Negotiation Space

90-10 rule

Perhaps you have heard of the 80-20 rule, where 20 percent of your market gives you 80 percent o of business? Well, in negotiations, Dr. Chester Karrass introduces us to the 90-10 rule, where 90 percent of the negotiation is spent discussing matters that have little importance, and 10 percent gets down to business.

How can knowing the 90-10 rule help you? In two ways.

1. If you are trying to avoid discussing an issue or position, you can spend lots of time discussing other items, and even making small talk. This ensures there will be little time left to discuss the issues that you don’t want to get into.
2. If you do want to discuss a crucial issue, you must understand the ratio, so that you can shorten the discussion of extraneous issues to focus on what needs to be said.

Acceptance time

People often resist new ideas or change. It can take a long time for people to begin to accept what they have been resisting. Acceptance time gives people a chance to adjust gradually.  In negotiation, most people come to the table with a set of expectations. If these expectations are not met, they discuss and resist. With time for acceptance, they will adjust their expectations.

As Dr. Chester L. Karrass writes:

Negotiation is a process by which the other party must exchange some of their old ideas for new ones….it would be foolish to believe that they will do so without acceptance time…Factor acceptance time into your bargaining strategy.

There are many other time tactics, many have been discussed here on Negotiating Space. What time tactics do you use most frequently? Have you noticed the 90-10 rule for yourself? Let us know in the comments.

Many negotiators use the escalation tactic because it is effective. At times, escalation can be used unethically. For instance, both parties agree on a price and the next day the seller raises the price so that a compromise ends up with a higher price.

However, some escalation is ethical and productive. People tend to lag on decision-making and tend to stick to their decisions once they are made. Dr. Chester L. Karrass writes that: “Escalation can help a seller prove that the price originally proposed is a fair one.” He adds that escalation can also be used ethically to discourage additional demands.  Karrass says:

Whenever you as a buyer or seller want to convey your resolve and tell the other party that they have gone as far as they can go, escalation is an ethical alternative.

If you are dealing with an escalation (either ethical or unethical) here are five effective countermeasures:

1. Call the other party’s bluff.
2. Counter-escalate—change your offer or demand.
3. Give yourself time to think.
4. Consider walking away from the deal.
5. Get high-level people/decision-makers to sign a contract.

Remember, when you are using these countermeasures you are testing the other party. Your mission is to test vigorously.

How do you deal with escalation? Tell us in the comments.

Almost every negotiator has to present his or her offer. It could be argued that the better your presentation is, the better the outcome of the negotiation will be for you. How do you go about improving your presentation?

Use rhetorical flourish

According to a 2008 article in Business Week magazine, there are four ways you can improve your presentation, and they have to do with rhetoric. It is more about how you present the information than what the information is. Author Carmine Gallo recommends that you use these four rhetorical flourishes:

• Analogies
• Similes
• Metaphors
• Triads (delivering three concepts)

Use online software to jazz up your presentation

Some people use PowerPoint, others rely on paper handouts or even writing on a whiteboard. You may also consider online presentation software, which has lots of bells and whistles to give your presentation pizzazz.

Entrepreneur Maureen Carroll tells Inc. Magazine that her favorite online tool for presentations is Prezi. With Prezi, you can include text, graphics, videos and other items in your presentation, and zoom from thing to thing.

Mashable provides a list of thirteen online presentation applications that you can use as well.

Share your presentation online

There are several places online where you can share your presentation, in many cases for free. Wish some, you may be able to link them to your LinkedIn Profile or put on Facebook. Here are three websites to check out:

Slideshare: http://www.slideshare.net/

Sliderocket: http://www.sliderocket.com/

Slidebloom: http://www.slideboom.com/

What tips do you offer to improve presentation? Share in the comments.

Negotiations: How to Handle Objections

“Nothing will ever be attempted if all possible objections must first be overcome.” Samuel Jackson

There will always be objections—to your price, to your delivery, to your product or service, or maybe even to you. How you handle these objections will determine the success of your business negotiation.

The first step in handling objections is to try to understand the viewpoint. You don’t have to agree with the objection, but you must understand how the other party is thinking. Convey your understanding to the other party by re-phrasing the objection as a question. You can say something like “You think our delivery time is too slow?”

Handling objections also involves pre-negotiation preparation. For instance, if you are a seller, make a list of your product or service’s attributes, benefits and disadvantages. Do the same for your competitor’s product or service. Then, write down every conceivable objection to your product or service. Brainstorm with a group if possible. Come up with a list to counter these objections.

You will notice some objections are hard to handle and others are easy to handle. Easy-to-handle objections can always be refuted with available evidence (competitive pricing for example).

Other objections are harder to deal with. Dr. Chester L. Karrass suggests dealing with these by turning the objection into a yes-or-no question, and trying to elicit a “yes” answer. For instance, you can say something like “I see you are concerned with the price of this product. If you check our competition, you will notice that they don’t use the same material in producing the product, and you want this material if you want the product to have a 25-year life span, right?”

Dr. Karrass counsels that you should NEVER agree with the other party’s objection. In the example above, you would never agree point-black that the price is too high, instead you would only note that the other party thinks the price is too high.

What do you do to handle objections? What process do you follow?

“Time is free, but it’s priceless. You can’t own it, but you can use it. You can’t keep it, but you can spend it. Once you’ve lost it you can never get it back.”—Harvey MacKay

“The only reason for time is so that everything doesn’t happen at once.” –Albert Einstein

Time—how long or when—is a major factor in all negotiations. Some negotiators will say they did not have enough time to reach an agreement and some will say there was too much time.

How time is perceived may have to do with cultural background, and can affect a negotiation. In an article discussing time perceptions in Middle East peace negotiations, the following is worth noting:

“An article by Ilai Alon of Tel Aviv University and Jeanne Brett of Northwestern, however, cautions that good intentions alone may not bridge cultural differences. Specifically, they note that conflicting conceptions of time can thwart successful negotiation.”

According to Dr. Chester L. Karrass, time has power in a negotiation. Whichever party is constrained by time provides the other party with a source of strength.

Timing and schedules are crucial during a negotiation.  If you are on a tight schedule, or an internal deadline is looming, time can be a source of urgency. There are times of the year that are more beneficial to buyers than sellers (and vice versa). For instance, if it is the end of the month and a salesperson needs to meet a quota, he or she may be more willing to negotiate on price.

Dr. Karrass asserts that the timing of a final offer impacts its credibility—if you do it to early the other party may think you are bluffing.

“Time talks. It is the hidden language of negotiation.”—Chester L. Karrass

How does time affect your negotiations?

A year ago on Negotiation Space, we discussed how civility can save your negotiation. It is worth revisiting this now as the country marks Dr. Martin Luther King’s birthday on Monday, January 17 and also deals with the aftermath of the horrible tragedy in Tucson, Arizona.

It is hard to escape the calls for increased civility in political discourse. Although in the case of the Tucson shooting it is not clear that political rhetoric led the shooter to execute his rampage, it is easy to see how angry, heated exchanges can lead to violence. In terms of the civil rights movement, Dr. King advocated for civil disobedience—using quiet resistance instead of violence.

The issue for business negotiations is that attacking and creating an “us-versus-them” dynamic does not lead to agreement. Any negotiation starts with the premise that the parties are seeking to reach agreement. Insulting the other party is not going to result in compromise and finding common ground.

Dr. Chester Karrass writes:

“There are people who try to get what they want by becoming emotional, by embarrassing the other person or becoming a nuisance. Most of us become defensive when we encounter such behavior. We are not prepared for people in business to display emotions or act in an embarrassing way.”

Dr. Karrass goes on to say that people who act this way in a negotiation are using an intimidation tactic designed to make you less assertive in supporting your position.

To deal with incivility, you first must recognize that if the other party is being rude or otherwise unpleasant, it may be a negotiation tactic to put you on the defensive. Take the higher ground, but also stand your ground.

How do you deal with incivility in a business negotiation?

You’ve probably heard that getting through life is more like running a marathon than a sprint. That is because to succeed in a marathon you need endurance more than speed.

Marathon negotiations require endurance and focus and they often produce agreement. These types of long–usually overnight –negotiations, are seen often in diplomacy, international trade talks and in union-management bargaining.

Why are marathon negotiations so successful?

• The more time you spend with the other party, the better you will get to know each other.
• It isolates the parties at the table from their larger organizations, creating an “us versus them” dynamic.
• Repeating an argument many times makes both sides tired of it and more likely to want to compromise.
• Working on something so long makes the parties want to succeed (that is, to reach agreement)

Marathon sessions are more likely to be successful if you have very defined goals. It also may be that more highly charged issues benefit the most from the marathon treatment

However, as we said before, marathons are all about endurance. If you don’t have the stamina to hammer out an agreement over a very long stretch of time, you may actually be the party that buckles in or you may force a deadlock.

Most negotiators would probably prefer shorter sessions. Many would opt to have breaks and time-outs if the negotiations draw long.

In the end, it will depend on what is being discussed and who is discussing it to determine whether a marathon session will bring about agreement.

How do you tip the scales in your favor if you are trying to get a buyer to buy or a seller to sell? The answer is very simple: set a deadline. Deadlines work very well to force action.

If you need some prompts, here are some for sellers to use on buyers:

• The price goes up on [date].
• This option expires at the end of this month.
• The offer is only good for 15 days.
• In order to get delivery on [date], orders must be place four weeks ahead.
• To ensure availability, orders need to be in by [name your date].
• If we don’t get your deposit by [date], we can’t hold this item for you.
• Our container ships on [date].

If you are buyer and you want to get a seller to sell, use some of the tactics below:

• I am going to place the order on [date].
• I will not accept any more bids after [date].
• I need an estimate by tomorrow.
• Our fiscal year ends on [date] and we need to have our orders in by then.
• I am going on a three-week vacation starting Friday.
• The procurement folks are meeting tomorrow—is that a firm price?
• My boss has to give the final approval and he is will be at a retreat/conference/hospital next week.

According to Dr. Chester L. Karrass: “Some deadlines imposed by buyers are actually good for salespeople because they may make it easier for the salespeople to negotiate with their own management, pricing or engineering people.”

The next time you want to wrap up a sale, use time pressure to your advantage.

For both buyers and sellers, understanding pricing is crucial. Buyers want to know as much as possible about the price whereas sellers usually want to keep the details to themselves. How does a negotiator get around the secretive nature of pricing?

For buyers:

Are you a buyer trying to understand the seller’s pricing structure? It is important to get your exact cost breakdowns—in many cases so you can compare pricing with other vendors. Often, sellers will resist giving you this information, unless you can convince them that cost breakdowns will help their long-range interests.

There are several ways to convince the seller to provide you with the price breakdown:

1. Make the case that—due to policy and legal regulations–you cannot deal with sellers who don’t provide breakdowns.
2. Delay giving your order until you get the price breakdown.
3. Tie this purchase to future sales.
4. Leverage the competition: tell the seller they are providing the breakdowns.
5. If all else fails, protest to a higher authority.

For sellers:

Pricing is something most sellers try to keep close to the vest. Revealing too much could be troublesome and create a loss of negotiating power. If you are a seller trying to avoid providing a price breakdown, following are few tactics you could use:

1. Your company policy prohibits it
2. Detailed information is not available
3. Providing breakdowns is a large expense, due to the detailed nature of the work
4. Cost breakdowns involve proprietary information
5. If all else fails, keep saying no.

How do you deal with pricing issues? Please share your tactics (both as a seller and as a buyer) in the comments.

As we say good-bye to 2010, and get ready for 2011, what better time to come up with some New Year’s resolutions to improve your negotiations in the coming year.

Before we look forward to the New Year, it is a good idea to look back and review the year that was. A few questions to get you started:

• How many negotiations were you involved in?
• How did you or your team fare?
• What were the most contentious issues and how did you resolve them?
• Did you deadlock on anything?
• What did you find was the most useful negotiating strategy or tactic?
• If you did not reach a deal that you wanted, what was the main reason?

From your answers above, have you identified areas for improvement? Have you identified areas where you did well? What conclusions can you draw? Are there any trends?

First negotiation resolution for 2011: Continue doing what works.

Second negotiation resolution: Identify and improve your weak areas. Perhaps you should work on your strategizing or your market research.

Third negotiation resolution: Practice an assessment after every negotiation to discover what works and what doesn’t work. Keep a record of your assessments to identify patterns and changes over time.

Fourth negotiation resolution: Keep informed on general business issues and not just issues related to your industry. There may be issues looming that will affect all businesses and the economy in general.

Fifth negotiation resolution: Keep abreast of technological changes. Entrepreneur magazine has a good list.

Sixth negotiation (and business and even personal) resolution: Get and stay organized! For a starting point, read this article about business de-cluttering from USA Today.

Karrass and Negotiating Space wish you a very happy and successful New Year 2011!