5.2. How to Conduct Negotiation Conversations

Negotiation Preparation = Negotiation Success

Undoubtedly successful negotiators have a well thought out strategy before entering into the negotiation process. They have their facts in place, are well prepared, self- confident and structure the negotiation so that they remain in control of the negotiating process.

Here’s a recommended structure to consider before you start a negotiation with a client which is based on years of experience of advising companies on deals. It provides guidance on what you can do as a negotiator before making offers or counter offers. The four factors listed below can have a tremendous impact on negotiation outcomes.

• Identify your BAND – Best Alternative to No Deal”.Here, the salesperson must ask, if this deal does not go through, then what is my alternative? Here’s how a BAND is identified:

  • Identify all plausible alternative options you could pursue if you are unable to reach an agreement; who are the other customers I could sell to, and what are the terms they are offering me? Ascertain if you could negotiate this offering upwards and by what percentage.
  • Select the best alternative that you currently have
  • If the current customer you are negotiating with is offering you the best deal, then you are in business. If not, you know what else you have available
  • Going into a negotiation with this kind of information gives you a sense of power

For example, you could be expecting a price of Rs 100 for your product. Before you meet with your current prospect (we’ll call him Prospect C), check who else is interested in your offering, as well what they are willing to pay. You realize that Prospect A is willing to pay Rs 90 and Prospect B Rs. 87. However, you believe that you could get Prospect A to up that to Rs 94  or to Rs 96, and the latter to up their offering to between Rs 90 & 92.

Prospect A is your best alternative, currently; your BAND, in other words.

So, you can approach Prospect C for the negotiation, you know that if you cannot arrive at a deal, what the next best alternative for you is.

• Identify your walk-away point

Since you are already fairly sure that you can get between Rs. 94 to 96 currently, anything that Prospect A offers must better this. You might decide that if you are to offer the deal to Prospect A, she has to offer you:

• Rs. 100, or you walk away
• Anything between Rs 100 & Rs, 97, or you walk away
• Rs 96, and you choose to work with both prospects A & C (or we flip a coin and choose between them)

• Identify your Prospect’s BAND

Here, the salesperson must ask,

• • If this deal with you does not go through, then is there anyone else who can offer exactly what you are offering/ at your turn-around-times/ with your kind of caliber/ with the ease of doing business like your firm offers/ at a price point that you are offering?
  • If another entity can offer some of what you offer, but not everything, then the question will be
    • Is the prospect in talks with such an entity?
    • What might the prospect do if we cannot arrive at a deal?

• Identify Your Prospect’s Probable Walk-Away Point

For example, you know that your prospect is talking to a rival firm for the same deal. You also know that while your rival can offer a lower price, they cannot offer your prospect some key offerings like quicker turnaround times and ease of doing business (say, some dashboards/ updates that you offer). You are also a bigger brand as compared to your rival

• • Estimate how much the customer is willing to pay for that extra something that you are offering
  • Will the extra something, and the promise of quality that is associated with a big brand be sufficient to get them to pay a premium?
  • Now, say you know that your pricing is roughly 80% higher than what your rival is charging (meaning they are offering this at around Rs. 56). Now, you must ask yourself: will the prospect consider the extra something that you are offering and the promise of quality associated with being a large brand are worth the 40 – 44 rupee premium that you are charging? What might the maximum amount be that they are willing to pay for that extra something that you are offering?
  • How much could that extra something be worth to your customer?
  • You may estimate that your prospect is willing to pay an extra 50% on this over your rival’s offer. Which means they are willing to pay Rs 80 for your offering.

• Check if you Can Up That & By How Much

  • Identify, if you can use certain ‘guarantees of success/ quality’ or a proof of concept that attests to your ability and past successes bolster your position. Can these help you bridge that gap between their walk-away point and what you are offering?

Asking the four questions related to your respective BANDs & Walk-Away Points will hold you in good stead when it comes to being prepared for a negotiation. Knowledge, they say, is power. It is never truer than in a negotiation.

In subsequent lessons, we will look at how you can conduct yourself during a negotiation.

How to Conduct Negotiation Conversations

Prospects will try all sorts of tactics to wrangle a better deal for themselves from you. They could:

• Go silent on the deal, leaving you desperate and thus willing to concede
• Threaten to close the sale with your rival
• Cajole you
• Claim that the possible price they can pay has been set by their senior management and is non-negotiable
• Claim that they are only following norms that the organisation follows globally
• In extreme cases, beg Etc.,

It is important to note that each of the above represents a negotiating tactic, and can be dealt with. Mostly, at least.

Once again though, it is important for us to state that you need to have conducted the preceding stages of the sales process effectively if you wish to ensure negotiation effectiveness. Devoid of this, you will weaken your case during the negotiation process.

Principled Negotiations

Negotiations need not be a battle of wills. And, while they can be challenging affairs, these conversations are also an opportunity to solidify your value proposition and justify your premium.

The key is to conduct what experts call ‘principled negotiations’, which as the name suggests is conducting the negotiation as a dialogue where you:

• try and understand each other’s needs and interests
• try to meet these as best as possible, what is commonly called arriving at the Best Possible Negotiated Agreement (BPNA)

Here’s how you arrive at a BPNA:

a. Create a safe respectful environment for the negotiation discussion

Negotiations can often devolve into downright unpleasant discussions. This usually happens because the discussion is taking place in a borderline toxic and confrontational environment.

So, start by saying something like: “We’ve both been discussing about the value you are seeking from this assignment, and how the firm I represent is best suited to provide you with this. Now, I think it is apt to discuss how we can move this forward. I want us to see how we can help you succeed. Any suggestions from your end?”

Your focus should always be on how you to create a positive, mutually respectful environment to conduct the conversation within. Small talk at the start of the discussion helps, as does open body language and maintaining eye contact with your prospect as you speak.

b. Start by Agreeing on Goals

To prevent the conversation from attaining a focus on price and terms alone, reiterate the value – the business metrics that you are trying to impact – that all discussions must be geared to achieve.

Say something like: “Mr/ Ms. ____________________ I hear what you are saying. And I have appreciate your points. And this is more to help me guide my thinking here, but it would help if we revisit the outcomes that you wish to see achieved through this assignment. [Then reiterate these]. Okay, now that we have stated these, let’s see how we can best achieve these.”

c. Clarify and Validate Interests

It is important that both parties understand each other’s interests. For example, your prospect could only be executing the project. It might actually be the CEO’s pet project. So, it would be of vital importance to your prospect to ensure seamless delivery of the project (interest number one). She would also be interested in highlighting her ability to her CEO (Interest number two).

Table your interests as well.

The better you can identify these, the more positive your discussion will be.

d. Adopt a ‘You & Me Vs. the Problem’ Approach

Position the negotiation discussion as a joint effort to find a way to meet the desired outcome (the business metrics identified) and address each other’s interests

Say something like: “I want us both to be happy with what we agree to. Mostly, though, I want us both to be able to achieve the objectives we’ve identified. So, may I request for a means for us to conduct this discussion as a joint effort to ensure that we are both happy.”

e. Set Objective Criteria

No matter your intentions, and not matter how well you begin the discussion, chances are that the conversation will at some time turn antagonistic, since your respective interests would be –it almost always is – at loggerheads.

The way to overcome these is by setting objective criteria, which can be used to filter suggestions made. These could include:

• Market price & terms (as offered by comparable rivals)
• Established industry best practices
• Project execution best practices

Etc.,

f. Meet Both Sets of Needs & Interests

In your discussions, try to meet both sets of needs and criteria.

This approach allows for a positive dialogue between parties in the search for mutual benefit. However, only someone naïve would think that everyone that you negotiate with would be amenable to such an approach (and we will learn how to deal with these in the next section). However, try and find opportunities to adopt such an approach. It will greatly help you achieve more desirable outcomes through your negotiations.

Negotiation Dirty Tricks Customer Use and How to Overcome These

1. Asking you to drop your pricing or terms by giving you the promise of future business

2. Quoting what they believe is the ‘fair price’ for your service; one which is less than 50% of your quote

3. Insisting on you dropping price

4. Using emotional blackmail

5. Going AWOL on you

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