Business Negotiation July 1, 2013

Act One-Before the Negotiation Begins

Act One takes place before the conference, sometimes long before. For a buyer of consumer or industrial goods or services, it starts as early as when the buyer first contemplates the purchase and considers the choices available. For the seller, Act One starts at first contact with the prospective buyer and ends when the parties begin to negotiate. For both buyer and seller, Act One is longer than the few days prior to negotiation which we usually think of as planning and preparation time. Act One in the real world of business may continue for days or, in some cases, for years.

Act One is when the seller can best learn about the buyer’s needs and how dependent they are on the seller’s service or product. The seller, at this early stage, can determine who in the buyer’s business organization favors them, who the real decision-makers are, how the product or service is to be used and where the money to pay for it will really come from. It is far more difficult for a seller to get answers to these questions after talks begin.

Act One is also when the buyer can learn about the salesperson, how they are paid and given bonuses, how they are to be measured as individuals, and how they relate to others in their organization, such as the price or engineering departments. At this early stage, buyers can get cost and production information that would be unobtainable at the talks themselves-when both parties are wary of one another. Act One is when buyers can determine how badly the seller needs the business and what they will do to get it. Act One is off the record in most cases.

An alert buyer or seller can use this first act to reduce the tension of negotiation. They can iron out the tough issues before the formal talks begin and use the conference time itself to settle on terms and conditions of a less contentious nature.

It is interesting to note that this is what the Japanese do routinely in dealings between their buyers and sellers. They work so closely together during Act One that the negotiation which follows is, for the most party, ceremonial. Both parties in Japan know how to make Act One an important part of the bargaining process. We in America do not.

In my next post, I will discuss Act Two-The Bargaining Talks Begin and Act Three-Moving Toward Agreement.