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Market Crunch: Using Your Negotiation Skills To Negotiate For Survival
One can sense a great deal of uncertainty in the world financial markets wherever you go - for the first time - regardless of geographical location.
Warren Buffet said that it is only when the tide goes out that one can see who is naked. In other words, it is easy to be prosperous when the economy is booming; it is only in tough times that we can clearly discern quality & commitment.
How can you use your negotiation skills, negotiation training or purchasing training to sidestep losses in the current economic climate?
Use 'Loss Framing'
People are more interested by evading loss than by achieving the very same gain. Kahneman & Tversky's Prospect Theory work describes how individuals will become risk seeking in an attempt to avoid a loss whilst they are more likely to be risk averse when pursuing rewards. In the way that we negotiate, we can make our counterparties aware of the items that they stand to lose if they don't agree to our requests and otherwise gain if they do.
Create Alternatives
In times of difficulty it is very important to look at other options so as to support our negotiation position. The ability to create options is vital in the context of negotiation and the power of options to securing a transaction is the key driver of our negotiation power.
Usually we wait until we recognise that we are not going to be able to do a transaction before we begin to think about alternatives. We risk entering into a less than ideal deal and if we have not studied all the options. Similarly, thinking about the options available to your counterparty in the negotiation will give you a clear view of their relative position of strength in the negotiation. If they have good options available then they will be more aggressive and if they don't, they will tend to be more agreeable.
Use Reciprocation
Reciprocation is a key principle of powerful influencing skills, because we are most likely to return to others the sort of behaviour that they demonstrate towards us. In times of difficulty it is key that we perform in the interests of the other side if we would like them to perform in our best interests. You can use this principle to your advantage by acting first and using the principle of reciprocation. Be careful and ensure that you record the obligation with your counterparty.
Move from price to value
Remove the focus off price and home in on the Total Cost of Ownership. For any service, product or solution that we buy or sell, there is always a trade off between value & price. If we only engage on the price, the best that we will do is to haggle and it is only once we start to explore the entire lifecycle of the service, product or solution that we trade, that we start to discover opportunities for negotiation. Before you even state price in negotiation, evaluate your counterparty's long term strategic fit, expertise, switching costs should they wish to change a business partner, financial steadiness and potential risks or negative consequences that may happen when the other side doesn't manage to reach agreement with you.
Remember that the magic in negotiation is found in the quality of your planning. In times of economic uncertainty it is key to dedicate enough time to preparing for your negotiations.
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