Tag archive: value-of-satisfaction
Negotiation: Seeking satisfaction
When you enter a business negotiation, it is likely that you expect to achieve your goals. You are seeking to satisfy your expectations. Because you are practical, you know that your goals may be satisfied within a certain range of comfort (e.g. you are willing to pay anywhere from $x to $y). You also know that there is a probability you will not get exactly what you expect.
To explain how this works, we need to understand the expected-satisfaction theory. This theory discusses how both parties in a negotiation have expectations about the result of the negotiation, and that these expectations may not be equal.
In order to better understand the theory, let’s look at several underlying propositions:
• All transactions are based on future expectations of satisfaction
• It is improbable that both parties will gain equal satisfaction from a negotiation.
• Value systems are different, therefore parties may have different perceived satisfaction from achieving the same goals.
• Share bargaining is a rationing process where one party’s gains are based on the other party’s losses.
• Satisfaction is the most intangible yet important part of a negotiation.
• Parties can only assume what will satisfy the other party, and therefore, must test these assumptions.
Both parties enter a negotiation with expectations; and when a deal is reached, each party may have come away with a different level of satisfaction with the outcome.
Do you always meet your expectations in a negotiation? Are you always satisfied with the results?
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Making Concessions
In most negotiations, both sides move from their original positions. It is wise to leave yourself 'negotiating space' when you make your initial offer.
Each side to a negotiation usually compromises by making some concessions to reach agreement. Careful concessions help guide you through this process towards a mutually satisfying agreement. Below we list some tips on things to keep in mind when making concessions.
Don't Give Free Concessions
Never give a concession without obtaining one in return. Don't give concessions away free or without serious discussion. A concession granted too easily does not contribute to the other party's satisfaction nearly as much as one that they struggle to obtain.
Craft Your Concession Wisely
Concessions that are poorly made can serve to further separate the parties rather than bring them together. A concession may serve to raise the aspiration level of the other party if it is interpreted as a signal of your weakness. Don't be too quick to give a concession, and don't 'shoot from the hip' -- think through the potential impact of any concession you give. How a concession is made is as important as the value of the concession.
Keep Count
Never lose track of how many concessions you have made, regardless of their value. The overall number is important and can provide bargaining leverage. Keep a written record of your concessions.
Stay Flexible
Flexibility is like money in a checking account. Do not use up your "bank account of flexibility." Every concession should bring you closer to some goal. If you use up all of your potential concessions your bank account is down to zero and deadlock is harder to avoid. Always look for a concession that the other side will value more than what it really costs you.
Build In a Way to Retreat
Don't feel constrained to stick with a concession on a specific issue. The whole agreement is more important than individual issues. Indicate to the other side that all concessions you give are tentative and based on a satisfactory overall agreement (i.e. "tie a string"). Some people tend to stick to interim concessions when they should not. They fear that their integrity may be questioned if they retreat from concessions they have made. Such rigidity can be costly.
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Tense Recession Negotiations
Recessions create pressures which translate into tensions at the negotiating table. Sales are harder to close and margins are evaporating. Procurement and supply chain managers are under tremendous demands to reduce costs. Internal negotiations face increased competition for reduced resources.
Today your negotiating skills are critical—they might have become your survival skills! You are going to have to work harder – and smarter – to negotiate successful agreements.
The key issue today is how to negotiate a Both-Win outcome where both you and the other party benefit.
Don’t underestimate your negotiating power. So often we fail to examine the limits on the other party’s power. In a recession there may be more limitations on the other party. Only start a negotiation with full understanding of your strengths and a full examination of the potential pressures on the other side.
Slow down!
The longer a negotiation takes, the more you discover about yourself and the other party. This is the framework for a better agreement. A quick deal generally is a dumb deal. Not always but often. And a quick deal may fail if it leaves out what may be the most important part of a negotiation, which is making a better deal for both parties.
The cure for tense negotiations is to quickly transition into a search for a Both-Win outcome. This helps dissolve the tension. As soon as the other party senses what you are doing, their comfort level with you will soar. Suppose a salesperson says to a buyer: “Let’s stop talking about whether the price should be $1.00 or .95 cents. Let’s talk instead about ways to make this deal better for both of us. Do you need financing? How about staging shipments or just-in-time deliveries? What if I change the design like this? Can this specification be modified; it could save both of us some costs. Are there any ways we can increase the size of the project? When a salesperson does this, the potential for mutual satisfaction soars.
Examine Total Cost
The total cost approach is a powerful negotiating tool for any negotiation that is focused on prices. Direct the negotiation towards total cost instead of price. The price of what is being sold is only one component in the total cost of ownership. The process of identifying all of the components that go into ‘Total Cost’ provides a fertile environment for relationships to build between the negotiators and for each side to uncover potential Both-Win opportunities that are not focused on the single issue of price.
Many salespeople will have a tendency to convince themselves that if only they had lower prices they could bring in more business. They will increasingly discount their company and product advantages because buyers will be telling them that those ‘value added’ aspects don’t mean a thing today. Sure prices are important, but often price is not the crucial aspect of a negotiation. There can be many reasons to win or lose business besides price. The buyer who returns to their organization with the best price and nothing else is not considered a winner. The successful buyer is one who looks at the full picture, from quality to delivery to product specifications to support services and yes price. A buyer who gets what they need on the other issues can give a little on price. Will they? That’s going to be determined by negotiating skills.
Concessions and Satisfaction
The recession is going to condition everyone to ask for more and more concessions. How you make concessions is critical to success in negotiations. Make sure you do leave yourself room to negotiate, to come down. Why? You want to leave the other party with a degree of satisfaction. They want to leave the negotiation feeling that they have won some concessions, so make certain you allow for that. And don’t make large concessions. Large concessions leave the other party wondering what else they can get out of you. The same goes for making concessions too quickly. So go slow and small. Whenever you make a concession, learn to ask for something in return.
In a successful negotiation, in the final analysis what you are doing is creating satisfaction for the other party. In fact, all the advice above relates to that. These are ways to create satisfaction. If you happen to be in sales, do this and, even if you don’t land this deal, you will get a chance to negotiate on the next deal. You will have established a relationship, and that’s really how you will succeed in business. Recession or not.
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Negotiating During Economic Turbulence
During times of economic turbulence (LIKE NOW!) most negotiations get tougher. Don't reduce your bargaining power by making mistakes. Now is not the time!
Here are eight common negotiating missteps people make. Despite their good intentions "not to do that again," mistakes like these happen over and over. Don't fall into these negotiating traps!
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- Do not underestimate your negotiating power. Most people tend to have more power than they think. Make a systematic analysis of your power -- understand your strengths. Your negotiating power rests on a foundation of more than just competition or financial matters. Your commitment, knowledge, risk taking, hard work, and your negotiating skill are also real sources of power. Don't assume the other party knows your weaknesses. On the contrary, assume they do not, and test that assumption. You probably have more power than you think.
- Don't be intimidated by status. We all become so accustomed to showing deference to titles and positions that we carry these attitudes into the negotiation. Remember that some experts are superficial; some people with PHD's quite learning years ago; some people in authority are incompetent; a specialist may be excellent in their field but without skill in other areas; learned people, despite high positions of power and authority, sometimes lack the courage to pursue their convictions, or sometimes don't even have a strong conviction on the issue being negotiated.
- Remember not to be intimidated by statistics, precedents, principles or regulations. This is 2008 and economic times have changed. Some of today's decisions are being made on the basis of premises or principles long dead or irrelevant. Be skeptical. Many premises or principles may not apply today -- or do not apply for your specific situation. When necessary, challenge them!
- Do not forget that the other party is negotiating with you because they believe there is something they can gain by being there. You may discover that this negotiation, no matter how small, is part of a larger framework in the other party's objectives. This fact alone may provide you greater negotiating power that is apparent from the situation. Be positive in your approach. Assume the other party wants an agreement as much as you do. If it appears they do not -- find out why.
- Don't focus on your own problems or your possible losses if a deadlock occurs. In all likelihood, there are consequences for the other party as severe as your own. Concentrate on their problems and issues. These will reveal opportunities for possible ways to agree.
- Most negotiations require some concession making. Don't set your initial demands too close to your final objective. There is sufficient evidence to conclude that it pays to start high. Don't be shy about asking for everything you might want and more. Many times your demands are too modest, or too easy to achieve. The other party may not know what they want, or may have a set of values quite different from your own. Remember never to give a concession without obtaining on in return. Don't give concessions away free -- or at least without a thought provoking discussion with the other party about what they are getting. A concession granted too easily does not contribute to the other party's satisfaction as much as one that they struggle to obtain.
- It is a mistake to assume you know what the other party wants. It is far more prudent to assume you do not know, and then proceed to discover the realities of the situation by patient testing and discussion. If you proceed to negotiate a deal on the basis of your own untested estimates, you are making a serious mistake.
- Never accept the first offer (even if you like it). Many people do. There are two good reasons not to: First, the other party is probably willing to make some concessions. Second, if you do accept the first offer, there is a distinct chance the other party will feel that their offer was foolish and they should have asked for more. Immediately their satisfaction with the agreement will be reduced, and they may find ways to spoil the agreement later. In either case, the negotiator who takes the first offer too fast makes a mistake.
Your Negotiation Challenges
Negotiation is one of the most difficult jobs a person can do. It requires a combination of diverse traits and skills. The process of negotiating demands good business judgment and a keen understanding of human nature. There is no other area in business where the alchemy of power, persuasion, economics, motivation, and organizational pressures come together in so concentrated a fashion and so narrow a time frame. But – nowhere is the return on investment potential so high!
Today economic pressures around the world are causing organizations to put more pressure on their negotiators. In other words—you!
Buyers and supply management professionals are being asked to cut costs and increase efficiencies. Sellers and marketing professionals are being asked to increase volumes and increase margins. Engineering, system analysts, IT professionals, manufacturing managers, and HR managers are being asked to do more with less. There is a lot of negotiating going on!
Graduates of the Karrass Effective Negotiating seminar have a distinct advantage over any untrained negotiator. If, in your negotiations, you happen to encounter another Karrass trained negotiator – great! Both of you are now in an ideal position to create real value using the “Both-Win” negotiating techniques you learned at the seminar.
Here are some of the key attributes good negotiators exhibit:
1. An ability to negotiate effectively with members of their own organization and win their confidence.
2. A willingness and commitment to plan carefully; know the product/project, the rules and the alternatives; and the courage to probe and verify information.
3. Good business judgment; an ability to discern the real bottom-line issues.
4. The ability to tolerate conflict and ambiguity—it comes with the negotiating process.
5. The courage to commit oneself to higher targets and to take the risks that go along with it.
6. The wisdom to be patient—to wait for the story to unfold.
7. A willingness to get involved with the other party and their organization— to understand all the various personal and business issues.
8. A commitment to integrity and mutual satisfaction.
9. An ability to listen with an open-mind.
10. The insight to view the negotiation from a personal standpoint—discover the hidden personal issues that could affect the outcome.
11. Self-confidence based on your knowledge and your planning.
12. A willingness to use experts and an understanding of how a team might be valuable in the negotiation.
13. A stable person; one who has learned to negotiate with oneself and to laugh a little; one who doesn’t have too strong a need to be liked so they can feel free to disagree when the need arises.
Research shows us that skilled negotiators create better agreements. But we are not born with these skills, it takes training, practice and persistence. Use what you learned at the Karrass Effective Negotiating Seminar. Be confident in your ability to negotiate. You have the tools and skills to create good, long-lasting agreements that will satisfy all parties.
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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 dissatisfaction); 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.
consessions 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 receiver 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.
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Concessions -- Much Like Investing in the Stock Market
A negotiator should approach their concessions like an investor approaches the stock market.
Prudent stock market investors look to increase the value of their money. They look at growth potential, expected dividends, and risks associated with an investment. They attempt to compute the present value of the investment given the expected growth rate and dividend payouts. This present value is balanced against the associated risks, compared to other potential investments, and a decision is made to buy or not. Is the 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 present value of future satisfactions (and dissatisfactions), and compare that to making no deal at all or holding out for 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 head of each participant. Some participants are optimistic about the future. Others are pessimistic. Some are "I-want-my-kicks-right-now" people, while others are prepared to wait a long time.
Much of your strength as a negotiator comes from your ability to provide satisfaction in one form or another. You can help raise 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 them that future dissatisfactions are unlikely. If they want kicks now, show them how much more important kicks will be later.
Concessions can play a big role in creating the flow of satisfaction. But this flow between people is not as simple as it looks. Before you start making concessions to increase 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 receiver 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.
Every negotiator has the same role to perform: to raise the present value of future satisfaction for the other person and thereby help the other party reach a decision.
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