Formal Negotiating

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Chapter 12

• Formal Negotiating

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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

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Continued

• What Can Be Negotiated? (See Exhibit 12.1, P.
  324)
• 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

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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

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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

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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

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Individual Behavior Patterns

• (See P. 331 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

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Continued

• Information Control
• Dont give everyone access to all the information
• Keeping certain details from the buyer could be
  very beneficial

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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

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Continued

• General Guidelines
• 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 guys proposal avoid
  the consequences of the bad guys proposal

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Continued

• 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

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Continued

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

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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
• Trail balloons
• Floating an idea without really offering it as a
  concession

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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
• Dont be afraid to say no if objectives arent
  met
• All concessions are tentative until finalization
• Dont give concessions carelessly
• Dont accept first concessions
• Help buyer see value of concessions

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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)

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Questions?