MBA 2004

Negotiation tactics

Mistakes you should avoid (articles for business owners, may/June 1998. www.shoreline.com)
- not being prepared
-talking too much
-not checking out the buyer
-talking to only one buyer
-talking with competitors
-understanding the value of their business
-disclosing prematurely
Unethical negotiating gambits and how to protect yourself against them (www.bizoprerund.com. May 2002
-Decoy (stay focused and isolate the objection)
-Red Herring (i.e. phoney objection used to draw out a concession from you) - keep your eye on real negotiating issues and don't allow the linkage
-cherry picking (the fewer altneratives the other side has, the more power you have)
-Deliberate mistake (never try to get away with anything. Be fair and don't get greedy)
-erroneous conclusion (similar to above...stay focused on what you want)
-Default (don't get lazy or let the other side make assumptions)
-escalation of demands (tie up details up front, build strong personal relationships, get more commitment up front so harder to back out)
-planted information (beware of being manipulated)
Six Keys to profitable Sales Negotiations revealed (from Dartnell Corporation Selling, 2003)
-positoin products/services advantageously
-set high targets
-manage information skillfully
-know full range and strngth of your power
-satisfy cusotmer's needs and wants
-concede according to plan
Negotiating SW contracts (www.smthacker.co.uk)
-make the vendor aware he has a credible competitor but not who it is
-identifall all costs and deliverables (installation, maintenance, ongoing support, application implementation, documentation, integration, new releases
bug fixes, cost of tailoring, any hidden tricks like charging for upgrades.
-read the contract very carefully (what happens if you change/grow shrink, what happens if supplier changes/grows/shrinks/disappears, what if
technology changes, what if project is delayed/changed/scrapped
-use competitive comparisons...ideally negotiating with two credible vendors
-before the purchase time is on your side. do not rush even if there are internal reasons to make a quick decision.
-no more than 18% for annual maintenance. insist on inflation clause.
-pay initial costs only after proving trials
-project management support from the supplier. no incremental billings
-used fixe pricng not itme and mterials to ensure that if delays you don't pay penalities
-escrow sw
-competitive agruments shoudl include better fit so less taloority (ehnaced functions at their expense), easier integration (to get more help), less
risk(to get more guarantees/help), better price (if you are looking for discount)
-logevity and security are key parameters for data. make sure there is adequate protection in future proofiing the contract
-make sure you have an adequate technical infrasture set up
Negotiating in Industrial Business (cheresources.com)
-understanding the playes involved
-the value of trust
-avoiding misunderstandings (open honest discussions, seller should open discussion product limitations, expected costs
-sitting down at the table...target range between opening price and the customer's estiamted target toward gettng probable agreement
-distinguishing between a good and bad trade off
The "other" party: getting into the mind of your negotiating counterpart (Ivey Business Journal)
-the other party's interests(what can you do that has value to them), craft deals that the deal will be sustanable, uncover value that might have been missed
-the other party's walk away alternative (what is their "something else"?, get an idea of when they're bluffing, craft agruments to make the walk away
look unattractive, limit thier ability to pursue their walk-away)
-the other parthy's authority (avoid falling prey to making substantive concesisons, determine if you need to invite different parties, assess escalation sooner,
decide if you need to prepare documents or models that can help the negotiation counterpart in their internal negotiations, guage progress you're making
so you can develop a negotiation timeline and set appropriate expectations
-the other party's agruments, questions and tactics (think thru strenghts and weaknesses and then prepare effective counter agruments, decide what info
you want to share (at least intiially), diagnose the tactics and negotiations gamaes they are employing, avoid making uncousious reactions and facial
expressions, practice role playing in delivering responses, reactions or counter arguments.
-Tips on getting into their mind (talk to other's who've worked iwth them, call poeple in the ogranzation iwth same role, ask your marketing department for
industry research, reports or competitive intelligence, read trade journals, visit their website, news articles, etc)
Negoitating 101 (from Canadian Vending October 2002)
-price shouldn't be the main issue
-ask questions ot create an environment for the person to open up and share information
-position yourself as a problem solver
-always ask for more than you think you will get
-avoid saying yes to quickly even if you like the deal. the other peson needs to feel good by having to work for it
-listen carefully to what the other person tells you.
-always ask for somethign in return when you give a concession. make hte other peson work for what they get.
-common mistakes (not gathering information, giving into demands too quickly, not taking time out to think, allowing your ego to interfere or influence
your decision, moving to the bottomline too quickly.
French and Raven's Five Forms of Power (ChangingMinds.org)
-coercive power (often physical, demonstrations of harm...power of governments or parents, or a person holding back a friend who is about to step
in front a of a car)
-reward power (give other popele what they want...also used to punish if withheld)
-legitiamte power (what is invested in a role...kings, policeman, managers) legitimacy may come from a coercive power.
-referent power. power from another person liking you or wanting to be like you. charisma fame weilded by celebrities. can use as coercion as
people fear social exclusion
-expert power. knowledge or skill that some else requires. used in a large proportion of human collaboration.
-what does this mean for negotiating. use as a checklist to determine what forms of power you have available. It's a mistake to assume you are
powerless or ahve less power than the other person.
Avoiding Common Negotiating Mistakes (from Negotiating for Dummies)
-Starting to negotiate permaturely
-Negotiating with the wrong person
-locking into a position
-feeling powerless
-worrying about losing control of the negotiation
-wandering away from the goals you set
-worrying too much about the other guy
-thinking of just hte right thing to say - the next day
-blaming yoruself for another's mistakes.
-not focusing on closing
Ke;y lessons form 2004 for those negotaitign and drafting contracts (Herbert Smith, January 2005)
-Exclusion clauses need to be clearly and unabifuously drafted to be effective.
- Try to anticipate how a loss might arise
- liquidated damages clauses shoudl be a genuine pre-estimate of loss
- due dilligence reports are important and should be read carefully
- general discuslosures don't always work. be specific.
-don't rely on representations made early on in the negotiation process especially where there is an entire agreement clause
-eleeventh hour amendments may amount to uncounscionable ocnduct. you shoudl be careful in the final stages of negotiation that you do
not fall foul of unfair dealing rules by failing to disclose sustantive changes made
-consider when drafting the contract and faced with breach whether you want to retain the right to terminate while negotiating how to deal with the breach
-care should be taken in losses where the claim may fall down a legal black hole if the claim belons to one member of the group but the loss is suffered
by another