Negotiation – The Importance Of Trading Concessions

A “Win-Win” negotiation can only be achieved if both parties are prepared to concede some of their ‘would like to have’s’ in favour of preserving their ‘must have’s’. The way concessions are handled is a vitally important negotiating skill and can have a huge impact on the final result. Below are ten tried and tested tactics to help you.

1. Discover and agree all the points for negotiation before it begins. Ensure that for each one of these points you have identified whether it is a fixed or a variable point from your perspective. (Variable means that there is some flexibility of movement.) If you have a separate meeting scheduled for your negotiation, it’s a good practice to send out you points for negotiation prior to your meeting. This ensures that both parties aren’t presented with any sudden surprises.

2. Increase the number of points for negotiation (if possible) because you increase the opportunities for a trade. If you only negotiate on price you are potentially setting the stage for a Win-Lose outcome. People very rarely buy on price alone, which is why it’s important to do a thorough fact find at the beginning of the sales process, to flush out the buyer’s list of requirements.

3. Always trade concessions (as opposed to giving them away). This means that for each point where you agree to a concession, you’ll want the buyer to make a concession in return. If you give a concession without requesting a return concession then you’ll be unlikely to get one afterwards. Therefore, it helps to preface your concession with the words ‘what if’. For example, “What if I offered you this (specify concession), what could you offer me in return?” As soon as you begin the process of trading concessions you are creating a frame for agreement, this underpins the belief that together you can reach an overall agreement.

4. Make concessions in small incremental amounts, gradually. If you offer up a large concession too quickly you could create the perception that ‘you loaded the deal’. It’s always best to aim to hold something in reserve for those buyers that are tougher with their negotiations, and present every concession as if it has huge value to you. When presenting concessions use features and benefits to really highlight the value that you are offering.

5. If the price changes, change the deal. This can help to maintain your credibility and justifies the reason for the price change. If you simply comply with a request to lower your prices then you imply that you were asking too much originally.

6. Use a calculator to quantify the impact of price decreases overall. For example, a couple of cents or euros on a large deal could equate to a huge amount over a twelve month period. This can be useful to show just how much you are offering in the long term. It’s a good idea to calculate the long-term value of every concession you are offering.

7. It can be disadvantageous to have your opening offer completely disregarded so encourage the buyer to go first with their offer if you can. Sometimes the buyer offers more than the sales person was prepared to accept, yet avoids having to do so because they kept quiet and let the seller go first. It also provides you with the opportunity to evaluate their opening stance in terms of the possibility of getting an overall result. If their opening offer is ridiculously low then they may not be taking the negotiation as seriously as you.

8. Make each concession really count. People have a tendency to appreciate what they have worked hard to get. If the winning of a concession is too easy then you are depriving the buyer of some emotional satisfaction. This is also an ideal time to request the opportunity to consult with another individual within your organisation. If the buyer sees that their requested concession appears to be outside of your own authority limits, then this helps to build the case that they have negotiated well.

9. Be creative when generating concessions. Work with the other party to generate a variety of options and brainstorm each option neutrally. You’ll be amazed at how many good ideas are created when this process is allowed to occur. You can help this process prior to the negotiation by seeking input and ideas from other people in your organisation. Often, getting some alternative suggestions from people who are not involved in the deal, can provide you with some refreshing new insights.

10. Leave price until last so you build a sense of agreement between both parties. Aim to discover what the buyer really needs when they request a particular price. At the end of a negotiation, the buyer has made an investment of time and has demonstrated a desire to do business with you by making concessions. Therefore, to reach a stalemate at this final stage will be viewed as a waste of their time.

Before tackling the price, summarise all the concessions that you have made and where possible attach a value to them. This amount can look even more impressive if you total this over a twelve month period. Always have a list of the buyers agreed requirements in front of you so that you can show the buyer just how many of them you have already met.

Attitude Charting

Takes up one or more of the populations from the original pie chart map of constituent groups and develops a graphic representation of the attitudes toward the change initiative within the various sub-populations, using a bell-curve type chart.

Each population of constituents from the pie chart is described as some mix of four groups:

– Innovators
– Early Adopters
– Late Adopters
– Resistors

Emphasis is placed on determining how normal the populations is. For example, is there a normal population mix of 15% Innovators, 35% Early Adopters, 35% Late Adopters, and 15% Resistors? Or is the population skewed in some fashion (Example: a larger block of Resistors and lasted Adopters due to failures in the past)?

Uses:
With this tool, the team becomes more focused in its analysis and more pointed in its discussion of the nature of the support and resistance to the change initiative. The emphasis shifts to
an analysis of the range of support or resistance within each group of key constituents.

How To Steps:
1. Select one of the groups impacted by the change initiative from the pie chart analysis
(See The Article “Key Constituency Map” by Steven Bonacorsi. Lean Six SIgma Master Black Belt)

2. Have each member of the team draw a Population Chart indicating how he/she perceives the group members’ attitude toward the change effort. If necessary, clarify what each piece of the piece of the population means (example: Innovators = Those who will readily endorse this change initiative and work on behalf of the team; Early Adopters = while not first in line, this population will quickly follow the lead of others and actively support the change initiative; Late Adopters = while not necessarily hostile or overtly resistant, this population will lag behind in terms of actively supporting the change initiative; resistors = will actively and openly resist the change initiative.

3. Share individual charts and work to reach consensus on how the population actually looks. If significant differences of opinions exist within the team, it may be useful to seek another perspective, perhaps even from some members of the population under construction.

4. At a minimum, the team should check their perceptions and assumptions about the population with others outside the team before accepting this chart as the correct view of the population.

5. OPTION: Use this population charting process to uncover the attitudes of specific individuals within a population. If the team chooses to use the tool in this fashion, the discussion should include a debate about where each individual status is for the change effort to be successful (example: a late adopter may only need to be helped to not become a resistor).

10 Tips For Effective Negotiations in Life and Business

In every field you are involved in negotiations on a regular basis, whether you realize it or not. When people think of negotiations generally the term “high level” comes to mind. There is a group of cigar smoking men surrounding a table in a board room and the volume is loud and occasionally emphasized with a fist pounding on the table.

That scene may have played in the ’70’s or earlier, but it really is an archaic vision into a past era, and it has almost nothing to do with this article. Everything you do comes as the result of a negotiation with someone, unless you are living alone on a desert island, and even then you are probably negotiating with Wilson.

Think about it. What did you have for dinner last night? Did you cook it? Did you choose the food? Where did you buy the food? All of these are the results of some low level negotiations. Did you speak with your spouse about the choice? If you looked in the paper for sales on food, that is a form of negotiation with the vendor.

But now the point is made, and perhaps you are looking at negotiating and thinking, gee, I never thought about it that way. So how do you negotiate face to face (or through other communication methods?) You have to start either with a need or with a solution, depending which side you are on. Either way these 10 points are things you need to have in mind to have a win-win.

1. Your negotiation has to have a two way commitment to the agreed upon ending

2. Know the real goal when you sit down to the table. Your goal is not to every step of the process necessarily, but to achieve the end result. Don’t let the steps drag down the negotiations

3. Remember the process is going to involve give and take. Don’t expect to dictate the terms, unless you are willing to walk, if they are not met. (See point 4)

4. Be prepared to walk if the negotiations aren’t going to fulfill your needs within your budget.

5. When you sit down at the table, know what your limits are on all aspects of the deal. What are your time, money, and product parameters? What is open to negotiation, and where is your wiggle room?

6. Have options in mind when you sit down. Perhaps you don’t need the widget gold plated; maybe silver will work just as well. Keep an open mind.

7. Know that to have successful negotiations it is not generally a once and done deal. Don’t bargain so hard that you won’t be able to return for another deal.

8. When you are done, you should have a written contract with solid goals and a timeline. There should also be consequences if the timeline is not kept, and possibly incentive if it is done right and done early.

9. Create a winning team. When you enter into a deal with someone, you are forming a team, at least in the short term. Make sure you can work with someone, if need be. Sometimes negotiations will make odd bedfellows, but make sure everyone is willing to pull their weight for the good of the team.

10. Remember the “Big Picture.” You are there for a specific purpose. Don’t get sidetracked and bogged down by the bug dust.

It takes commitment on the part of everyone involved to have a successful negotiation, and all negotiations are the beginning of a relationship. How that relationship starts out often dictates how it goes over time. Camaraderie goes a long way to keep things smooth along your journey, so keep your sense of humor and know that life will throw curve balls at you occasionally. Negotiations are the start of a relationship and relationships make business work.

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