Tune Up Your Negotiation SkillsTactics and Strategies

Andrew L. Urich, J.D.Puterbaugh Professor of

Ethics & Legal StudiesSpears School of Business

Oklahoma State University 405.744.8619

aurich@okstate.edu

www.andrewurich.com

The World’s Greatest Car Salesman

• We like, trust, and believe people who like us.

Making a Connection

Overcoming Fear

Nikita KhrushchevMy Sales Philosophy

“When you are skinning your customers, you should leave some skin on,

to grow again so you can skin them again.”

Making a Connection

Showing Respect & Building Trust

• “My child choked on a chicken bone”

• Can you “get off on the right foot?”• What telemarketers don’t want us to know

• If they are defensive you may be offensive.

• Winston Churchill’s thoughts on the subject

Making a Connection

Showing Respect

Showing Respect

Small Software Co. vs. Massive Industrial Powerhouse, Inc.

“This product is provided subject to an evaluation condition. In the event that the software is deemed unacceptable by the buyer for any reason, at the sole discretion of the buyer, the buyer shall incur no obligation to make the final payment as described in the above payment schedule.”

Making a Connection

Concept Summary:

1. ABC….Always Be Charming.

2. Show respect and build trust.

3. “They” are not trying to skin you.

4. The relationship is the most important thing.

Making a Connection

What We Need To Know

1. What is the essence of negotiation? (Not what everyone seems to think)

2. Which negotiation variable has the highest correlation with “winning” negotiations?

3. How do I plan for a negotiation?

4. How do I know when to be satisfied with my negotiation outcome?

Program Introduction & Goals

What We Need To Know

5. How do costs and values impact negotiations?

6. How can I adopt a win/win (more/more) focus without becoming Pollyanna?

7. Appreciate the vital importance of “no.”

8. How can I increase my bargaining power?

Program Introduction & Goals

Leverage Through Negotiation

Status QuoSales 100

Cost of Goods 90

Profit 10

Program Introduction & Goals

Leverage Through Negotiation

Concerted Efforts on

Negotiation

Sales 105

Cost of Goods 85

Profit 20

Program Introduction & Goals

Negotiation of a Movie Contract

On a scale of 1 to 10 please note yoursatisfaction level when you finish

1 = dissatisfied 10 = extremely happy

1

dissatisfied

10

extremely happy

5

Exercise

“Negotiation is an inefficient waste of time. Can’t we quit messing around and get to the bottom line?”

•Saturn•Winner’s curse•The box or the curtain

Change Your “Mental Model” of Negotiation

Have you ever heard anyone say this?

Change Your “Mental Model”

• Completely new focus: It's the experience, not the terms, that will provide satisfaction to the other party.

• Don't look at negotiation as a necessary evil.

A) It's an opportunity to discover their bottom line.

B) And an opportunity to demonstrate the FAIRNESS of your position.

Change Your “Mental Model” of Negotiation

Which provides more satisfaction?

A) a bad deal mistakenly considered to be a good deal.

B) a good deal mistakenly considered to be a bad deal.

Change Your “Mental Model” of Negotiation

What Does it Mean to “Win?”

The Bargaining Area

$200,000 $215,000 $235,000 $250,000

Buyer

Seller

Bargaining

Area

Program Introduction & Goals

What matters most?

Which of these factors are most highly correlated with successful negotiation outcomes?

• Bargaining power

• Aspiration level

• Skill of the negotiator

Research on Aspiration Level

• High aspirants beat low aspirants without regard to skill or power.

• Skilled negotiators without power lowered their aspirations.

High Aspirations

Power of High Aspirations

• Reciprocity and Anchoring• Boy Scout circus• Giant teddy bear• Barbeque restaurant

• Analysis that does not improve decision making tends to be a waste

• Wife’s shoes• Selling up harder than selling down• Pick your clothes dryer

• You will not exceed your aspiration.• First offer makes a huge impact.

• Who should make the first offer?

High Aspirations

Factors Restraining High Aspirations

• Fear of offending

• Time constraints

• Fear of failure: A culture averse to failure stifles exploration, experimentation and discovery

• It’s more work

High Aspirations

How Do You Know When to be Satisfied?

• Are your criteria arbitrary?• Remember, you never get to see the bargaining

area.

• Our satisfaction level is based on…..1. Our expectation

2. How we were treated during the negotiation• Are you impacted by how far you moved from

their starting point?• Are you impacted by their pain?

Analyze Your Level of Satisfaction

How Do You Know When to be Satisfied?

• Inaccurate measurement can create a false sense of confidence.

• Ideal Measures & Benchmarking• Energy consumption should be measured

against some ideal – not a budget.• Southwest Airlines studied NASCAR pit crews

to speed up turnarounds – not other airlines.

Analyze Your Level of Satisfaction

Concept Summary:

1. Raise your aspirations.

2. It’s not the terms that make them happy– it’s the negotiation experience.

3. Avoid the winner’s curse.

4. When they see the fairness they say “yes.”

5. Being satisfied is a trap

Mental Model & Satisfaction Level

All Values Are Subjective

• Values differ between all customers/clients.

• Nothing has inherent value.

• PEOPLE value things.

• Value will vary from person to person.

Adopt a Value Focus

Bases of Subjective Value

• Specific situation

• Time

• Uses for the product

• Personal preference

• Alternatives

Adopt a Value Focus

PRICE

COST VALUE

Bargaining Area Redefined by MBM®

Adopt a Value Focus

…..No Talking Please!

• $10,000 has been designated for you to share with another department head.

• Person A writes a number on a piece of paper and passes it to Person B.

• Person B writes “Yes” or “No” and passes it back.

Exercise

Show Respect & Build Trust Win/Win Attitude

Win/win

•Ka-shing

Make the Pie BiggerInstead of Arguing About How to Slice It

• Win/win is an attitude. (Fixed Pie Fallacy)

• 62% buy into the fixed pie fallacy.

• Pay close attention to their concerns.

• Increase their “value.” Make it easier for them to buy from you.

• Reduce their opportunity cost (because if they deal with you they aren’t dealing with someone else)

• Use creativity, diligence and enthusiasm to identify new options – Stephen Covey’s “Third Alternative.”

Win/win

Listen First

• Are you projecting?--Listen for something unexpected.

• “They” know everything you want to know.

• Listen for opportunities to make the pie bigger?

• Identify their problems before you sell a solution.

• Take notes.

• Listen twice as much as speaking.

Win/Win

Concept Summary:

1. Win/win is an attitude.

2. Listen!!

3. The goal is to increase the value for both sides of the transaction.

4. Cooperation is better than competition.

Win/win

“NO” Induces Trauma

• Develop a positive “NO.”

• Being ready, willing, and able to say “no” gives you power.

• Knowing when to say “no” gives you power.• Setting Priorities: Risk-adjusted present value of

opportunities relative to resources consumed (such as scarce talent or capital)

The Power of “No”

Rigorously Explore All Alternatives

• Harvard’s Methodology: Have you identified your BATNA (Best Alternative to Negotiated Agreement)?

• Have you fully explored and analyzed your BATNA?

• Confidence soars• Identify alternatives so you will feel able

to say “no.”

The Power of “No”

A lot of problems are caused by people who say “yes” when they should say “no.”

• Southwest Airlines: The King of “No!”• No food• No choice of planes• No assigned seats• No extra baggage• No first class• No shared reservation system• No expensive equipment

• Why we need a Sales Manager

• Failure to say “no” leads to disaster

The Power of “No”

Purchasing Manager’s Favorite Trick

• How to say “no” when “they” tell you your competitor will say “yes.”

● “They” are testing you

● Your competitor is over promising ● You will lose focus ● With a good relationship, “they” will get over it

The Power of “No”

Concept Summary

1. “No” is the key to success.2. Practice your “no!”3. Slow down

1. Hmmmm….4. Focus on the relationship not the terms.

1. Manage emotions2. Show respect

5. Manage their response to your “no.”1. Fear2. Guilt

6. You don’t want to win them all.

The Power of “No”

Understanding Bargaining Power

• Don’t underestimate your power.

• Don’t dwell on your weaknesses.

• The illusion of power

• The power of competition

• The power of legitimacy

Evaluating and Building Bargaining Power

Landlord - Tenant Exercise

Exercise Summary

• Win/Win Paving and Utilities• Who made the first offer? High Aspirations?• You both wanted the same thing

• Listening advantage• Satisfaction trap

• Anyone leave pie in the plate?• Fairness? Trouble saying no?• Any lapses in trust?

Landlord - Tenant Exercise

The Most Important Things to Remember

1. The most important thing—make a connectionIt’s not about terms—they want a fair deal.

2. The other most important thing—high aspirations.

3. Your satisfaction criteria are arbitrary?

4. You are trading values—cost is irrelevant.

Conclusion and Summary

The Ten Most Important Things to Remember

5. Listen first.

6. Look for Win/Win opportunities.

7. You always have more power than you think you do. 20% of the power is missing.

8. Who’s skinning who?

Conclusion and Summary

Thank You

I appreciate your time and attention.

Please keep in touch.

Andrew Urich405.744.8619

www.andrewurich.comaurich@okstate.edu

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Schuster, 1989.• Dayton, Doug. Selling Microsoft. Holbrook, MA., Adams Media Corporation, 1997.• Fisher, Roger and William Ury. Getting to Yes. New York: Viking Penguin, Inc.,

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1993.• Schoonmaker, Alan N. Negotiate to Win: Gaining the Psychological Edge.

Englewood Cliffs, N.J.: Prentice Hall, 1989.