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