Influence

Negotiating Myth #3 Always make the first offer

One great myth of negotiating is to never make an offer until they have made an offer first. This false theory suggests that you give away too much if you make the first offer. In practice the opposite is true. You are better off making the first offer in a negotiation for three reasons:

1. It acts as an anchor around which the rest of the negotiation revolves.
2. It's much easier to be bargained down than to bargain the other side up.
3. When you are making concessions you can always ask the other person for a concession too.

So next time you are negotiating be sure to make the first offers.

Negotiation Myth #2

Where there is a single issue negotiation such as at a market where you might haggle over the price of a carving, there is a fixed pie. A fixed pie means there is no chance of exploring ways of both getting more – there are only so many slices of the pie to divide. In most commercial negotiations there are three characteristics which make the pie elastic in size and desirability:

1. More than one issue
2. Each party values each issue differently
3. Interests may be complementary

An outcome can be reached by both people which is better for both than if they assumed there was a fixed pie. Many negotiators don't reach these types of agreement because they assume their interests are conflicting. The assumption of conflicting interests may also lead to devaluing concessions made by the other party since we think that "If they are conceding it to us then it can't be too valuable to them".

So make your first approach one where you attempt to work with the other person to expand your outcomes and the number of alternative ways of getting them. You will then both end up better off.

Download the Metta Negotiation Planner

Effective Strategy is key to successful negotiating, since most good deals are won in planning as much as in execution. Strategy means we must arrive at a series of potential bundles of outcomes that leave us better off than not reaching agreement. You can download the Metta approach to planning negotiations below:

Download SalesNegotiationPlanner.pdf

Negotiation Myth #1

Be careful what you start. Situations worthwhile entering may not be worthwhile pursuing. Continuing a course of action beyond what is rational is common in negotiation – the initial goal may remain despite new information that changes the value of the outcome. Be aware of persistence and consistency in this regard. We must recognise that time; money and effort already expended are sunk costs that cannot be recovered. The reference for whether a bargain is of value is whether it is of present value. When looking at options consider:

Present (costs + benefits) + Future (costs + benefits)

So why do we stay committed to a sometimes irrational course of action?

• To justify prior decisions and offers
• Perception often filters in what confirms the decision and filters out what goes against it.
• Consistency is valued – we like to act consistent with our prior actions because we assume that if we did it before it must be a good idea.

Sometimes winners quit because to keep negotiating will give them a deal that leaves them worse off than no deal at all.

What is negotiating?

I will not tell you how to negotiate - you already know how - you have been negotiating since you were a child, negotiating with your parents before you could speak and with everyone else since.

What I will teach you is how to negotiate better.

Whether you realise it or not you are a negotiator, and you must be negotiating at a high level to be performing in your role.

Negotiation is a part of life – whether you negotiate with your partner over what movie to see, with your boss about pay rise, with a car dealer about your trade in price – you are always negotiating.

Negotiating is a basic means of getting what you want from other people.

It's important for you to examine very closely what your negotiation style is and introduce you to mastery skills – so you get more of what you want personally and professionally.

Negotiating without a net

Dominick Misino was a New York Police Department Detective for 22 years. He spent the last six years of his career as a primary negotiator in hostage crisis situations where he persuaded a range of people from psychopaths to armed criminals to not harm their hostages. In the 200 incidents he handled he never lost a life. His most famous case was in 1993 successfully persuading the hijacker of Lufthansa Flight 592 to take the pistol away from the pilot’s head surrender himself at Kennedy Airport. He had only 45 minutes to build a relationship with the hijacker and bring the plane down safely.

He offers good advice for dealing with people that are in operating from an extreme version of the Power Leading Value. The people he was persuading were often very agitated, angry and erratic. The seven keys to what he suggests are:

1. Be respectful and sensitive to his needs, even at this level if you give something to somebody they feel obliged to give something back. Force is a last resort

2. Ask him if he would like you to tell him the truth. When they say yes you have set up an early agreement, and all large agreements are just a series of small ones.

3. Be a good listener – ask him to tell you his side of the story. Also be alert for the emotion that may be behind the words. Let the other person vent if they are angry

4. Be empathetic and understanding but remember that you never know exactly how someone else feels

5. Be aware of your strong emotions and occasionally let them out provided you are aware of what you are doing and the potential risks.

6. Separate the decision making from the negotiation

7. Allow the other person to save face. Find a way for them to maintain their pride if they agree to change their thinking. Often in a red situation he knows he’s wrong but his pride won’t allow him to agree with you.

Read more in Negotiating Without A Net: A Conversation with NYPD’s Dominick J.Misino, Harvard Business Review October 2002. See also http://www.hostagenegotiation.com/

How to build price and value

The most popular question I’m asked by salespeople I work with is “How do I get a better price for what I am selling?” It’s a question that gets to the whole art of the sale. If my primary focus is on price it means that my customer can’t differentiate between the cost of the product and the price she is willing to pay. The bigger the difference between these two things the more she will pay. A low differentiator means the sale is really just taking an order. So how does a seller add value and get a bigger price? Value starts with the customer because it’s a measure of how much you know about what they want. This means spending more time with them, studying their issues and opportunities, asking them more questions and working with them. The measure of your willingness to do this is the measure of the value you will create and the price the customer is willing to pay. So to build your price go ahead and invest in building real customer value better than anyone else can.

The Snapper mowers value proposition

Fast Company magazine recently introduced me to Snapper lawn mowers. Snapper Mowers are made in McDonough Georgia. An entry level mower is made on a line by 28 people who make 265 mowers in an 8 hour shift, that’s a new mower from loose parts to tight box every 109 seconds. They have made the distinctive red mowers since 1951. The entry level model sells at $US350. At Wal-Mart you can buy a mower for $99. So you could buy a new mower every year. Wal-Mart approached Snapper and said we can double your business in 12 months. The CEO Jim Wier said no. He said:” We’re not obsessed with volume. We're obsessed with having differentiated, high end, and quality products." Sometimes in sales knowing when to say no is necessary to maintain your brand, your integrity and the value of what you are selling. I like the the Snapper mower value proposition too: "We manufacture a complete line of residential lawn care and snow removal equipment that’s easy to own, easy to use and easy to maintain." So they are not selling lawn mowers but lawn care. The full range of Snapper lawn care is available at www.snappper.com

What are you really selling?

When you think about creating value propositions for your clients or customers think about what they are really buying. A reality TV show in the US recently told the story of two sales managers that illustrates this well.

One story featured Chopper who manages 50 car salesman in his Los Vegas car dealership. Chopper was the master of his three ring sales circus and he wore mirrored sunglasses that matched his ruby ring. He says he doesn't sell cars he sells lifestyle. He says that when someone asks "what are you driving?" they are really asking “who are you?” Chopper says he sells lifestyle and achievement to people, the car is just a demonstration of it.

Kimberly the local sales director for Mary Kay cosmetics in Texas, was the second story. She says not every woman wears make-up but every woman looks better when they do. She says she is selling beauty, romance and being forever young. The Mary Kay cosmetics sales people she works with are taught to sell the promise of feeling great by looking great and the more her customers believe in the promise the more cosmetics she sells. You may not be selling cars or cosmetics but it is still vital to ask the question “what am I really selling?” and “what do my clients really want?” Your clients could be looking for a whole range of things that you could represent things like a sense of accomplishment, security or control. The best way to find this out is to ask them. So what’s important to your clients?

Three Great Negotiation Books

You Can Negotiate Anything by Herb Cohen Cohen defines negotiating as "the use of information and power to affect behaviour within a web of tension." This is a useful introductory book on negotiation that's full of great anecdotes and practical real life and business examples.

Getting to Yes by Roger Fisher and William UryFisher and Ury define negotiation as "a basic means of getting what you want from others". It has very useful approaches to interest based negotiating and BATNA (best alternatives to negotiated agreements).

Negotiating Rationally by Max Bazerman and Margaret Neale"Negotiating Rationally means making the best decisions to maximise your interests. However we are not concerned with getting to yes." says Bazerman and Neale who remind us that we have to first work out what a good deal looks like and then go ahead and bargain for it. What to read? I recommend you read both Getting to yes and Negotiating Rationally, but if you read just one book make it Getting to Yes.