World expert Dr Victoria Medvec lays out the negotiation skills you need to do better deals
Is your company gearing up for a big negotiation? Perhaps you're in the process of finalising a new deal or hammering out the details of an important contract. In any case, it's essential to have the best tools and techniques at your disposal. At our global headliner event Victoria Medvec – High Stakes Negotiation, we learned the negotiation frameworks Dr Medvec teaches to clients like Google, CISCO and IBM.
Negotiation traps you might fall into
A world-renowned expert on negotiation skills, Dr Victoria Medvec, author of Negotiate Without Fear and CEO of Medvec and Associates, says too many people negotiate the wrong deal.
· They negotiate what is standard or typical.
· They fail to establish ambitious goals for the negotiation.
· They focus on highly quantified issues in the negotiation.
· They tell no story, or the wrong story, in the negotiation.
· They use a single offer when negotiating. They do not get the benefits of a multiple offer strategy.
Don’t negotiate what is standard or typical
Most companies stick to what they know when they are negotiating, says Victoria. For example, a consulting firm sticks to negotiating on fees, scope of work, and staffing.
If you’re an employee, it is usually salary or a promotion.
If you’re a customer, it is most often price.
That's because we focus on what is important to us. Too often we overlook issues that are important to the other side.
What are your objectives in this negotiation?
Think carefully about your objectives for the negotiation. You need to particularly focus on the importance of including issues that a) address the other side’s pressing business needs b) build the relationship with the others side c) differentiate yourself, your company, or your product, and d) maximise your own outcome.
“Most of us would like to have relationships with senior leaders. We need to lay down the breadcrumbs to create the pathway into the C-suite leadership,” says Victoria.
Differentiate yourself as a buyer or supplier
If you’re a CEO you should have your team differentiating your services in every customer interaction. What is unique about what you offer, that the other side cares about? If you have an in-house design team, make every negotiable issue come back to “because we have an in-house design team.” Offer to deliver a customised design in a few weeks “because we have an in-house design team.” Offer design modifications “because we have an in-house design team.” See the pattern?
Prepare, prepare, prepare
Dr Medvec says too few people prepare before they negotiate. You should get your hands on as much information as you can about the company you are negotiating with. Look at analyst calls, presentations from investor conferences, or look up the company online. This helps you understand your other side’s pressing needs. It also gives you your biggest source of power in any negotiation: knowing if the other side has strong alternative options to your product, service or business.
Finding their BATNA weakness
You will be in better negotiating position if you know what you’re up against. This is called BATNA and it stands for Best Alternative To Negotiated Agreement. It’s often also called “Plan B” (and C and D). It’s also how you assess the strength of the other side’s negotiating power. How strong is their BATNA/Plan B? Who else would they sell to? Lease to? Buy from? If their BATNA is low, you have better negotiating power.
Your goal should be based on the weakness of the other side’s options; that is, the weakness of their BATNA. Negotiate Without Fear lays out examples of the BATNA Analysis Tool you can use, a series of questions that score your own, and the other side’s, BATNA.
Here are a few example questions:
· What are the supplier’s alternatives to selling to you?
· How strong are your relationships with the customer’s senior leaders?
· How critical are you to the customer’s core products?
· What are the customer’s switching costs if they leave you?
· Does the supplier already sell to your competitors?
Use RFPs (Request for Proposals) as BATNA generation tools. They help to raise your BATNA (the number of your Plan Bs). The objectives of RFPs should be to create competition, learn about alternatives, gain information, and select who should advance to the negotiation phase, not to select a winner.
Set ambitious goals
Many negotiators use “cost plus” as the outcome they drive for in a negotiation. But people who set ambitious goals get a better outcome. Cost plus just isn’t ambitious enough, says Victoria Medvec, and can mean you leave money on the table. She says that costs should drive your bottom line, but should have nothing to do with your goal. Your goal should be based entirely on the other side and the weakness of their BATNA (their alternatives or Plan B).
Speak first in the negotiation
In Negotiate Without Fear Victoria lists her Five “Fs” to become a fearless negotiator.
1. Go FIRST. Research shows the person who offers first does best. You get the anchoring advantage, and you get to frame the discussion. You also get to set the table with the right issues.
2. FOCUS on them. Craft a rationale that shows how uniquely you meet their pressing needs.
3. FRAME your offer correctly: Highlight loss words (eg. risk, cost, exposure) to move them off the status quo to try something new, and gain words (benefit, improve, value) to maintain the status quo.
4. Be FLEXIBLE: leave yourself room to concede and use multiple option offers to reframe the discussion to “how” (not “if”) we will work together.
5. No FEEBLE offers. Don’t say Can you give us a better price? Make a clear, specific ask.
No single issues, go for Multiple Equivalent Simultaneous Offers
There’s a great way to look more reasonable, sincere, credible, cooperative, and flexible in a negotiation. It’s always using MESO: Multiple Equivalent Simultaneous Offers. Starting a negotiation with three offers (call them “options” to your customer) will engage the other side in discussion and allows you to communicate a more compelling message about how your business addresses the other side’s pressing business needs. People love choice. The three offers should have relatively the same value to you, so they are considered equivalent, but it is likely the other side will value them quite differently. Put storytelling issues (customisation, industry updates, order from a call centre), tradeoff (volume discount, length of contract, payment terms) and contentious issues (price) in each one of your offers.
Think of a train, and their needs as the engine
Dr Medvec asks us to imagine negotiation as a train, with the engine being the other party’s pressing needs. Behind the engine is another car, this is how you will uniquely address the pressing needs. The third car back is the guarantees on how your differentiators uniquely address their pressing needs. At the very back, “the caboose” is price/salary. Most people lead with the caboose, she says, and that just makes the train go backwards!
Dr Medvec trains executive teams on eliminating the fear of having an emotionally charged, contentious, single-issue discussion (usually around price). The biggest mistake, she says, is not putting the right issues on the table.
“I always advise my clients that it is nice if your customers like you but essential that they need you,” she says.
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