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Lecture 1

6 Characteristics of a Negotiation Situation


1. Two or more parties involved
It involves two or more individuals, groups or organizations
2. Conflict of needs & desires
what one party wants is may not be what the other wants
3. Voluntary process
Negotiators negotiate by choice
Believe that they can get a better deal by negotiating than accepting what is voluntarily
exchanged
4. Give & take process
Parties move away from their opening positions to middle position (compromise) to reach an
agreement accepted by both
5. Preference for negotiation & search for agreement to fighting openly
Parties prefer to invent their own solution that resolves the conflict
No fixed rules on how to resolve the conflict
6. Management of tangibles & resolution of intangibles
Intangible factors (psychological motivations) that may directly or indirectly influence parties
in negotiation
Examples: the need to win, look good, protect ones reputation
Have enormous influence on negotiation processes & outcomes

Interdependence
Parties need each other to achieve their desired objectives / outcomes.
Either they need to coordinate with each other to achieve their own objectives
Or choose to work together because joint efforts can produce better outcomes than individual
effort

Types of Interdependence affect Outcomes


Competitive Goals: Goals of both parties are interconnected such that only 1 party achieve
his/her goal Zero-sum / distributive situation, -ive correlation between their goal attainments
Collaborative Goals: Goals of both parties are linked such that when 1 partys goal
achievement helps the other party achieve his/her goal as well Non-zero-sum / integrative
situation, +ive correlation between their goal attainments.
Two types of goals:
Convergent goals (similar goals) interlocking
Divergent goals (non-similar goals)

Lecture 2
Negotiation Strategies
Distributive Strategy: Claiming all the profit or the maximum share for
oneself winning it all.
Integrative Strategy: Creating value (expanding the pie) and finding
solutions that best fit the needs of all or most parties -especially over time.
Mixed-Motive Strategy: Expanding the pie and meeting the needs of all or
most parties as much as possible while claiming an appropriate share.

Negotiation Styles
Competitive Style: To try to do better than all others.
Cooperative Style: To try to be sure that the feelings of all are properly
dealt with.
Independent Style: To try to find the best possible outcome regardless of
the achievements and feelings of others.

Alternatives Shape Interdependence


Desirability of alternatives to working together is used to evaluate interdependence
Best Alternative to a Negotiated Agreement (BATNA)
Need to understand ones & counterparts BATNA

What is best alternative to a negotiated agreement


(BATNA)?
BATNA (best alternative to a Negotiated Agreement) is a better alternative to a negotiation (the
alternative that one would take in case of not reaching an agreement). Before any negotiation, we
must determine our BATNA and thus know when no agreement is better and retire (when
possible agreement less favorable than our BATNA), for example, if we calculate that we can
charge a client 1000, that amount will be our BATNA when negotiating with a second client, in
this case, our goal is to reach an agreement where we pay 1000 or more and preferably, should
offer a lower figure, we know that it is preferable to a non- agreement and seek the first
customer.
Some peculiarities of BATNA is dynamic, ie constantly changing, and it is psychological, ie

based on a personal perspective, which tends to be subjective (eg, a seller might consider that his
product is worth much more than actually worth).

Mutual Adjustment
One of the key causes of changes occurring during negotiation
One assumption for successful mutual adjustment: the more information one has about the
other party, the better
However, too much information may only confuse the parties involved
When one party adjust his position to the another nearer to the counterparts position, its
concession making
Parties involved will likely make similar concessions until a mutual agreement is reached.

Two dilemmas in Mutual Adjustment


Dilemma of honesty
o How much to tell the other party?
o Revealing too much info puts one in a vulnerable position, susceptible to being taken
advantage of
o Revealing too little info may not help in allowing both parties to look for an agreement
Dilemma of trust
o How much should one believe what the other party says?
o Believing in all of the other partys words may put one in disadvantage
o Not believing in the other partys words may make it difficult to find an agreement

Value Claiming & Value Creation


Two types of negotiation:
o Distributive
o Integrative
Distributive is associated with Value Claiming
o Only 1 winner
o Each party tries to claim as much as possible from the fixed resource
Integrative is associated with Value Creation
o Win-win strategies applied to create win-win situations
o Finding ways for all parties to meet their goals and objectives by either finding more resources
or coordinating and sharing the resources
Most negotiations have a combination of value creation & claiming processes
o Negotiators must be able to identify situations that require more of one approach than the other

o Negotiators should be versatile and comfortable with the use of both approaches
o Negotiators tend to see problems as more distributive/competitive than they really are

Key differences between Negotiators


Differences in interests
o Items are seldom regarded equally in negotiations
Differences in judgments about the future
o People hold differing views about the future value of something
Differences in risk tolerance
o Different people have different risk appetite
Differences in time preference
Time has different impact on different parties

Lecture 3
Conflict
It is defined as a disagreement in interests, views or positions.

Levels of Conflict
1. Intrapersonal or intra-psychic conflict
a. Occurs within a person
b. Can include conflicting ideas, emotions etc.
2. Interpersonal conflict
a. Occurs between individuals
b. Clash of interests, views between e.g. Co-workers, classmates, friends
3. Intragroup conflict
a. Occurs within groups or organizations
b. Affects groups ability to function well
4. Intergroup conflict
a. Occurs between different groups or organizations
b. Most complex form of negotiation

Negotiation Styles/Strategies

5 major strategies for Conflict Management


Competing is a style in which one's own needs are advocated over the
needs of others. It relies on an aggressive style of communication, low regard
for future relationships, and the exercise of coercive power. Those using a
competitive style tend to seek control over a discussion, in both substance
and ground rules.
Consequence - They fear that loss of such control will result in solutions
that fail to meet their needs. Competing tends to result in responses that
increase the level of threat.
Accommodating, also known as smoothing, is the opposite of competing.
Persons using this style yield their needs to those of others, trying to be
diplomatic.
Consequence -They tend to allow the needs of
the
group
to
overwhelm their own, which may not ever be stated, as preserving the
relationship is seen as most important.
Avoiding is a common response to the negative perception of conflict.
"Perhaps if we don't bring it up, it will blow over," we say to ourselves. But,
generally, all that happens is that feelings get pent up, views go
unexpressed, and the conflict festers until it becomes too big to ignore.
Consequence - Like a cancer that may well have been cured if treated
early, the conflict grows and spreads until it kills the relationship. Because
needs and concerns go unexpressed, people are often confused, wondering
what went wrong in a relationship.
Compromising is an approach to conflict in which people gain and give in a
series of trade-offs. While satisfactory, compromise is generally not
satisfying. We each remain shaped by our individual perceptions of our needs
and don't necessarily understand the other side very well.
Consequence -We often retain a lack of trust and avoid risk-taking involved
in more collaborative behaviours.
Collaborating is the pooling of individual needs and goals toward a
common goal. Often called "win-win problem-solving," collaboration requires
assertive communication and cooperation in order to achieve a better
solution than either individual could have achieved alone.
Consequence - It offers the chance for consensus, the integration of needs,
and the potential to exceed the "budget of possibilities" that previously
limited our views of the conflict. It brings new time, energy, and ideas to
resolve the dispute meaningfully

Lecture 4
Strategy and Tactics of Distributive Bargaining
Distributive bargaining situation:
Win-lose: Distributive bargaining (Claiming value)
Integrative bargaining situation:
Win-win: integrated bargaining (Value creating)

Distributive Bargaining situation


Claiming Value
Resources are limited
Maximize your own gain
If you are in relationship than bargaining is not easy with that party and if no
than bargaining is easy.
A Negotiated Agreement: establish a bargaining zone (Basics)
1.
2.
3.
4.

The Role of Alternatives to a Negotiated Agreement


Settlement Point
Bargaining Mix
Fundamental Strategies

Resistant Point
The objective of both parties is to reach an agreement
as close to the other partys resistant point as
possible.
Both parties must believe that the settlement is the
best they can get.
Another factor will aff ect the satisfaction with the
agreement is whether the parties will see each other
again.

The buyers view of the house negotiation: (A) vs (B)

The
Buyers view of the house negotiation (Extended)
The Role of Alternatives to a Negotiated Agreement

Th
e buyer s view of the house negotiation (Extended with
alternatives)
Positive bargain Range= Buyer resistance point > seller
resistance point
Negative bargain Range= Buyer resistance point< seller
resistance point

Bargaining Mix
The package of issues for negotiation is bargaining mix. Each item in
the mix has its own starting, target, and resistance point.
Negotiators need to understand what is important to them and to
the other party, and they need to take these priorities into account
during the planning process

Fundamental Strategies
In the previous example, the buy has four fundamental strategies available:
(1) To push for a settlement close to the sellers resistance point.
(2) To convince the seller to change her resistance point.
(3) If a negative settlement range exists, to convince the seller to
reduce her resistance point.

(4) To convince the seller to believe that this settlement is the best that
is possible.

Discovering the Other Partys Resistance Point

. The more you can learn about the other partys target, resistance point,
motives, feelings of confidence, and so on, the more able you will be to strike
a favorable agreement.

. To influence the other partys perception, however, they must establish


some points effectively and convincingly.

Infl uencing the Other Partys Resistance Point


(1) The value the other attaches to a particular outcome;
(2) The cost the other attaches to delay or difficulty in negotiations;
(3) The cost the other attaches to having the negotiation aborted.

To explain how these factors can affect the process


1. The higher the other partys estimate of your cost of delay or impasse, the
stronger the other partys resistance point will be.
2. The higher the other partys estimate of his or her own cost of delay or
impasse, the weaker the other partys resistance point will be.
3. The less the other values an issue, the lower their resistance point will be.
4. The more the other believes that you value an issue, the lower their
resistance point may be

Tactical Tasks
(1) Assess the other partys target, resistance point, and cost of
terminating negotiation.
(2) Manage the other partys impressions of a negotiators target,
resistance point, and cost of terminating negotiation.

(3) Modify the other partys perceptions of his own target,


resistance point, and cost of terminating negotiation.
(4) Manipulate the other partys actual cost of delaying or
terminating negotiation.

Pattern of Concession Making

Lecture 5
Positions Taken during Negotiation
Eff ective distributive bargainers need to understand the process of
making positions during bargaining, including the importance of
opening off er, opening stance, and the role of making concessions
throughout the negotiation process.
Changes in position are usually accompanied by new information
concerning the others intentions, the value of outcomes, and likely
zones for settlement.

Opening Off ers


The fundamental question is whether the opening off er should be
exaggerated or modest.
There are at least two reasons that an exaggerated opening off er is
advantageous.
Two disadvantages of exaggerated opening off er are: (1) it may be
summarily rejected by the other party; (2) it communicates an
attitude of toughness that may be harmful to long-term
relationships.

Opening Stance

Will you be competitive or moderate?


It is important for negotiators to think carefully about the
messages that they wish to signal with their opening stance and
subsequent concessions.
To communicate eff ectively, a negotiator should try to send a
consistent messages through both opening off er and stance.

Initial Concessions
First concession conveys a message, frequently a symbolic one to
the other party that how you will proceed.
Firmness may actually shorten negotiations, there is also the very
real possibility, and however, it will be reciprocated by the other.
There are good reasons for adopting a fl exible position.

Role of Concessions
Concessions are central to negotiation.
Negotiators also generally resent a take-it-or-leave-it
approach.
Parties feel better about a settlement when the
negotiation involved a progression of concession.
A reciprocal concession cannot be haphazard.
To encourage further concession from the other party,
negotiators sometimes link their concessions to a prior
concession made by the other party. (Since you have
reduced your demand on X, I am willing to concede on Y.)

Final Off ers


1. Eventually a negotiator wants to convey the message that there
is no further room for movement---that the present off er is the fi nal
one. (e.g. This is all I can do. OR, This is as far as I can go. . A
negotiator might simply let the absence of any further concessions
in spite of urging the other party.)
2. one way negotiators may convey the message that an off er is
the last one is to make the last concession more substantial. (OR, I
went to my boss and got a special deal just for you.)

Closing the Deal


Several tactics are available to negotiators for closing a deal:
Provide alternative
Assume the close
Split the diff erences
Exploding the off ers
SweetenersIll give you X if you agree to the deal.

8 Hardball Tactics
1. Good Cop / Bad Cop
a. Bad cop plays the role of the bad guy who takes tough measures
(threats, intimidation) against the targeted party
b. Bad cop leaves the negotiation table for the Good cop to come and
offer the targeted party an easy way out of the situation
c. The easy way out option is meant for the targeted party to yield to the
teams demands
Advantages
Often results in negotiated agreements

Disadvantages
easily seen through by targeted party
Can be countered easily by clearly exposing the negotiators plot
Distracts the negotiators from the negotiation goals
Dealing with Good Cop / Bad Cop
openly exposing the negotiators plot

2. Lowball / Highball
a. Starts the negotiation with a unreasonable low (high) opening offer
Advantages
Aims to get the other party to re-evaluate his opening offer & move closer
to his resistance point
Disadvantages
other party may not want to negotiate at all
requires a skilled negotiator to explain his extreme opening offer if the
other party continues to negotiate
Dealing with Lowball / Highball
Best tactic: ask for a more reasonable opening offer instead of a counter
offer
Insisting on a reasonable opening offer before negotiating further
Show that you are familiar with the bargaining mix and therefore you will
not be fooled
Show your displeasure of such tactic used against you by threatening to
leave the negotiating table
Come up with an extreme counter offer

3. Bogey
a. Negotiator pretends that an unimportant issue is quite important to him
b. Use this tactic to trade and make concessions for issues that are really
important

Advantages
Difficult to defend against
Disadvantages
Difficult to enact
May backfire if the other party takes you seriously and therefore giving you
what you want to bogey away
Dealing with Bogey
Question why the negotiator wants a particular outcome or makes a
sudden reversal in positions
Not conceding to what the negotiator wants after his sudden reversal in
position

4. The Nibble
a. Negotiator adds a small item (the nibble) to the agreement when the both
parties had spent significant time & effort in negotiation and the agreement
is near
Advantages
None
Disadvantages
although the nibble is small in size, its enough to upset the other party
the other party may be motivated to seek revenge in future negotiations
Dealing with The Nibble
Ask the negotiator What else do you want? every time he asks for a
nibble, until all issues are raised and identified
Come up with ones own nibbles in exchange for the negotiators nibbles

5. Chicken
a. The negotiator uses a big bluff with a threatened action, in order to force
the other party to chicken out and yield to their demands
Advantages
Non

Disadvantages
Turns the negotiation into a high-stakes gamble for both sides
Makes it hard to distinguish whether either party will follow through on
his/her stated course of action
Dealing with Chicken
Preparation before negotiation helps to understand both parties situations
Using external sources to verify whats exchanged in the negotiation

6. Intimidation
a. Many tactics take the form of intimidation
b. Common point of these tactics: the use of emotional ploys to force the
other party to yield
c. Other forms of intimidation: increasing the appearance of legitimacy &
guilt
d. All these tactics make intimidator feel more powerful
e. leads the targeted party to give in due to emotional rather than objective
reasons
Dealing with Intimidation
Discuss the negotiation process with the intimidator, stating that you
expect a fair negotiation process
Ignore the intimidation
Using a team to negotiate with the intimidator
o Not everyone in the team is intimidated by the same things
o Team members provide mutual support to one another through the process

7. Aggressive Behavior
a. Similar to intimidation tactics
b. being aggressive in establishing your position and attacking the other
partys position eg.
i. Asking for best offer early in the negotiation
ii. Getting the other party to explain his position by justifying item by item

c. Getting the other party to make many concessions


Dealing with Aggressive Behavior
Stop the negotiation to discuss the process itself
Using a team of negotiators to negotiate with the aggressive party

8. Snow Job
a. To overwhelm the other party with large amount of information, such that
the other party have a problem determining which information are real or
important
b. To use technical or expert language such that a non-expert party cannot
understand and would simply acknowledge it just to avoid embarrassment
Dealing with Snow Job
Not to be afraid to ask questions until a clearly understood answer is
obtained
Use of technical experts to discuss and verify technical issues
Looking out for inconsistency in the negotiators answer or response & ask
if in doubt

Dealing with typical hardball tactics there are several


choices about how to respond.

Discuss them.
Ignore them.
Respond in kind.
Co-opt the other party

Lecture 6
Integrative Negotiation
Strategy and Tactics of Integrative Negotiation
What Makes Integrative Negotiation Different?
Focus on commonalties rather than differences

Address needs and interests, not positions

Commit to meeting the needs of all involved parties

Exchange information and ideas

Invent options for mutual gain

Use objective criteria to set standards

Claiming and Creating Value

Key Steps in the Integrative Negotiation Process


Identify and define the problem
Understand the problem fully
--- Identify interests and needs on both sides
Generate alternative solutions
Evaluate and select among alternatives

Identify and Define the Problem

Define the problem in a way that is mutually acceptable to both sides

State the problem with an eye toward practicality and comprehensiveness

State the problem as a goal and identify the obstacles in attaining this goal

Depersonalize the problem

Separate the problem definition from the search for solutions

Understand the Problem Fully Identify Interests and Needs

Interests: the underlying concerns, needs, desires, or fears that motivate a negotiator

Substantive interests relate to key issues in the negotiation

Process interests are related to the way the dispute is settled

Relationship interests indicate that one or both parties value their relationship

Interests in principle: doing what is fair, right, acceptable, ethical may be shared
by the parties

6 Key Strategies for Reaching Integrative Negotiation


1. Expand the Pie
Effective for negotiations that experience shortages in resources that fails to meet both
parties objectives and interest
Assumes that the enlargement of resources will solve the problem
Solution:
Add resources (expand the pie) so that both parties can achieve their objectives
How?
Ask diagnostic questions, such as, Is there a resource shortage, How can resources be
expanded to meet both parties needs/interest?
Make package deals
Unbundle issues
Advantages:
requires no information from the other parties except of their interest
Simple and easy method to solve problems relating to resource shortages

Disadvantages:
Not applicable to problems that are outside the scope of shortages in resources

2. Logrolling
Effective for negotiation that have more than one conflicting issues that are of different
priorities
Solution
Involves the trading off of issues between parties so that both achieve their preferred
outcome
How?
Done by trial and error, experimenting with numerous package deals that satisfies
everyones interest
Ask diagnostic questions, Can I unbundle issues, make one issue into smaller ones that
can then be logrolled?
Unbundling issues and unlinking them
Making package deals
Advantages:
Result in a win-win options
Simple and easy way to solve negotiations with multiple conflicting issues
Enable the establishment of long-term working relationships
Disadvantages:
Time-consuming
Only applicable to negotiation that have more than one conflicting issue at stake
Not suitable for successive negotiations-where parties takes turn to get what they want
Not suitable for parties that do not wish to establish long-term working relationships

3. Non Specific Compensation


Involves the paying off of a nonspecific compensation to the party that accommodates
to the other partys interest and objectives
the payoff is unrelated to substantive negotiation but adequate for the party in agreeing
to the other partys preferences.

How?
Parties should know how much compensation is sufficient in making the
accommodative party satisfied
Need to experiment with different types of compensation offers to identify the one that
satisfies the other party the most
Ask diagnostic questions, What are the things that will be inexpensive to me but
valuable to the other party?
Advantages:
Disadvantages:
Time-consuming
Fear of turning into distributive situation when , the other party may request for high
demands as in return for accommodating while the other tries to play down the
compensation that he/she will pay.

4. Cut the Cost for Compliance


Involves the achieving of ones objective by minimizing the cost incurred by the
agreeing party

How?
Parties are required to have personal knowledge of the agreeing partys needs, wants,
desire and preferences.
Advantages:
More sophisticated as compared to logrolling and nonspecific compensation as it
requires a more detailed personal knowledge of the agreeing party
Disadvantages:
Time-consuming

5. Bridging
Involves the inventing of a new options that meet the needs of both parties
How?
Through the revealing of sufficient information which discloses interests and needs that
facilitate the invention of new options

Advantages:
highly satisfying when negotiators commit themselves to win-win negotiations
Disadvantages:
Do not always remedy all concerns
Not applicable when parties commit themselves to win-lose negotiations

6. Post Settlement Settlement


Involves the using of current settlement as a benchmark or (BATNA) to explore other
possible/satisfying options and agreement
How?
Find a more satisfying option or agreement over the present negotiated outcome

Advantages:
Enable both parties another chance to reach an even more satisfying outcome
Disadvantages:

Generate Alternative Solutions


Two techniques

Inventing Options: Generating Alternative Solutions by Redefining the Problem or


Problem Set

Generate Alternative Solutions to the Problem as Given

Invent options by redefining the problem set:

Expand the pie

How can both parties get what they are demanding?

Is there a resource shortage?

How can resources be expanded to meet the demands of both sides?

Logroll

What issues are of higher and lower priority to me?

What issues are of higher and lower priority to the other?

Are issues of high priority to me low for the other, and vice versa?

Can I unbundled an issue---i.e. make one larger issue into two or more smaller ones--that can then be logrolled?

What are things that would be inexpensive for me to give and valuable for the other to get
that might be used in logrolling?

Use nonspecific compensation

What are the other partys goals and values?

What could I do for the other side that would make them happy and have them allow me
to get my way on the key issue?

What are things that would be inexpensive for me to give and valuable for the other to get
that might be used as nonspecific compensation?

Cut the costs for compliance

What risks and costs does my proposal create for the other?

What can I do to minimize the others risks and costs so that they would be more willing
to go along?

Find a bridge solution

What are the others real underlying interests and needs?

What are my own real underlying interests and needs?

What are the higher and lower priorities for each of us in our underlying interests and
needs?

Can we invent a solution that meets both sides relative priorities and their underlying
interests and needs?

Generate options to the problem as a given:

Brainstorming

Electronic brainstorming

Surveys

Evaluation and Selection of Alternatives

Take time to cool off

Explore different ways to logroll

Exploit differences in expectations and risk/ time preferences

Keep decisions tentative and conditional until a final proposal is complete

Minimize formality, record keeping until final agreements are closed

Narrow the Range of Solution Options

Evaluate Solutions on the Basis of Quality, Standards, and Acceptability.

Agree to the Criteria in Advance of Evaluating Options

Be Willing to Justify Personal Preferences.

Be Alert to the Influence of Intangibles in Selecting Options.

Evaluate and Select Alternatives-2

Use Subgroup to Evaluate Complex Options

Take Time Out to Cool Off

Explore Different Ways to Logroll

Keep Decisions Tentative and Conditional until All Aspects of the Final Process

Minimize Formality and Record Keeping until Agreement are Closed

7 Key Factors in Achieving Successful Integrative Negotiation


1. Common Objective or Goal
It is important for individuals to focus on the commonalities within a group to achieve
successful integrative outcome. Parties have to believe that collaborative efforts will be
beneficial to all of them. Therefore, it is important for them to establish common, shared or joint
goals among them.
Common goal
A goal that is being shared equally among one another.
One that would not be accomplished without each others collaboration.
Shared goal
A goal that both parties hopes to achieve but are beneficial to each other in a different way.
Joint goal
A goal that comprises of a collective effort to combine differing individual goals together.
2. Faith in Ones Problem-Solving Ability
Parties must have a collaborative attitude when working together.
The absence of such mentality will result in a lower devotion to collaborative relationship
3. A Belief in the Validity of Ones Own Position and the others Perspectives
Parties should respect and accepts the view, interest and desires of other parties and incorporate
them into the negotiation problem instead of challenging their viewpoint.
Hence, search for mutually beneficial alternatives that lead to satisfying negotiation outcomes.
4. Motivation and Commitment to Work Together
Parties must be highly motivated to collaborate rather than to compete
They should be committed to achieve a mutually beneficial objective or goal
One should present interpersonal style that are more:
1) Friendly than Competitive
2) Flexible(but firm) than Obstinate (but yielding)
3) Accepting and Trusting than Defensive and Evasive
Parties should state their needs clearly, be willing to focus on the similarities and accepts

differences among each other


Be comfortable with inconsistencies and uncertainties
5. Trust
Parties must be able to elicit a certain level of trust towards the other party, vice versa.
The eliciting of trust will facilitate the sharing of information and greater accuracy in
communicating individuals needs, wants, positions and desires in the given situation.
6. Clear and Accurate Communication
Parties must be willing to share relevant information and state what they want clearly to
prevent any misunderstanding as a result of generalities or vagueness
Parties must be willing to speak up and clarify any ambiguities
Parties must make sure that the messages that were communicated through numerous
communication channels are consistent.
Parties should always give everyone a chance to speak, no one should dominate the negotiation
process
7. An understanding of the Dynamics of Integrative Negotiation
to achieve a successful outcome in Integrative Negotiation, one should truly understand the
dynamics, key elements, structure and principles that make up integrative negotiation.
It is only through thorough understanding and training that one will be able to successfully
pursue the process.
Factors that affect integrated negotiation

Common objective
Self-efficacy related to problem solving
Motivations commitments
Free flow of information
Your trust on other party
Process control (how to integrated negotiation)
Effective communication
History of relationship

Lecture 8
Chapter 5: Perception, Cognition and Emotion

Perception is the process by which individuals connect to their environment. In laymans terms,
it is a sense-making process where people interpret their environment so to respond
appropriately. As perception depends on the perceivers current state of mind, role and
comprehension, here could always be errors in the interpretation and subsequent communication.
Some forms of such distortions are as follows;

I. Types of Perceptual Distortions

Stereotyping

Assign attributes to one solely on the basis of the membership to a


particular large group or category (social, racial, religious or sexual
orientations )
Eg: He is an Italian so he must know so much about Rome.
Very common, highly resistant to change once formed

Halo effect

Generalize many attributes based on the knowledge of one attribute of


the individuals without any consistent relationship between them
Positive effect good attribute, negative effect bad attribute
Reasons for occurrence
Very little experience with the other party
When the person is well known
When the qualities have strong moral implications
E.g.: He is smiling so he must be telling the truth!

Selective perception

Singles out certain information that supports a prior belief and filters out
information that does confirm the belief.

Projection

Assign to others the characteristics or feelings that they possess


themselves.

E.g.: I feel upset to postpone things, so he also will probably get


frustrated if I tell him to delay our meeting.
Framing
Frame is the subjective mechanism through which people evaluate and make sense out of
situations based on their own experiences, leading them to pursue or avoid subsequent actions.
Type of Frames Used in Disputes
Substantive
Disposition about key issue and concern in the conflict
Neglects how parties will resolve the dispute
Outcome
Predisposition to achieving a specific result or outcome from the
negotiation
Primarily used by distributive negotiators
Aspiration
Predisposition to a broader set of interests, needs and concern other
than a specific outcome.
Primarily used by integrative negotiators
Process
Procedure on how parties will resolve their dispute.
Does not care much about specific key issues and concern in the conflict

Identity
Definition of oneself, based on membership of a number of different
social groups such as gender, religion, ethnic origin, etc.
Used to differentiate themselves from others and tend to be positive

Characterization
Ones definition of the other parties, shaped by prior or early experience
and knowledge about others.
Tend to be negative in conflicts
Loss/ Gain
Definition of risk and reward associated with different outcomes
Can frame the outcome as loss or reward based on risk preference of
other parties
For instance, a car buyer can view the transaction as a monetary cost of
the purchase (loss) or the value (gain) of the item.
How frames work in Negotiation
Negotiators can use more than one frame
Mismatches in frames between parties are sources of conflict
Different types of frames or content from the two parties can cause
misunderstanding and conflict escalation
Can reframe the conflict into the frame that is more compatible for both
parties3. Particular types of frames may lead to particular types of
agreements
Aspiration frames lead to integrative agreement
Outcome or negative frames can lead to distributive agreement
Specific frames may be likely to be used with certain types of issues
People discussing salary may be likely to use outcome frame.
People discussing relationship may be likely to use
characterization frame
Parties are likely to assume a particular frame because of various factors
Differences in personality
Value differences
Power differences
Differences in background
Social context

Different approach on how frames work in negotiation


Interests
Frame the conflicts based on interest, not on their positions
and demands
Rights
Use some standards and rules to decide who has legitimacy,
who is correct and fair in resolving the problem
Power
Create win-lose situation
Resolve the conflict based on power ability to coerce the
other by imposing other types of forces economic
pressures, expertise, legitimate authority, etc.
II. Cognitive Biases in Negotiation
Irrational Escalation of Commitment stick with a failing course of
action
E.g.: a country continues to pour resources into an unwinnable war
because the conflict has already happened.
Mythical Fixed-Pie Beliefs assume that all negotiations are win-lose
Anchoring and Adjustment effect of standard against which
subsequent adjustments are made during negotiation
Issue Framing and Risk more risk averse when a decision problem is
framed as gain, and risk seeking when framed as a loss
Availability of Information- depends on how easily information can be
recalled and used
The Winners curse tendency to settle quickly and subsequently feel
discomfort about a win that comes easily
E.g.: the other party gives in too easily, so there might be something
wrong with the outcome or I could have done better.
Overconfidence tendency to believe their ability to be correct or
accurate is greater than for real.
The Law of Small Numbers- tendency to draw conclusions from small
sizes
E.g.: assuming all negotiations as distributive based on a number of
past negotiations or prior experiences

Self-Serving Biases- explain behaviors by making attributions to the


person or situation
E.g.: If I mess up, its bad luck. If you mess up, its your fault!
Endowment Effect tendency to overvalue something you posess
E.g.: One is likely to pay $3 for a mug if he is to buy from others, but
values $7 on the same mug he owns.
Ignoring Others Cognitions ignoring the other partys perceptions
and thoughts hence working with incomplete information
Reactive Devaluation- devaluing the other partys concessions simply
because the other party made them

Managing Misperceptions and Cognitive Biases in Negotiation


Be aware that misperceptions and cognitive biases can occur as
negotiators gather and process information and discuss them in a
structured manner within their team and with their counterparts
Careful discussion of the issues and preference can reduce the effects of
perceptual biases
III. Mood, Emotion and Negotiation
Mood and emotion are different in specificity (emotion is directed at
more specific targets), intensity (mood is less intense) and
duration (mood is more enduring)
Negotiations create both positive (happiness)and negative (dejectionrelated, agitation-related) emotions
Positive emotions generally have positive consequences for negotiations
(lead parties to integrative process)
Negative emotions generally have negative consequences for
negotiations (lead parties to competitive or distributive process or
escalate conflicts)
Emotions can be used strategically as negotiation gambits
The effect of positive and negative emotion in negotiation
1)

Positive feelings may have negative consequences

More susceptible to a competitive opponents deceptive tactics

Less focus on arguments of other party, leading to less-than-optimal


outcomes
Create strong positive expectations, experiencing the defeat more
strongly and treating other more harshly if an satisfying integrative
agreement is not found
2)

Negative feelings may create positive outcomes

Negative emotion has information value


Motivate people to either leave the situation or resolve the problem
Alerting other party of a problem in relationship, leading both to work on
fixing the problem

Chapter 6: Communication during Negotiation


Offers, Counteroffers, and Motives
-The communicative framework for negotiation
1). the communication of offers is a dynamic process
2). the offer process is interactive
3). various internal and external factors drive the interaction and motivate a bargainer to
change his or her offer.
Information about Alternatives

Negotiators with an attractive BATNA should tell the other party about it if they expect to
receive its full benefits.
-The style and tone used to convey information about an attractive BATNA
1).Politely making the other party aware of ones good alternative can provide leverage without
alienating the other party.
2).Waving a good BATNA in the other partys face in an imposing or condescending manner
may be construed as aggressive and threatening.
Information about Outcomes
Negotiators should be cautious about sharing their outcomes or even their positive reactions to
outcomes with the other party, especially if they are going to negotiate with that party again in
the future.
Social Accounts
Three explanation types:
1).Explanations of mitigating circumstances
2).Explanations of exonerating circumstances
3).Reframing explanation
Communication about Process
How well it is going or what procedures might be adopted to improve the situation.
Consider: Is More Information Always Better?
Information-is-weakness Effect: Negotiators who know the complete preferences of both
parties may have more difficulty determining fair outcomes that negotiators who do not have this
information.
l How People Communicate in Negotiation
Use of Language

-Two levels of language operation: Logical level & Pragmatic level: The meaning conveyed by a
statement or proposition is combined with a logical surface message and several pragmatic
levels.
Parties whose statements communicated interests in both the substance of the negotiation and the
relationship with the other party achieved better, more integrative solutions.
Use of Nonverbal Communication
1).Make Eye Contact
When listening: show others you are paying attention and listening that you consider them
important
When delivering: emphasize the importance of the message that is being sent
2).Adjust Body Position
Ones body position indicates whether one is paying attention to the other party.
To show you are attentive: hold your body erect, lean slightly forward, and face the other
person directly
To show strong rejection or disapproval: crossing arms, bowing the head, furrowing the brow,
and squeezing eyebrows together.
3).Nonverbally Encourage or Discourage What the Other Says
Indicate encouragement: brief eye contact, a smile, or a nod of the head.
Indicate discouragement: a frown, a scowl, a shake of the head, or a grab of ones chest in mock
pain
Selection of a Communication Channel
Face-to-face negotiators are more easily to develop personal rapport, more inclined to disclose
information truthfully, increasing their ability to attain mutual gain.
What e-mail negotiations lack is schmoozingoff-task or relationship-focused conversations?

How to Improve Communication in Negotiation


The Use of Questions
Questions in Negotiation:
1).Manageable: cause attention or prepare the other persons thinking for further questions, get
information, generate thoughts
2).Unmanageable: cause difficulty, give information, bring the discussion to a false conclusion
collect and diagnose information, assist the other party in addressing and expressing needs and
interests
pry or lever a negotiation out of a breakdown or an apparent dead end
Listening
1). Passive listening
Receive the message while providing no feedback to the sender about the accuracy or
completeness of reception. (Can be used as the best strategy when the counterpart is talkative)
2).Acknowledgment:
Receivers occasionally nod their heads, maintain eye contact, or interject responses like I see,
mm-hmm. Interesting, really, and the like.
3).Active listening
Restate or paraphrase the senders message in their own language
Role Reversal
Gain an understanding of the other partys perspective or frame of reference: allow negotiators to
understand more completely the other partys position by actively arguing these positions until
the other party is convinced that he or she is understood.
Special Communication Considerations at the Close of Negotiations

Avoiding Fatal Mistakes


Achieving Closure
avoid surrendering important information needlessly, and to refrain from making dumb
remarks that push a wavering counterpart away from the agreement
recognize the other partys faux pas and dumb remarks for what they are and refuse to respond
or be distracted by them

Chapter 7: Sources of Power and Dealing with Others Who Have


More Power
Power capabilities negotiators can assemble to give themselves an
advantage or increase the probability of achieving their objectives
Sources of Power How People Acquire Power
Traditional Sources of Power

Expert power

from having unique, in-depth information about a subject

Reward power

from ability to reward other for doing what needs to be done

Coercive power

from ability to punish other for not doing what needs to be done

Legitimate power

from hierarchical status within organization

Referent power

from respect or admiration one commands due to attributes like


personality, integrity, interpersonal style and the like
Major Source of Power in Negotiation

Informational sources of power

Personal sources of power

Power based on position in an organization

Relationship-based sources of power

Contextual sources of power

1) Informational Sources of Power

Most common source of power derived from ability to assemble and

organize facts and data to support ones position, arguments or desired


outcomes

Challenge others position or desired outcomes

undermine the effectiveness of the others negotiating argument

Power based on expertise is a special form of information power

only for those who have achievement some level of command and mastery
of a body of information

Experts arguments are more credible than no experts ones

To use expert power, demonstrate that this expertise actually exists

and is relevant to the issues under discussion


2) Personal Sources of Power

have different psychological orientations to social situations

Cognitive orientation

individual differences in ideological frames of reference


shape ones expectations, the way individual process social information
about power and peoples willingness to share power
3 types of ideological frames
The unitary

Beliefs that society is an integrated whole and that the interests


of individuals and society are one, such that power can be largely
ignored or, when needed, be used by benevolent authorities to
benefit the good of all. (communal)
The radical
Beliefs that society is in a continual clash of social, political, and
class interests, and that power is inherently and structurally
imbalanced (Marxist)
The pluralist
Beliefs that power is distributed relatively equally across various
groups, which compete and bargain for a share of the continually
evolving balance of power (liberal democracies)

Motivational orientation
differences rooted more in need and energizing elements of the
personality rather than in ideology
power motive a need to influence and control others and to seek
positions of power and authority

Dispositions and skills


Competitive dispositions and skill emphasize on power over approach
along with skills such as sustaining energy and stamina, maintaining
focus and having high expertise, strong self-confidence and high
tolerance for conflict.
Cooperative dispositions and skill emphasize on power with approach
along with skills such as sensitivity to others, flexibility and ability to
consider and incorporate others views into an agreement

Moral orientation
different moral view about power and its use
3) Power Based on Position in an organization

Legitimate power

exist at the foundation of our social structure


from occupying a particular job, office or position in an organizational
hierarchy
make people feel proper (legitimate) to receive directions from others
and proper (obligatory) to follow it
ways of acquiring legitimate power
by birthright
by election (from peers)
by appointment (from superior)
by cultural value (the young respects the old)
legitimate power cannot function without obedience or the consent of
the governed
types of social legitimate powers
legitimate power of reciprocity
if a person something positive for other, the gesture or favor is
expected to be returned
legitimate power of equity
someone has a right to request compensation from other if
he/she goes out of his way or endures suffering for the other
legitimate power of responsibility or dependence
we have an obligation to help others who cannot help
themselves and are dependent on us

Resource control

resource can be anything valued by participants in the negotiation


ability to create or control and dispense resources is a major power
source in organizations
develop and maintain control over some desirable reward that other
party wants or control over some punishment the other wants to avoid
4) Relationship-Based Sources of Power

Goal interdependence

has strong impact on how likely parties will be to constructively use


power

shape power with orientation between parties, inducing higher


expectations of assistance, more persuasion and less coercion and more
trusting and friendly attitude

Referent power

Derived from the respect or admiration one commands due to attributes


such as personality, interpersonal style, integrity and the like.
Based on an appeal to commonalities
Has negative forms to create distance between themselves and others or
to label others
5) Contextual Sources of Power

BATNAs

Alternative deal that a negotiator might pursue in case of negotiation


failure
Offers negotiator significant power

Culture

Often contains many implicit rules about use of power and more or less
processes
Company culture shapes what kind of power are seen as legitimate and
illegitimate or how people use influence and react to influence
National cultures also differ in the degree to which these power over or
power with orientations are supported or encouraged

Agents, constituencies and external audiences

Negotiation process is more complex when acting as agents, or other


parties such as public media, critics, etc. are present to observe.
These other parties might or might not share your interests, putting
pressure on either party.
Dealing with Others Who Have More Power
Never do an all-or-nothing deal deal with several other partners to
lower risks
Make the other party smaller- diversify into multiple negotiations by
establishing relationships with several departments or individuals in
an organization

Make yourself bigger- build coalitions


Build momentum through doing deals in sequence
Use the power of competition to leverage power-create competition
among partners by using BATNA
Constrain yourself- limit the ways you can do business
Good information is always a source of power seek information that
is most compelling and persuasive to the counterpart
Do what you can to manage the process steer the deal in an
advantageous direction. Do not let the high-power party control the
process (agenda, cadence, timing, location)

Chapter 9: Relationships in Negotiation


Negotiation within Relationships
When negotiating in the context of an important relationship, relationship
issues could dramatically change the approach to negotiation strategy and
tactics
Negotiation within relationships takes place over time.
Negotiation is often not a way to discuss an issue, but a way to learn
more about the other party and increase interdependence.
Resolution of simple distributive issues has implications for the
future.
Distributive issues within relationship negotiations can be
emotionally hot.
Negotiating within relationships may never end.
Parties may defer negotiations over tough issues in order to start on the
right foot.
Attempting to anticipate the future and negotiate everything up front is
often impossible.

Issues on which parties truly disagree may never go away.


In many negotiations, the other persons behavior is the focal
problem.
In some negotiations, relationship preservation is the overarching
negotiation goal, and parties may make concessions on substantive
issues to preserve or enhance the relationship.

Key Elements in Managing Negotiations within Relationships


Reputation
Reputations are perceptual and highly subjective in nature.
An individual can have a number of different, even conflicting, reputations.
Reputation is influenced by an individuals personal characteristics and
accomplishments.
Reputations develop over time; once developed, they are hard to change.
Negative reputation is difficult to repair.
Trust
Many people show remarkably high levels of trust when approaching a new
relationship.
Trust tends to cue cooperative behavior.
Individual motives shape both trust and expectations of the others
behavior.

Trusties, and those trusted, may focus on different things as trust is being
guilt.
The nature of the negotiation task can shape how parties judge the trust.
Greater expectations of trust between negotiators lead to greater
information sharing, therefore tend to enhance effectiveness in achieving a
good outcome.
Distributive processes may tend to reduce trust while integrative processes
tend to increase trust.
Trust increases the likelihood that negotiation will proceed on a favorable
course over the life of a negotiation.
Face-to-face negotiation encourages greater trust development.
Negotiators who are representing others interest tend to behave in a less
trusting way.
Trust Repair
the more severe the breach of trust, the more difficult it is to repair trust
and reconcile the relationship.
If the parties had a good past relationship, it was easier to repair trust.
The party who breach the trust must apologize as soon as better.
the apology must be sincere enough.
the one who makes the apology must take personal responsibility for
having created the breach.
Apologies were more effective when the trust breach appeared to be an
isolated event rather than habitual and repetitive for the other party.
Justice

Forms of justice:
1)

Distributive Justice: about the distribution of outcomes

2)

Procedural Justice: about the process of determining outcomes

3)

Interactional Justice: about how parties treat each other in one-to-one

relationship
4)

Systemic Justice: about how organizations appear to treat groups of

individuals and the norms that develop for how they should be treated.
Relationships among Reputation, Trust, and Justice
They are all central to relationship negotiations and feed each other.
Relationship Repair
Find out:
what might be causing any present misunderstanding, and what can I do
to understand it better?
what might be causing a lack of trust, and what can I do to begin to repair
trust that might have been broken?
what might be causing one or both of us to feel coerced, and what can I
do to put the focus on persuasion rather than coercion?
What might be causing one or both of us to feel disrespected, and what
can I do to demonstrate acceptance and respect?
What might be causing one or both of us to get upset, and what can I do
to balance emotion and reason?

Nonverbal Negotiation Skills


Researchers in nonverbal communication claim:
As much as 90 percent of the meaning transmitted between two people in face-to-face
communication is nonverbal. This means that as little as 10 percent of your verbal
communication will have an impact on the outcome of your negotiations! If these figures are
even close to reality, the importance of nonverbal negotiation skills cannot be overestimated.
Learning the language of nonverbal communications is almost as difficult as acquiring fluency in
a foreign language. In addition to studying your own gestures and the meaning you are
conveying, you must also become aware of what your counterpart is conveying.
Gesture Clusters
Many skeptics argue that it is difficult to tell what someone is thinking by singling out one
gestureand they are right. A single gesture is like a single word; its true meaning is difficult to
understand out of context. However, when gestures come in clusters, their meaning becomes
clearer. For example, while a persons fidgeting may not mean much by itself, if that person is
avoiding eye contact, holding his hands around his mouth, touching his face and fidgeting,
theres a good chance he is not being totally honest.
As you study nonverbal behavior, you will begin to understand the clustering process. When
scanning a counterpart for clusters of gestures, a good formula to follow is to divide the body
into five categories:
1. Face and head. The face and head truly provide a window into your counterparts soul. Look
for the following signs.
*Someone who is trying to hide something will avoid eye contact.
*Someone who is bored may gaze past you or glance around the room.
*Someone who is angry or feels superior to you may maintain piercing eye contact.
*Someone who is evaluating what you are saying may turn his head slightly to one side, almost
as though trying to hear you better.
*Someone who is in agreement may nod his head as you are speaking.
2. Body. The body also plays an important role in nonverbal communication. Here are some
signs to watch for:

*someone who is interested and in agreement with you will usually lean toward you or position
her body closer to you.
*Someone who is in disagreement with, uncertain about, or bored with what you are saying will
generally turn her body away from you and lean back farther in her chair.
*Someone who feels insecure, nervous or in doubt may move from side to side, shifting her
weight.
For your part, to create a win/win outcome, you should always position your body toward the
other party.
3. Arms. In general, an open arm position suggests that someone is receptive to the negotiation
process. Watch especially for changes in arm position. If your counterparts arms are lying open
on the table where you are both sitting as you start the negotiation., and he takes his arms off the
table and crosses them over his chest when you mention that your company has a standard
deposit of 50 percent on all first-time orders, thats a good indication that this information was
not received well. You may want to clarify your words or, better yet, ask your counterpart
whether he has a concern about the deposit.
4. Hands. Peoples true feelings are commonly revealed through hand movements. For example,
open palms generally convey a positive message. This goes back to medieval days, when people
showed their open palms to prove they were not carrying any weapons.
Involuntary hand movements can be particularly telling. People often touch their nose, chin, ear,
arm or clothing when they are nervous or lack confidence in what they are saying.
5. Legs. When asked why they cross their legs, most people say they do so for comfort. Although
they are being truthful, they are only partially correct. If you have ever crossed your legs for a
long period of time, you know that this position can become painfully uncomfortable.
Crossing your legs can have a devastating effect on a negotiation. In a study described in How to
Read a Person like a Book, Gerard I. Nierenberg and Henry H. Calero found after videotaping
2,000 transactions that no sales were made by people who had their legs crossed.
If you want your counterpart to perceive you as cooperative and trustworthy, sit with your legs
uncrossed, feet flat on the floor and body tilted slightly toward the other party. This posture will
give you a better chance of sending a positive signal.

Interpreting Body Language


Studying what you and your counterpart in the negotiation process are not saying is critical to
achieving a win/win outcome. The following chart is a dictionary that will help you translate
your counterparts body language, and use your own to say what you really mean to say.
Dominance, Power
*Feet on desk

*Piercing eye contact

hips *Palm-down handshake

*Hands behind head or on

*Steepling of the fingers

*Standing while other is

seated
Submission, Nervousness
*Fidgeting

*Minimum eye contact

*Hands to face, hair, etc.


*Palm-up handshake
* Throat clearing
Disagreement, Anger, Skepticism
*Red skin

*Finger pointing

*Squinting eyes

*Frowning

*Turning away

*Crossing arms or legs

Boredom, Lack of Interest


*Avoiding eye contact
*Playing with objects on desk
*Staring blankly
*Drumming on table
*Picking at clothes
*Looking at watch, door, etc.
Uncertainty, Indecision *Cleaning glasses
fingers to mouth
head

*Biting lip

*Looking puzzled
*Pacing back and forth

*Putting
*Tilting

Suspicion, Dishonesty
*Touching nose while speaking
*Covering mouth
*Avoiding eye contact
*Moving away
*Crossing arms or legs
Evaluation
*Nodding

*Squinting

*Tilting head slightly

*Stroking chin

*Putting index finger to lips

Confidence, Cooperation, Honesty


*Leaning forward
*Opening arms and palms
*Maintaining great eye contact
*Keeping feet flat on floor
*Smiling
*Moving with counterparts rhythm

Costco Uses Hardball Negotiation Tactics with Coca-Cola

Im going to preempt todays installment of Whitepaper Wednesday to bring you some breaking
news in a high-profile procurement case.
Retailing giant Costco has cut off inbound shipments of beverages from the Coca-Cola Co. due
to unresolved price negotiations. While negotiations between retailers and their suppliers are
very common, it is rare that a retailer will stop ordering a certain product line in the name of
negotiation.

Its a bold move Costco is risking ticking off its customers who pay for the privilege of
shopping at its stores and expect to find their favorite items there in huge quantities but, as Ive
learned throughout my purchasing career, sometimes it takes a bold move to get the results you
want.
Not only is Costco making Coca-Cola feel the pain by cutting off its stream of orders, it is
publicly shaming Coca-Cola. According to Yahoo Finance, Costco has been aggressive in
putting up signs on store shelves and notices on its Web site, including an alert that stated
Costco is committed to carrying name brand merchandise at the best possible prices. At this
time, Coca-Cola has not provided Costco with competitive pricing so that we may pass along the
value our members deserve.
Ouch!
Cutting off orders? Publicly denigrating a suppliers brand?
Negotiation doesnt get more hardball than that.
Is Coca-Cola telling Costco that it can keep its money?
Actually, they are handling it gracefully with a clear hint that they arent strong enough to give
Costco a take-it-or-leave-it ultimatum. In the above-linked article, Coca-Cola said in a statement
that Costco is an important customer and that it is committed to working with it in a spirit of
fairness.'
My guess is that this situation will be resolved soon and the relationship will continue as if this
squabble never happened. But you gotta love the way that Costcos procurement is committed to
their values you may recall that I reported last month HYPERLINK
"http://www.purchasingcourses.com/2009/10/do-your-suppliers-bully-you-into.html" that Costco
insists on testing its beef ingredients despite a suppliers unwillingness to supply them under
such conditions.
Lets continue to watch Costco as its procurement strength continues to garner national publicity.

To Your Career,
Charles Dominick, SPSM
President & Chief Procurement Officer
Next Level Purchasing, Inc.

Question:
How do we negotiate with a customer that we cant afford to lose when we have limited
options? Hes been tough but fair over the years. Now hes making wild demands without
regard to our track record or trusted relationship. Im at a loss.
Response:
If you respond with confrontation, you put the relationship at risk. If you respond with
compromise, you put profitability at risk. If you want the discussion to move from a
disagreement to a deal, you will need to redirect the conversation to explore possibility.
Some customers resort to hardball tactics even when youve done a consummate job of selling.
The premise is that it costs nothing to ask for a concession. Sellers can always say no but
inexperienced sales people will say yes to even outrageous customer deals just to close a deal.
Some salespeople will try to strike to balance between accommodation and compromise. Wrong.
This is a common response by sales people whose commission structure does not take into
account profitability. A 10-percent reduction to margin may not dramatically impact their
commission, but it will undercut the companys profitability while simultaneously setting an
unhealthy (harmful) precedent.
Thomas Keiser, former president of the Forum Corp., says, The best response to aggressive but
important customers is a kind of assertive pacifism. Refuse to fight, but refuse to let your
customer take advantage of you. Dont cave in, just dont counterattack.
Here are eight strategies that may help you shift your customer from playing hardball to being
more cooperative:
1. Develop your negotiating road map.
Know your walk away point. This is typically a combination of price, terms and deliverables. It
represents the minimum that you will accept.

Define potential variable options so you dont get labeled as being inflexible or unwilling to
consider options. For example, if during the negotiation you discover that your customers one
sticking point is price, what options have you mapped out ahead of time that you can you explore
with him? Define your options before you walk into the negotiation so you dont feel put on the
spot.
Lets anticipate that his sticking point is price. Would he be willing to:
Commit in writing to additional volume within a specific period of time?
Add a services component to the product sale?
Introduce you to another customer who might benefit from your offerings?
Never give something without getting something in return; otherwise your credibility will be
undermined. When you have (can present) options, your flexibility increases and so does the
probability that you can find common ground.
2. Listen for clues.
When under attack, most people tend to defend themselves or counterattack. The best strategy
may seem counterintuitive: keep the customer talking (as long as they arent personally attacking
you); and listen without defending. This might diffuse their anger, and, when youre listening
you arent making concessions.
3. Note which issues require further discussion.
Negotiation discussions do not operate in a straight line. Key points can become confusing when
emotions are high. One trick to neutralize even the most outspoken opposition is to turn
objections into issues that need to be addressed. To do this, you must remain composed. During
the outburst, capture strategic words the customer says. When the time is right, respectfully
integrate his language into your summary. This will show that not only did you listen but are
willing to address their concerns in a respectful manner.
4. Assert your companys needs.
Salespeople are hired to protect their companys interest while strategically nurturing
relationships to grow revenue. Unfortunately, many sales people lose their perspective over time.
They begin to think like the customer and argue on behalf of their customers needs without
consideration to their own companys viability. This is both dangerous and short sighted. Thomas
Keiser said, the best negotiation stance is not a single-minded emphasis on customer
satisfaction but a concentration on problem solving that seeks to satisfy both parties.

Salespeople need to know and be held accountable for how they allocate company resources:
personnel, information, strategies, etc. The customer wont value the resource when it is freely
given away without justification about how this will advance the decision process.
5. Save the most controversial issues for last.
Resolve relatively easy issues first. This helps build momentum and creates a reconciliatory
climate for tackling more difficult issues. Additionally, new variables may emerge which will
help you strategize how to reach agreement without anguish.
6. Make customers work for their concessions.
Salespeople are the guardians of corporate resources. They must be diligent to release corporate
resources only when they are sure that in doing so they are advancing the sale
Make concessions slowly and make each concession progressively smaller. This will create the
perception that you are reaching your bottom line and you have little room to make concessions.
Aggressive negotiators want to see a return on their negotiation investment. Dont make big
concessions on big items otherwise you will lose credibility.
When you negotiate with belligerent customers, diffuse their high-spirited emotions by listening,
acknowledging and redirecting their attention to problem-solving conversations:
Sidestep their attacks (as long as they dont attack you personally).
Honor their position (even though you may not agree with it) by saying, Mitt, what Im
hearing you say is that what is most important to you is
Strategically revive issues from your notepad to create agreement and build momentum.
In doing so, you will gain respect and hopefully mutual agreement by drawing upon these
disciplines. If you succumb to their high pressured tactics and you will condition your customer
that their underhanded techniques work and you may forever play victim to their nasty and
manipulative strategies.