, another objective is to reduce the value of the concession given. Use the following to achieve this:
·Thank the other person. When you receive a concession, always thank them. Even if the concession is small, comments that show you appreciate their effort in moving forward will have a great emotional effect on them. If you act cold, they will not be encouraged to throw in another concession as they know they will get another cold response. Simply say, “Thank you” with a flat tone. Avoid saying an exaggerated, “Thank you very much for this” as it makes you look too thrilled.
·Reduce value directly. Do a reality check on concessions you receive.
·Treat the concession you receive as given. Show that when you were evaluating the offer, you already assumed their concessions will be given.
·Divide the concession to smaller parts. Where applicable, state the concession in smaller values to reduce its total perceived value. A similar technique is used in sales when it comes to stating costs. For example, instead of saying, “It will cost you £1000 per year”, you say, “Itwill only cost you £80 or so per month”. The second statement always feels cheaper, even though it might be exactly the same. Equally, you can use the same technique when evaluating concessions.
·Show that you have it. Explain that you already have what they are offering and hence you don’t really need one. This forces them to throw in something else.
·Show that you don’t need the concession. Devalue the concession by showing that you have no use for it. This is usually a setup to push the other person to move to another concession, so use this only if you don’t really want the concession.
·Accept it as a favour. Eventually, imply that you are giving the other person a favour by accepting the concession, so then you can move forward.
·Devalue the concession based on time. Show that the concession could have been valuable in the past, but in today’s market, either it is not needed (quoting technological progress, new fashion, etc.) or market competition has devalued it significantly.
Example:
“Thanks. The toolbox is a step forward, but after all we all have tools [thank the other person]. How many spanners do we really need? [reality check][show you have it]. Besides the time and effort I need to spend to use the toolbox and fix something is not really ideal [reality check][don't need it]. I am a busy person. If I ever wanted to, I could just buy a few tools each month for £10 to complete a set [divide the concession]. Toolboxes used to be big deal, but these days the market is full of cheap Chinese imports [devalue based on time]. So it is not a major concession. Besides, I was already under the impression that the toolbox comes with the car anyway [treat the concession as given]. Many people include them, because what do you want to do with a toolbox without a car anyway (sarcastic smile) [treat the concession as given].”
Negotiation Tips
- Recap
- Don’t make an offer until everything is on the table
- Be emphatic and show that you understand the other party’s problems and concerns.
- If you need to disagree, use a Devil’s Advocate point of view (a third person’s negative point of view) to avoid appearing confrontational
- Think out of the box
- Never underestimate the other party. Assume that they will always make the best decision. This thinking helps you not to rely on their mistakes for your own advantage
- Don’t get obsessed with numbers or positions. Think quality and have your objectives and theirs in mind.
- Everything is always negotiable. There is no such thing as a fixed price.
- Phrases to avoid during your Negotiation:
- “Trust me”
- Any version of “gotcha”.
- “I will be honest with you”
- “Take it or leave it”
NEGOTIATION TIPS : DON’T ASSUME
Do not assume anything about yourself. It is quite possible the value you put on what you have is less than the value someone else puts on it, especially if they know more about it than you do. Time and time again, people who end up regretting their negotiation realize that they have made a single fundamental mistake.
They assumed what they had (or the other party had) was worth X amount and based their entire negotiation around it. Once you realize that what you assumed was wrong, it will only lead to despair. Be open to new information.
In particular if you are in the middle of a negotiation and realize that you can get more than what you hoped for, update your position as you move on. Just keep calm, and adjust quickly to the new circ*mstances. Keep a poker face and play the game with new values.
- End of Part #6,Hope you enjoy it!
