Chapter 12Chapter 12

Formal Negotiating

The Nature Of NegotiatingThe 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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What Can Be Negotiated? (See Exhibit 12.1, P. 315) 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 Planning For The Negotiation SessionNegotiation 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

ContinuedContinued 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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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 PatternsIndividual Behavior Patterns

(See P. 322-323 – 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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Information Control

Don’t give everyone access to all the information

Keeping certain details from the buyer could be very beneficial

The Negotiation MeetingThe 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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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 guy’s proposal; avoid the

consequences of the bad guy’s proposal

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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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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 TacticsOther 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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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

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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)