Negotiating Satisfaction

A negotiator should approach their negotiation much like an investor approaches the stock market. With today's wild swings in the stock market, this can be quite a challenge! But, here's what I'm talking about.

Prudent investors look to increase the value of their money. They look at growth potential, expected dividends, and the risks associated with an investment. Investors attempt to calculate the present value of the potential investment given the expected growth rate and dividend payouts. In this way, their investment decision is balanced against the associated risks; compared to other potential investments; and a decision is made to buy or not. Is this potential investment fairly priced, over-valued or under-valued?

A good negotiator does the same thing -- but on a very subjective level. Negotiators need to focus on the present value of satisfaction; determine the value of future satisfactions (and dissatisfactions); and compare this to making a deal, making no deal, or working to create a better deal.

This brings up a fundamental but subtle point about any negotiation. The flow of positive and negative satisfiers in any deal is in the mind of each participant. Some participants are optimistic about the future. Others are pessimistic. Some want immediate satisfaction, while others are prepared to wait.

Much of your strength as a negotiator comes from your ability to provide satisfaction to the other party. You can help increase the present value of the deal by getting the other party to place a higher value on future satisfaction. You can do the same thing by showing the other party that future dissatisfactions are unlikely.

Concessions can play a big role in creating a flow of satisfaction. But this flow between people is not a simple as it looks. Before you start making concessions to increase the other party's satisfaction, think about how you want to do it. Take into account who will benefit, in what way, when, and from what source.

A concession can provide satisfaction to the reciver now or later. Maybe the receiver wants to take it all at once or a little at a time. A concession can direct its benefits to the organization, specific parts of the organization, third parties, to the other negotiator on a personal level, or to all of them at once. Make sure your well meaning concession does indeed provide satisfaction -- and not doubt, or dissatisfaction. Concessions can move people closer together (raise satisfaction) or move people further apart (decrease satisfaction). Be careful!

Every negotiator has the same role to perform: to raise the present value of future satisfactions for the other person and help the other party reach a decision that will provide satisfaction to both parties.

Negotiating Power Is In Your Head

There is an old expression, "If you think you can, or if you think you can't, you are right." This certainly applies to how you approach your negotiations. Your power is in your head.

Much of what happens during a negotiation is influenced by the expectations and pre-conditioning of each party. As we discuss in our Effective Negotiating Seminar, you are normally more aware of your pressures than the pressures on the other party. You need to discipline yourself to determine what pressures the other party has. And, to what extent you can, precondition the other party to impact their expectations.

A recent article in the Los Angeles Times (April 15, 2008) illustrates this issue. The article describes what's happening today with many consumer purchases – things like flat-screen televisions, new furniture, clothes, luggage, etc.

Most of us have preconceived expectations regarding what is possible, and what is not possible, when we see that sale price posted on a new flat-screen television. But, as this LA Times article states, this is changing!

"With jobs getting scarcer, stocks on a roller coaster and economists talking recession, not many people feel like paying full price for, well, anything." Now is the time to try negotiating. "That's right, the age-old tactic more frequently observed in foreign bazaars and rug stores is returning to the malls and Main Street. As stores feel pressured to move merchandise, and consumers feel the pinch of slowing economy, prices are becoming more negotiable."

Negotiating is at an all time high. "Negotiating is more common at independent retailers than big chain stores . . . but that is changing, says Richard Giss, a partner in Deloitte & Touche's consumer business division in Los Angeles."

Obviously when a store permits its salespeople to negotiate prices, it can hurt the bottom line. But, it can hurt the store much more if merchandise ends up sitting around unsold and larger discounts have to be offered to sell it a month from now.

What is the key to taking advantage of this changing climate in the consumer marketplace? You've got to try to negotiate. Don’t let your head tell you it can’t be done.

Remember what we talked about in our Effective Negotiating Seminar. Be prepared to negotiate. Research prices before you start and know what competitors are offering (the power of competition). Use the Web – more and more merchants are agreeing to match the price of something you can purchase on-line.

Be nice (i.e. establish a relationship). Take your time, this assures both you and the merchant have a vested interest in making a deal happen. Ask for information on upcoming discounts, past discounts, special un-advertised discounts, special discounts or coupons they have sent out to other customers, that could be used for this purchase.

Sometimes a merchant may be willing to take off the sales tax. Paying cash, “or pulling out a credit card or checkbook and looking ready to buy on the spot helps too.” Ask for help, “This is all I can spend. What can you do for me?”

Be persistent; but be prepared to walk out (deadlock) “When they say, ‘I can’t do that. I’ll lose money,’ say ‘If I walk out of here, you’ll lose even more money.” As one merchant said, “We don’t want to do it, but we don’t want to lose the business either.”

Don’t make a scene in the store. A merchant is much more likely to offer a price concession if not all the other shoppers in the store hear what is happening. If you are purchasing multiple products (i.e. three pairs of shoes) ask for a discount. If you are a repeat customer, ask for the ‘good customer discount.’ Try a ‘nibble’ – if I buy these, will you give me one of these?

You may be surprised how things have changed – just in the last few months. “One thing is certain: There’s no harm in asking. And shop owners probably won’t be surprised if you ask for a bargain.” These negotiations starts with you – you have to ask!

Negotiating Around An Impasse

You did everything right, yet you find yourself at an impasse with the other party. What do you do?

Too many negotiations break down for the wrong reasons. Impasses are not always caused by world shattering issues or great matters of economics. Many breakdowns are the result of simple things like personality differences, fear of loss-of-face, troubles within the organizations, a poor working relationship with the other party, or one party's sheer inability to make a decision.

Any consideration of how to break an impasse must take into account the human factor. It may not be what you do, but how you do it that becomes the critical factor.

Here are several moves useful in averting or breaking an impasse:

1. If the impasse involves money -- offer to change the shape of the money. A larger deposit, a shorter pay period, or a different payment stream works wonders -- even when the total amount of money involved is the same.

2. Change a team member or the team leader.

3. Eliminate some of the uncertainty. This can be cone by postponing some difficult parts of the agreement for renegotiation at a later time when you both have more information.

4. Change the scope of risk sharing. A willingness to share unknown losses or gains may restore a lagging discussion.

5. Change the time scale of performance. Maybe it's OK to complete 60% over four months rather than three months. It might be easier to start slower and still complete the job within the desired timeframe.

6. Assure satisfaction by recommending grievance procedures or guarantees.

7. Move from a competitive posture to a cooperative problem-solving mode. Get engineers involved with engineers, operations people with operations people, and bosses with bosses.

8. Change the type of contract: fixed price, indexed or scaled price, time and materials.

9. Change the base for calculating percentages: a small percentage of a larger base or a larger percentage of a smaller, but more predictable base, may bet things back on track.

10. Create a list of options or alternatives that need to be discussed. Or change the order of discussion.

11. Suggest changes in the specifications or terms.

Impasse breakers work because they re-engage the other party in discussions with his or her organization and team members. These icebreakers help create a climate where new alternatives can be developed and refined. Surprisingly, sometimes the introduction of new alternatives has the effect of making old propositions look better than ever.

Try to pre-plan a face-saving way to reopen discussion should an impasse occur. If you set the stage before the impasse sets in, you can better handle the problem.