Escalation - And how to deal with it.

You and the other party are close to a deal. A price has been named, and you’ve all but signed the paperwork. Then, the other party shows up and calls off the negotiated deal, and asks for a higher price. You balk. Escalation has just taken place.

Escalation can be an effective tactic in negotiation. However, there are ethical and unethical escalations. The scenario in the first paragraph is generally considered unethical, and it probably created anger, and the deal fell through. It was unethical because the price escalation occurred once a firm agreement(understanding)had been reached.

An ethical escalation could take place at the start or early in a negotiation (not at the end). For instance, both parties believe they are going to be negotiating on a proposal with a $50,000 price tag. The seller revises his original price and explains the reasoning behind this need to increase the price. This technique is a way for the seller to add some 'negotiating space' to the proposal, so when negotiations are completed, and concessions have been made, the seller can be at or above the desired $50,000 price. This type of escalation can be used to help justify that the original price was a good/fair price.

What happens when you are facing an escalation? There are some escalation countermeasures to consider:

• Call the bluff—perhaps the other party does not really want to start over
• Counter the escalation by changing your offer or demand
• Give yourself time to think—don’t accede to every demand
• Demand assurances and guarantees
• Get the agreements signed by high-level people on both sides to make it more difficult to break or modify
• If the escalation is totally unreasonable, consider leaving the negotiation

How do you handle an escalation? Have you used escalation to obtain a better deal from the other party?

Dealing with rumors and information leaks.

Mark Twain is known for quipping “the reports of my death are greatly exaggerated.” In Twain’s time, news traveled more slowly than today, and in great likelihood, many people believed that he was dead, before they heard otherwise.

If it weren’t for rumors and information leaks, many tabloids would be out of business. Unverified facts from unknown sources can create sensational stories. But this “heard it through the grapevine” information is not only used by journalists, it may be used as a tactic during a business negotiation.

Rumors and leaks are often used to test the waters, to gauge reactions and to measure potential impacts. Some parties use rumors to send messages to the other party, or to introduce a new position on an issue.

Because this information is unreliable, negotiators need to be able to separate fact from fiction, what is real from what is merely a ploy. The other party may be spreading these rumors in order to create confusion or to weaken resolve. On the other hand, rumors can often be a way of indirectly communicating crucial information that cannot be shared through “official” channels.

How can a negotiator confronted with this tactic know what to believe and what to discount? As with any information, negotiators must work to verify and test the information. It may be a good time to have off–the-record talks with the other party to see what the intent may be. Some of it also may be treated with good old-fashioned instinct: does this information seem valid, or does it seem designed to get a reaction?

How do you deal with rumors and leaks? Do you use this tactic in your negotiations?

Negotiation in the spotlight: Disney vs Cablevision

It was a very close call for the millions of Cablevision subscribers in the New York-New Jersey-Connecticut area who were anxiously looking forward to seeing the Oscar ceremony on Sunday night. ABC, through its parent company Disney, was in a dispute with Cablevision over fees. Disney withdrew the ABC signal to all Cablevision subscribers but the parties reached a last-minute agreement, and viewers were able to receive the signal about 15 minutes into the Oscar broadcast.

Clearly, Disney was using the massive appeal of the Oscar broadcast to put pressure on Cablevision to end the stalemate. Terms of the settlement were not disclosed.

The negotiation revolved around the fees Cablevision obtains from subscribers for the transmission of broadcast networks such as ABC. Disney wanted a share of those fees. .Although the local ABC station, WABC, is free over the air to anyone who gets television signals via antenna; Cablevision subscribers pay a fee to get that and other local television channels.

According to a report on CNN Money) Cablevision argued that:

”Disney's move would force its customers ‘to pay a new TV tax for programming [that] ABC Disney gives away free, both over-the-air and on the Internet.’”

Full article here: (http://money.cnn.com/2010/03/07/news/companies/cablevision_disney/

As the television business changes, and ad revenue, which supports local broadcasts, has been reduced, broadcasters are looking at ways to increase income. CNN Money summed it up this way:
“Unlike cable networks, which both collect advertising revenue and subscriber fees from pay-TV providers, broadcast networks rely solely on ad income. But as that money is drying up, they are in search of new sources of revenue.

For their part, cable providers say they are cash-strapped as a result of costly efforts to upgrade technology -- and fend off satellite and telecom providers as well as Web-based programming.”

A similar dispute took place late last year between Time-Warner Cable and the Fox Network late last year. Daily Finance reported that:

Fox's parent News Corp. (NWS) wanted to be paid $1 a month per subscriber from Time Warner. The details of settlement between the two companies were not made public, but the per-subscriber fee that Fox eventually received was estimated to be 50 cents a month, rising to 75 cents over the course of a four-year agreement. At the time that the deal was struck, BusinessWeek estimated that over-the-air broadcasters might demand a total of $5 billion a year from the nation's cable companies.

Read more here: http://www.dailyfinance.com/story/company-news/abc-to-cablevision-no-payment-for-us-no-oscars-for-you/19386527/