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Behavioral Styles in Negotiation

March 28, 2011 By 2 Comments

Successful sales professionals have a positive vision of their success, know their subject matter and have a firm grasp of the negotiation process. In addition, they have a good understanding of people. Accomplished sales professionals know not only their own personal negotiating style, but also their buyer’s preferred style–and they use this knowledge to build a stronger relationship that will help accomplish their goals.

Most sales professionals undervalue the impact of behavioral styles on a negotiation. Many use the same approach in every negotiation and are surprised when they do not get consistent results. But an approach that works well for one buyer’s negotiating style can actually cause deadlock with a buyer who has a different style. Everyone is different and every negotiation is different. Sales professionals who acknowledge these differences and vary their approach to negotiations, practice what we call “The Ultimate Rule of Negotiation,” which is do unto others as they want to be done unto. In other words, successful sales professionals tailor their approach to the behavioral style and needs of their buyers.

Being able to identify a buyer’s preferred style and adapt your own style accordingly can be incredibly helpful in building productive relationships. With that concept in mind, let’s take a look at the characteristics that will help you identify your buyer’s preferred style, and consider some tips to building relationships that lead to win-win outcomes.

First, we will discuss Amiables. They are one of the easiest buyers to get an appointment with, and one of the most difficult buyers to complete the sale. Buyers who use the Amiable style have a strong need to feel recognized and valued in the negotiating partnership. Because they have a strong concern for relationships, they tend to focus more on feelings and less on facts. They will often begin a negotiation with social conversation that is unrelated to the negotiation. They are trusting, optimistic and generally committed to outcomes that benefit both parties.

To build rapport with your Amiable buyer, show genuine respect and care. Be sincere, and don’t discount personal feelings. Remain positive and solution oriented. Do not go head to head in a confrontational manner, which will most likely cause the Amiable to retreat and end the negotiation. Negotiate in a manner that builds trust and understand that for your Amiable buyer, negotiation is more than just business, it is personal. Never tell an Amiable, “Don’t take it personally.”

Another style that you may encounter when negotiating is the Driver. Drivers and Amiables are often noted to be at opposite ends of the behavioral style continuum. While Amiables are focused on the relationship with their counterpart, Drivers are results-oriented and focused primarily on the bottom line. Drivers have a strong concern for outcomes and when ruthlessly pursuing their goal, may become shark like. They tend to be impatient, have little need for detailed information, and want to move the negotiation to closure quickly. Drivers are self-confident, assertive, and when feeling cornered, may become aggressive in their tactics. While both the Amiable and the Driver have a need to achieve a positive outcome, for the Driver, winning is all important.

Preparation is critical when negotiating with a Driver. Know your bottom line. Be prepared and keep your interactions focused on business. This will help you remain assertive, direct, focused and succinct. We are fond of saying, “You can tell a Driver, but you can’t tell them much, so don’t try.” Instead, ask questions that allow Drivers to discover solutions and suggest acceptable alternatives. Understand that when negotiating with a Driver, however ruthless your counterpart becomes, it’s not personal, just business from the Driver’s perspective.

If your buyer appears cautious and reserved, he or she may be using the Analytical style. True Analyticals methodically explore all options, leaving no stone unturned in their quest for a fair and economical outcome. Analyticals have a strong need for facts and details, and won’t move forward unless they have had the opportunity to carefully analyze all available data. They tend to process information slowly and may be somewhat withdrawn or unemotional during the negotiation. They are organized, systematic and approach the negotiation methodically, one step at a time. To build rapport and gain respect from your Analytical buyer, do your homework before the negotiation begins. Make sure your research is complete and accurate. Keep your discussions factual and business related. Be honest, ethical and demonstrate ways in which outcomes will be advantageous in terms of money, time, or resources conserved. When you present information regarding your product or service to an analytical buyer, always present both the pros and cons. Finally, be patient and respect the Analytical’s need to process information methodically.

The last style we will discuss is the Blend. Blends are people who have no clear preference for one style, but use a combination of styles. Blends are personable, social and often have a sense of humor. They are flexible, creative and open to change. They are big picture thinkers and often have little need for details. To build rapport with Blends, take the time to begin the negotiation on a social note. Be creative in your solutions and focus on coming up with a number of viable options. When you reach agreement on details, make sure that the deal points are clarified and specific before finalizing the negotiation.

Next month, The Master Negotiator will take this topic one step further and walk you through the steps to help you discover your counterpart’s negotiation type. Until then, focus on gaining a deeper understanding of your own preference.

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Blackmail, Bribes, Lies and W.I.I.F.M. – June 2010 Master Negotiator

August 11, 2010 By 1 Comment

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“The most important persuasion tool you have in your entire arsenal is integrity.”

- Zig Ziglar

Blackmail, bribes, lies and a “What’s in it for me?” attitude are the ingredients behind the Rod Blagojevich scandal. For the past 18 months, the public has been entertained by the allegations against Rod Blagojevich and some of his associates who, among other things, are currently being tried for attempting to negotiate something that shouldn’t even be negotiated in the first place: the sale of Barack Obama’s seat in the senate.

After news stories surface such as the one mentioned above, the word negotiation is given a negative connotation by some people. Negotiation is not a negative thing. In fact, every one of us negotiates almost every waking hour of every day. Whenever you communicate–whether you are trying to get your teenager to clean his room, convince your significant other to take you out to dinner, or encourage an employee to show up to work on time–you are negotiating. Gerard Nierenberg, the author of the first formal book on negotiation, The Art of Negotiating, explains it this way: “When two or more people exchange ideas with the intent of changing the relationship in some way, they are in negotiation.”

When we view negotiation from this perspective, we can see how important it is to improve our ability to negotiate so we can be more successful in achieving our goals. What we want to ensure is that when we do negotiate, we do so in a way that will ensure a win-win outcome–one that meets the needs and goals of both counterparts, and makes both of them willing to come back to the bargaining table to negotiate with each other again at a later time. Please feel free to contact us with any negotiation questions or article ideas. We’ll do our best to address them in upcoming issues. (peter@peterstark.com)

Remember, almost everything in life is negotiable.

Peter B. Stark & Jane Flaherty

What is the role of ethics in negotiation?

The dictionary definition of ethics is: “a system of moral principles or values; the rules or standards governing the conduct of the members of a profession; accepted principles of right or wrong.” Ethics establish the means of doing what is right, fair and honest.

Something may be perfectly legal and still not be ethical. I recently sold a rental house to a tenant who had lived in the home for two years. The tenant offered to buy the house for $485,000. I felt the house was worth over $500,000, so I decided to have it appraised. I told the tenant that if the appraisal came in at more than $500,000, he would have the option of buying the house at the higher price. On the other hand, if the house was appraised at less than $500,000, I would decide if I wanted to sell it at the lower price or hang onto it. The appraisal came in at $480,000: $5,000 less than what the tenant had offered me. I thought about not sharing this information with the tenant, and saying something like, “$485,000 is a deal.” That thought lasted about one minute. Ethically, I felt I needed tell the tenant about the appraisal price. Then, I could decide if I wanted to sell the house for that price or keep it.

You can’t be 95 percent or 99.9 percent ethical. You are either ethical or you are not. Would it have been legal for me to keep the appraisal from the tenant? Yes. Would it have been the right thing to do? People for whom the almighty dollar is the highest value would say yes. For me, to withhold this information was neither right nor fair. In short, doing so might be legal, but it would not be ethical.

The following 10 tips will ensure that you build all your negotiations on a foundation of ethics–which will, by the way, increase your chances of achieving win-win outcomes. Ethical negotiators don’t think only about what they can “get” out of a negotiation but also about what they can “give” to their counterpart. In this way, they take the long-term view. They know that a counterpart who walks away from a negotiation feeling successful will be willing to come back and negotiate again in the future. In Blagojevich’s case, he and some of his associates appeared more interested in what they could get for themselves rather than in building relationships and helping others. That hasn’t done them much good.

  1. Know what is not negotiable. Whenever we work with bank employees, we love to ask the following question: “How much can you steal from this bank before you get fired?” The question always draws a laugh because, of course, everyone knows that anyone who steals from a bank would be fired immediately. This is simply not an area that is negotiable. Knowing what is negotiable and what is not will make you a much more effective negotiator.

  2. Be honest. In a negotiation, whenever you are ethical and honest, even though it costs you something, you gain points. If a counterpart makes an invoice error that is to your advantage and you inform him of it, that costs you something–but it also earns you respect. A client recently called to inform us that we had not sent an invoice for services we had performed for her. That one telephone call let us know that this client is honest. That fact will undoubtedly affect all our future negotiations with her.

  3. Keep your promises. In your eagerness to put a deal together, you may sometimes make promises and concessions you hadn’t planned to make. You demonstrate your ethics when you fulfill those promises long after the desire to do so has left you.

  4. Have multiple options. Going into a negotiation with multiple options will help both you and your counterpart achieve your goals. If someone proposes an option you feel is unethical, you will be ready with another ethical option for accomplishing the same goal. Sometimes you may encounter negotiators who are unilateral thinkers who have only one option. With them, it’s their way or the highway. If their way is unethical in your opinion, you have only one option–to walk away from the deal.

  5. Be willing to say “no.” Some negotiators are quite comfortable looking a counterpart in the eye and saying “no” when they feel something is not right. Others worry that saying “no” seems confrontational, even when a proposal does not seem ethical–then later they regret agreeing to the proposal. Being willing to say “no” to something that is not right is a great strength.

  6. Be familiar with the law. Ignorance of the law is not a good excuse for unethical behavior. When in doubt about the law governing some aspect of your negotiation, check it out.

  7. Go with your gut. Recently, we were in a negotiation with a company and a person in one division of the company suggested that we not inform another division of an action we were planning to take. One counterpart said, “This just smells bad.” What he was saying was that this deal point simply did not feel right. Telling the members of the other division what we were up to, even though we knew they would be adamantly opposed to it, was the right thing to do.

  8. Practice the concept of “no surprises.” Gomer Pyle, played by Jim Nabors, used to draw a laugh whenever he said, “Surprise, surprise, surprise, Sergeant Carter.” What made this line so funny was that Gomer Pyle’s surprises were always negative. My wife is fond of telling me, “If you are going to surprise me, stick it in a jewelry box and put a bow on it.” Making sure that a negotiation does not contain any negative surprises will reduce the chances of an ethical lapse.

  9. Follow the Platinum Rule. The Golden Rule tells us to treat people the way we would like to be treated. The Platinum Rule tells us to treat people the way they want to be treated. Caring about your counterparts enough to treat them the way they want to be treated helps build long-term relationships based on ethics and trust.

  10. Be willing to walk away from a deal. When it comes to effective negotiations, remember, some of the best deals you will ever make are the ones you did not make. All of us have contemplated buying something from an individual, or entering into a business relationship with a company, and just getting a gut feeling that we should say “no.” So we have walked away from the deal. Later, when we heard negative information about this individual or company, the information reinforced the fact that we had made a great decision. In negotiations, your head may try to rationalize deal points to make your gut feel more comfortable. Remember to go with your gut instinct, since it does not rationalize as well as your head.

Putting these tips into use is critical to your success as a negotiator. Your reputation is at stake. A reputation takes years to build and only minutes to destroy. Plus, as some have recently learned, your job is at stake, and, if you take part in illegal and unethical negotiations, your freedom is at stake. Practicing ethical negotiations is not only right–it is a wise investment for your future.

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10 Ways to Lose a Negotiation – May 2010 Master Negotiator

May 28, 2010 By Leave a Comment

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“Your ability to negotiate, communicate, influence, and persuade others to do things is absolutely indispensable to everything you accomplish in life.”

-Brian Tracy

Recently, a seminar participant came up to us during a break and said, “I think I made a huge mistake in a recent negotiation regarding budgets.” The participant went on to add that she did not counter her CFO’s original budget number for her department. What gave her the feeling of buyer’s remorse is that two of her peers had each countered the original budget figure offered by the CFO and through negotiation, had their budgets increased.

Hind sight being 20/20, it is hard to say whether it was a mistake or if the participant received a great deal on her final budget. What we do know is that specific skills, when practiced, lead to better negotiated outcomes. Please feel free to contact us with any negotiation questions or article ideas. We’ll do our best to address them in upcoming issues. (peter@peterstark.com)

Remember, almost everything in life is negotiable.

Peter B. Stark & Jane Flaherty

Not satisfied with your negotiation outcomes, but not sure what is causing the problems? If you feel you are continually striking out, it’s time to reassess your approach and see if you are hurting your negotiation more than helping it.

Below, find the top ten ways to lose a negotiation.

  1. Be Pessimistic

    In every negotiation, counterparts have one of three visions of the outcome. The third type of vision is a negative one. These negotiators know they are going to lose the negotiation before they ever begin the process. The second type of vision is to obtain the status quo. You are not trying to win or lose anything: you are just trying to keep what you have already achieved.

    Vision number one, which is where you need to be if you want a win-win outcome, is a compelling, positive vision. This counterpart sees himself as successfully negotiating with their counterpart and achieving his goals. Great negotiators have a positive vision of the outcome and plan a strategy to turn the vision into a reality.

  2. Don’t Worry About Preparation

    Many negotiators prepare on the way to the negotiation. Or better yet, they use their first meeting with the counterpart to go in and determine the counterpart’s position. That’s great as long as the counterpart came into the negotiation with the same amount of preparation.

    The side who is the best prepared, usually receives the best outcome. If the counterpart spent a few hours of preparation to research you, your customers and your competitors, and you didn’t research them, you are going to be at an unfair advantage. It is amazing that in the age of the Internet, some people don’t even go to the web to do five minutes of research prior to the negotiation. Like we learned in school, doing your homework will almost always help you to be even more successful in your outcomes.

  3. Lower your Aspirations

    If you don’t expect much from the negotiation, you’ll always be pleasantly surprised by the outcome, right? Wrong!

    Good preparation goes hand in hand with high aspirations. When you go into a negotiation, you need to identify three points of information. First, you need to clearly articulate your goal. If the new software is quoted at $5,000, then what is your goal for the final price? If your goal is to pay less than $5,000, then you can never open up the negotiation at $5,000. You need to identify your second important piece of information which is your wish. To get a really great deal, your wish would be to buy the software for $4,000. The reason you need to establish a wish to open your negotiation at is that if you start the negotiation at $5,000, your goal, then you will always be negotiating on the wrong side of the fence. When you start the negotiation at $5,000, you are most likely going to end up higher than your $5,000 goal. But if you start at $4,000, your wish, there is a good chance you will end up somewhere between $4,000 and $5,000. Last, you need to identify your bottom line. If this software rises above $5,000 with add-ons, at what price are you willing to walk away from the table and go seek competitive bids? When you raise your aspirations by opening up your negotiation at your wish, you almost always achieve a better outcome.

  4. Never Compromise

    If you don’t compromise on anything, you can be sure that your counterpart will not want to negotiate with you again.

    Always compromise, except when it comes to core values. The core value may be quality, profitability or fidelity. When it comes to core values, negotiating becomes a slippery slope that usually becomes a lose-lose outcome. If the deal point is not a core value, we have found, in most instances, that it is beneficial to compromise and achieve a win-win outcome. Could you have done better? You can always do better. But, if you consider what your time is worth and more importantly, how you enjoy spending your time, the right decision is usually to compromise.

  5. Say “Yes” to the First Offer

    When you say “yes” to a counterpart’s first offer, you statistically increase the chances of undermining the deal.

    Don’t ever say “yes” to a counterpart’s first offer. People expect you to counter their first offer. Don’t disappoint them. Think about it. Someone is selling their car for $10,000. You offer them $5,000 and they extend their hand and tell you, “sold.” There would be two thoughts racing through your mind. The first thought would be, “I should have offered $4,000.” The second thought would be, “Something is wrong with this car.” Neither of these thoughts are motivators to encourage you to move forward with the deal.

    If your counterpart offers you the perfect price, then counter with another deal point like timing or a condition of sale. For example, on the car deal above, you could say, “I could accept the $5,000 but only under one condition: that you pay me today all in cash.” Always counter.

  6. Don’t Walk Away

    We are fond of saying: some of the very best deals we have ever negotiated are the ones we did not.

    Sometimes, the best deal you can make is to walk away. When you walk away, it is important to remember you are not creating a lose-lose or win-lose outcome, you are creating a “no outcome.” No outcome is very different than a lose-lose outcome. Most people have had the experience of walking out of a car dealership without making a purchase. In this example, you most likely will end up buying the car from the same dealership on a different day or you will buy it from a different dealership. The original dealership is either going to sell the car to you on a different day or they will sell it to someone else. On the day you walked out, no one lost. There just was no outcome in the deal.

  7. Talk More than Listen

    The old cliché is right. You’ve got two ears and one mouth and, in a negotiation, it is advisable to use those parts in direct proportion.

    The best negotiators are great listeners. By being a great listener, you are showing your counterpart that you value them and their opinion. When people feel valued, they are much more likely to concede and work toward a win-win outcome. When great listeners do speak in a negotiation, they usually practice the art of asking great questions, which facilitates even more listening.

  8. Forget About Multiple Options

    In a negotiation, when you do not have multiple options, you tend to throw your anchor over the side of the boat without a line attached.

    When you develop multiple options so that you can pull up your anchor and try a different strategy or tactic, you will become a resourceful negotiator. If each counterpart has three different options of how they can successfully achieve their goal, almost always, a win-win outcome can be achieved.

  9. Don’t Find Out the Needs and Goals of your Counterpart

    If you don’t know the needs of your counterpart, you will be unable to reach a win-win outcome.

    While communicating, pay attention to clues that your counterpart drops about their needs. In every negotiation, there are two types of needs operating. Your counterpart will always tell you their explicit needs, which are things like: price, quantity, delivery, warranty, terms, etc. However, they will never tell you their implicit needs, such as: looking good in the eyes of their boss, being liked, being right and feeling valued. Great negotiators know that it is the implicit needs, not the explicit needs, which drive the outcome of a negotiation. Help your counterpart meet their implicit needs and you will find it even easier to achieve a win-win outcome.

  10. Only Use One Strategy

    What if the one strategy you have fails? The negotiation will not end well.

    Great negotiators continually build their repertoire of strategies and tactics. The average person uses three to five strategies or tactics that they have mastered from using over and over. Sharks or bullies usually have less than three strategies and/or tactics. They need fewer tactics because the ones they do use, like yelling or swearing, work so well. In our best-selling book, The Only Negotiating Guide You’ll Ever Need, we review 101 different strategies and tactics you can use, and how to counter if someone ever used the tactic against you. To help you build your skills, you can also sign up for our free Negotiation Tactic of the Week newsletter. Start putting a few new strategies into play and have fun as you observe the results.

There you have it. The top ten ways to lose a negotiation. In your next negotiation, pull out this list and put a check by each one as you ensure that mistake is not going to derail your ability to successfully achieve your negotiated goal.

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12 Keys for Successfully Selling at a Price that is Higher than your Competitors’ – April 2010 Master Negotiator

April 29, 2010 By Leave a Comment

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“In business, you don’t get what you deserve, you get what you negotiate.”

-Dr. Chester L Karrass

One of the most frequent questions we are asked is how to negotiate when it appears that the only thing that matters to your counterpart is a low price. As a sales person or negotiator, your success, and your company’s success, depends on your ability to convince your counterpart that the value your product or service provides is worth the higher price.

In this issue, we will outline 12 keys to successfully negotiating in a price war. Please feel free to contact us with any negotiation questions or article ideas. We’ll do our best to address them in upcoming issues. (peter@peterstark.com)

Remember, almost everything in life is negotiable.

Peter B. Stark & Jane Flaherty

Negotiating with a counterpart who places high importance on a low price is always difficult. This problem is amplified when your counterpart is talking to multiple competitors and your product or service has a reputation for having high value in the marketplace. Typically, when your product or service is recognized for having high value, you can charge a higher price. Competitors who are recognized as having lower value in the marketplace tend to compete by charging a lower price. Most people buying a product or service want the highest quality and best value at the lowest price.

Our clients have found the following 12 keys helpful in successfully negotiating a price that is higher than that of their competitors: even in situations where it appears that the only thing that matters to your counterpart is a low price.

  1. Build your confidence. Part of the reason your product or service is worth more is because of the service and support you and your team provide. If you don’t believe that your product or service is worth more, then it will be difficult to convince a customer that paying more than your competitors is a good thing.

  2. Develop a positive vision. You have to believe that you are going to win this sale, and that it is going to be in the customer’s best interest that you do so. If you feel you are going to lose on price, you already have. Get excited about putting together a plan, with options, that will lead to a successful outcome. This one may be tough, but you have to believe in a positive outcome.

    An important part of your positive vision is to remember that you have more price power than you think. If the client still returns your phone calls and emails, or agrees to meet with you, you have power. If you had no power, they would simply place the order with the competitor at a lower price.

  3. Ask great questions. Sales people who lack confidence tend to ask closed ended questions that yield short answers with little information. Control the conversation by asking great questions that uncover a customer’s true needs and the importance of value to them in this negotiation. Ask great open-ended questions, then listen.

  4. Make sure you are dealing with the decision maker. If price is going to be the deal maker or breaker, there is no sense dealing with the monkey when the organ grinder is sitting in the next office. Competitors who steal business tend to do it by gaining direct access to the decision maker, while the incumbent maintains their existing relationships with the user buyer with whom they are most comfortable. The incumbent is then left playing a challenging game of good-guy, bad-guy with the user and economic buyer/decision maker. That game is highly effective in forcing you to lower your price.

  5. Understand the true needs of your buyer. There are two types of needs. Explicit needs like price, quantity, quality, features, terms, warranty and delivery. Then there are implicit needs like the buyer’s reputation, credibility, and the need to look good to their boss and peers. Implicit needs almost always override explicit needs in determining the outcome of a negotiation. If implicit needs did not override explicit needs, we would all be driving Yugos: the lowest priced car ever sold in the United States. If the thought of buying the lowest price could impact your credibility and reputation, almost always, you are quite excited about paying a higher price.

  6. Remember, people hate giving up value! Everyone hates to pay a high price but they hate giving up value even more. Don’t ever lower your price without taking away some value at the same time. If you lower the price, but don’t adjust the value, the customer will continue to ask for an even lower price.

  7. Strong relationships count. When you are in a business that has repeat or annual renewals, it is important to build strong relationships with key players throughout the year, even when you don’t need them. If you only have a relationship with the user buyer, and the economic buyer decides to get involved in the negotiation, you do not have the relationship or the credibility to negotiate a higher price. Wal-Mart has made billions by rotating buyers, giving them high goals to gain price reductions with sellers they have very limited relationships with. When there is no relationship, it is harder to support a higher price.

  8. Treat your counterpart the way they want to be treated. If your buyer’s negotiation style is a driver or a director, then trying to dump 87 pages of data down their throat to support the value of your product or service will not work. The driver/director ignores your data and flips to the last page with the price. Conversely, to give a one page overview of your product/service to a highly analytical user buyer is going to decrease the amount of trust they have in you and what you are selling. Design communication that is aligned to your client’s behavioral style.

  9. Know your competition better than your customer. If you don’t know your competition, then you tend to take anything your buyer says about your competitor as true. To successfully defend a higher price, you need to know your competitors, and you need to know the truth. Do your research in advance: not being the best prepared undermines the value of your higher price.

  10. Focus on value first, brand second. Some people feel that the reputation of their brand deserves a higher price. Although the reputation of your brand may hold power, when it comes to price negotiations, the value that your brand brings to meet the implicit and explicit needs of your buyer holds even more power. Whenever possible, get the prospect to tell you about the value they have received from your product or are expecting to receive from your product versus your competitors.

  11. Develop options. When it comes to selling at a higher price, options help to change the buyer’s question to, “How will they use us?” Not, “If they will use us.” By adjusting price and value and developing a variety of options, you will find it easier to defend a higher price.

  12. Sell the problem, not the solution. Almost always, there is a reason for your higher price. Most sales people try to sell the solutions of their product or service. It is much easier to defend a higher price by selling the problem. If you buy the lowest priced back-up system and it fails in a catastrophe, what impact is that going to have on you and your company?

And last but not least:

Celebrate your success! You won’t win them all but with these 12 strategies you will win a lot more price wars. Start celebrating your success!

For more negotiation tactics, sign up for our tactic of the week.

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Wal-Mart: The Big Gorilla – March 2010 Master Negotiator

April 29, 2010 By Leave a Comment

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“Any business arrangement that is not profitable to the other person, will, in the end, prove unprofitable for you.”

-B. C. Forbes

In last month’s Master Negotiator, we advised against the tactic of walking away from a deal. Specifically, we referenced that win-win negotiation is about getting what you want, but also ensuring that the needs of your counterpart are met. Why is the success of your counterpart critical? Because, in real life negotiations, chances are good that you will negotiate more than once with the same counterpart: for example, with your boss, a coworker, family member or friend. When either party walks away, whether they choose to or are forced to by an un-yielding counterpart, bridges are burned and ties are cut. Last month, we urged our readers to use the walk away strategy cautiously for this reason. According to recent news, even super giant Wal-Mart is not immune to the problems that arise from walking away in negotiations.

Please feel free to contact us with any negotiation questions or article ideas. We’ll do our best to address them in upcoming issues. (peter@peterstark.com)

Remember, almost everything in life is negotiable.

Peter B. Stark & Jane Flaherty

For years, manufacturers’ or distributors’ biggest reasons for celebration was landing the Wal-Mart account. But the story that is not told often is about the pressure that Wal-Mart puts upon its suppliers to bring “everyday low prices” to their customers. It is common knowledge that whatever price Wal-Mart sets for products from each of its 21,000 suppliers this year, the price will be lower next year. And, if the supplier doesn’t agree to the lower price, you can guarantee that Wal-Mart will threaten to remove all of that supplier’s products from their shelves. Wal-Mart tells the companies when they are no longer willing to buy their products that they are working on the art of SKU optimization, and your SKU’s are no longer being utilized.

There is some good news in these hardball negotiations. First, there is no doubt that customers have benefited from Wal-Mart’s drive to have suppliers squeeze their profits. Second, some have even said that Wal-Mart is partly responsible for helping the U.S. keep a lid on inflation. And third, if you are a supplier to Wal-Mart, they will force you to lower your price which will force you to become more efficient, leaner, faster and more productive.

So, how can Wal-Mart do this to both huge and small companies, even those who have products that are strong household names? It’s easy. Wal-Mart is the world’s biggest company. Wal-Mart is bigger than Exxon Mobil, General Electric and General Motors combined. It does more retail business than Target, Sears, Kmart, J.C. Penny, Safeway and Kroger combined (Fast Company). The challenge for suppliers becomes a negotiating decision similar to the ones that a crack addict has to make. If you move forward with the decision, it feels good (take the fix and make the sale) but it destroys your health (physically and profitably). You know the decision of lowering your price is going to increase your sales, but most likely erode your profits. Why do companies move forward with their decision and cave into Wal-Mart’s demands? Like the crack addict, it feels so good. And, the thought of telling anyone you just lost your biggest customer hurts so badly.

Thirty days ago, I was planning to write this article and tell you that Wal-Mart was one of the few companies who effectively used this walk-away strategy in negotiations. Wal-Mart requires companies to lower their prices and then dumps them if they refuse. This seemed to work for Wal-Mart at first, because it’s obvious they have a much better BATNA (Best Alternative to a Negotiated Agreement) than their suppliers. As long as you never have to work with your counterpart again, as I imagine Wal-Mart believed they would not, this is a highly effective strategy.

Some of their suppliers have even gone out of business or bankrupt when Wal-Mart utilized their walking away strategy (The Loveable Company and Vlasic Pickles). So why should Wal-Mart even care about their suppliers? Because as Wal-Mart has since experienced, very seldom are negotiations one-time affairs.

On March 8th, Bloomberg reported that Wal-Mart is bringing back some of the very products they had walked away from and removed from their shelves. Why is Wal-Mart bringing back products that they had literally given the middle finger to? Because consumers were demanding a wider selection from which to make their purchases. The retailer said last month that its U.S. stores recorded a drop in sales and had a “slight decrease” in customer traffic in the quarter that ended in January. Even harder for Wal-Mart to acknowledge was the fact that consumers were shopping at other stores to find the products that Wal-Mart used to supply. Even I left Wal-Mart and headed for my local supermarket to buy some Purina dog treats that Wal-Mart had pulled from the pet food section. Bloomberg reported that Wal-Mart has now begun re-stocking products they removed from the categories of health and beauty suppliers, cereal, pet treats, soda, bedding and laundry detergent.

I started this article with the premise: if you are big enough and have a better BATNA, you can walk away and win. I end this article by stating a premise we have written about for twenty years: almost always in on-going relationships, it is better to develop a win-win outcome where the needs and goals of both parties have been achieved. Hopefully in round two of these negotiations, Wal-Mart will obtain the products their consumers are demanding, and the suppliers can obtain a price from Wal-Mart that keeps them successfully profitable.

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You Have the Power to Walk Away… But Should You? – February 2010 Master Negotiator

April 29, 2010 By Leave a Comment

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“The most important trip you may take in life is meeting people half way.”

-Henry Boyle

Win-win negotiation is all about getting what you want, but also ensuring that the needs of your counterpart are met. Why is the success of your counterpart critical? Because, in real life negotiations, chances are good that you will negotiate more than once with the same counterpart: for example, with your boss, a coworker, family member or friend. When either party walks away, whether they chose to or are forced to by an un-yielding counterpart, bridges are burned and ties are cut. This is clearly not a good tactic when negotiating with individuals with whom you’re close to, but is it different for business?

Please feel free to contact us with any negotiation questions or article ideas. We’ll do our best to address them in upcoming issues. (peter@pbsconsulting.com)

Remember, almost everything in life is negotiable.

Peter B. Stark & Jane Flaherty

Let’s say that you and your spouse are having a serious discussion about an upcoming vacation destination. You want to hike the Grand Canyon, while your spouse argues that a cruise will provide you both with entertainment, great food and much needed relaxation. You are both arguing passionately about your choices for the vacation and have a strong need to achieve your outcome. At any point, you could use the tactic of threatening to walk away from the negotiation by saying, “Fine, if you won’t come with me to Arizona, I’ll go by myself.”

Recently, Google tried just the same tactic with China, saying that if China continued to censor Internet use, Google would pull out of China. Within minutes, it appeared that Google was reconsidering the threat to leave. Here are just a few facts that came to light after Google used the tactic of: “If you won’t play our game by our rules, we’re out of here:”

  1. Google’s threat to pull out of China drew little reaction among the country’s 384 million Internet users. The prevailing sentiment was that if Google left, there would be other choices. T. R. Harrington, CEO of Shanghai-based Darwin Marketing, said, “It’s like in the U.S. saying, ‘You can’t use Yahoo search anymore.’”

  2. China has its own search engine, named Baidu, which is used by 60% of China’s search engine market, and gives users access to 3.2 million registered Web sites.

  3. Goggle took a stand on China’s censorship of the Internet, but most Chinese users are currently in their 20s and are known for their love of consumerism and disdain for politics. Their favorite online activities are listening to music, chatting with friends and playing video games. As such, there was very little public outcry when Google threatened to depart.

From an outsider’s perspective, China’s official reaction seemed to be, “Fine. If you don’t like our laws, you don’t have to be here.” While we don’t have closure on the Google/China standoff, Google appears to have backed off on their threat to pull out of China, perhaps acknowledging the financial consequences of this decision. China, with nearly 400 million Internet users, is seen by many as one of the most important and fastest growing Internet advertising markets in the world.

Whether the threat to walk away from the negotiation occurs between big players, such as Google and China, or over a family disagreement, the outcome is almost always the same – there are winners and losers. And, the losers are typically reluctant to play the game again. In the case of Google vs. China, there is potential for both to become losers. If you use this tactic, it will most likely be your last negotiation with this counterpart. Walking away from a negotiation will work, but only if you have no intention of continuing the relationship. If you chose to put this tactic into play, make sure you’ve thought the consequences through completely. In the Grand Canyon example, you could just go to the Grand Canyon no matter what your spouse says, but it might be a lonely trip with a difficult homecoming.

  1. Negotiate using the “If… then” tactic. Compromise is difficult, because both sides are reluctant to back down from their original stance. The “If… then” tactic seeks a compromise based on mutual agreement. Meaning, if you could agree to a counterpart’s stance, would they concede a part of their stance and accept your proposal? For example, you might say to your spouse, “If I agree to do a cruise with you this year, would you then agree to come to the Grand Canyon with me next year?”

  2. Try “Sweetening the Deal.” This tactic is used extensively in business to make a deal work. When a buyer balks at a price or condition, the seller often says something like, “Of course, that comes with a full three year warranty at no extra cost, and we’ll even throw in the delivery for free.” The same approach could work well in negotiating your vacation. You might get your spouse to agree to your travel plans by adding, “If you came with me to the Grand Canyon, we’d stay three nights at the historic Yavapai Lodge on the South Rim of the canyon, and then how about we spend the next four days at that spa you like so much in Sedona?”

  3. Use a “Trade off Concession.” Effective negotiators aim to never concede a deal point without getting something in return. Using this tactic to negotiate your quest to get to the Grand Canyon, you might try this approach. “Honey, I know the cruise is important to you, and I like cruising also. But, we’ve only got so much money in the budget and not much time off. Rather than doing a week long cruise, would you consider the three day Mexican Riviera cruise departing from San Diego? If we did that, we’d still have time left for our visit to the Grand Canyon.”

In our book, “The Only Negotiating Guide You’ll Ever Need,” we refer to the tactic of walking away as, “These Boots are Made for Walking.” In any negotiation, you have the power to end the negotiation by leaving, or threatening to leave. Our recommendation: pick your strategy carefully, considering other options and the ultimate consequence or damage to the relationship if you exercise your ability to walk away from the negotiation. If the negotiation is a one-time only negotiation, or you hold all the power in the relationship, you may well benefit from taking a hike. However, if you exercise your options under situations where on-going relationships are important, we recommend that you use caution and pick your strategy carefully.

We invite you to join us next month, when we will present the flip side of using “These Boots are Made for Walking” and share with you how a mass merchandiser effectively uses this strategy to their advantage.

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Everyone Loses in a Price War – January 2010 Master Negotiator

April 29, 2010 By Leave a Comment

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“Nowadays people know the price of everything, but the value of nothing.”

-Oscar Wilde

As we learn about the current price wars going on between competing retailers, it is easy to be reminded of the above Oscar Wilde quote. Retailers who constantly lower prices to beat competitors may bring more traffic to stores, but does this really bring any long-term value to their bottom line or are they discounting themselves into oblivion? This is something that you should heed if you ever find yourself in a negotiation situation involving a price war with a counterpart.

In this issue, we will provide you with some ammo in case you ever see a price war coming your way. Please feel free to contact us with any negotiation questions or article ideas. We’ll do our best to address them in upcoming issues. (peter@pbsconsulting.com)

Remember, almost everything in life is negotiable.

Peter B. Stark & Jane Flaherty

The question we are asked almost as frequently as, “How do you negotiate with a bully or shark?” is, “What do you do when the only thing your counterpart cares about is price?” What makes the situation even worse is only having one strategy in your tool bucket when you reach a roadblock in your negotiation; lowering your price. Negotiating solely on price is a long-term losing proposition, unless you have a huge cannon and losing money or operating on extremely low margins does not hurt your ability to operate as a strong, sustainable business.

The greatest recent example of two companies that are in a price war, without their counterparts even asking them to lower their prices, are Wal-Mart and Amazon. Wal-Mart started the war when they marked down the prices of their top ten best-selling books to $10.00. Amazon, determined not to be beat, matched Wal-Mart’s price. In turn, Wal-Mart lowered their price to $8.99. Then Target joined in by selling their top ten best-sellers at $8.99, forcing Wal-Mart to lower their price to $8.98.

Keeping in mind that retailers can buy books from the publishers for one-half of the retail price, it becomes apparent that, by lowering their prices to $10.00 and below, all three of these retailers were losing money on every book they sold. The retailers are probably thinking, “If we are losing money on each sale, let’s lower the price even more to increase sales and steal our competitors business.” This makes no business sense. In a price war, almost always, everyone loses.

The good news for Wal-Mart, Amazon and Target is that they all have big cannons and these sales leading to losses will not hurt their business. It is important to note that these three giants actually had a goal: entice new, on-line shoppers interested in the top ten best-sellers, and introduce other items to them which they, otherwise, may never have been exposed to in brick and mortar stores. Indirectly, this price war helped Wal-Mart, Amazon and Target, but I will bet that anyone smaller who tries to participate will lose this price war in a big way.

A second retail arena where we see constant price wars is in the electronics industry. Just ask a former Circuit City or Good Guys employee; they will agree that very few people win long-term in a price war strategy.

So, what can you do to effectively compete in an environment where it seems like the only thing that matters is price?

  1. Recognize that people seldom buy things solely based on price. If it was really true, we would all be driving YUGOs and the YUGO car company would still be in business. Although the entire auto industry is in a world of hurt trying to sell based on huge price incentives, over the last 18 months it became obvious that sometimes people are unwilling to buy even when you lower your prices to well below your costs. The positive example is that most cars are bought, not because of their price, but because of the implicit needs they meet for the buyer. Many a car salesperson has closed the deal by simply saying, “You look really good in that ride.” Focusing on the value that your product provides for the customer, rather than boasting low prices, will give you a competitive advantage.

  2. Realize that very seldom does your counterpart hold all the price power. Many salespeople have told us that if they want to make the sale, they have no option but to lower the price. We always respond by asking, “Does the counterpart call you back, return your emails or agree to meet with you?” If the answer is yes, you have more price power than you think you do. If you did not, the counterpart would instantly call your competitor and place the order with them. It would be your counterpart’s most productive and profitable call of the day. When your counterpart continues to talk with you about price, they are telling you that you have something of implicit value to them other than price.

  3. Differentiate or die. If everything is truly apples to apples, and there is zero difference between you and your competitor, then you are right, the only thing that will differentiate you is a lower price.

  4. Innovate if you want to be a price winner. One of the companies that I resisted supporting for most of my life was Apple. They were so innovative that I did not fully understand their products. I was an idiot. Then I had kids. Through my kids I was introduced to iPods, MacBooks and so on. The reason the new generation loves Apple products is because they are so innovative and so cool. When a company is so cool and innovative that a customer cannot buy any other competitor’s product and achieve the same experience, price is not negotiable. Last week, I took the kids to the Apple store. It was packed! Not one person was asking for the sales price or a discount. After we bought the new MacBook Pro, they slipped it into a plastic backpack so we could walk though the mall advertising to everyone that we just paid full price and loved the experience.

  5. Practice détente with your biggest competitors. Let your competitors know that if they lower their price to try and steal business, you will lower your price as low as you need to go not to lose. If both competitors have the price cannon faced at each other, each will be less willing to play the price war game.

  6. Concede small. If you are going to concede and lower your price, in the opening round of the concessions, concede small. Your first concession sets the stage for all future rounds of concession.

Do price wars work? Yes, if you are Wal-Mart, Target and Amazon. For the rest of us, put these six strategies into action and play a different, more profitable game.

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Negotiating with Sharks – December 2009 Master Negotiator

April 28, 2010 By Leave a Comment

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“Spectacular achievement is always preceded by spectacular preparation.”

-Robert H. Schuller

In this issue of The Master Negotiator, we will share with you three strategies for successfully negotiating with a bully, someone whose main negotiation strategy is intimidation.

Based on our research from seminars and training on negotiation skills, we have learned that the most difficult person for many people to negotiate with is a bully, more effectively referred to as a shark in our book, The Only Negotiating Guide You’ll Ever Need.

There are many different ways to negotiate with a shark, but the three that we outline here are the strategies that are most likely to help a challenging negotiation end with a win-win outcome. In this issue you will also find a complimentary video which expands on these three strategies.

We are proud to announce that we will soon be releasing an additional negotiation resource, the Negotiating Tactic of the Week. This mini-newsletter will provide you with an insider’s look at hundreds of strategies and tactics, and will ensure that you know more than your counterpart by profiling a specific tactic each week. If you are interested, please update your mailing profile by entering your email address and select the Negotiating Tactic of the Week.

Please feel free to contact us with any negotiation questions or article ideas. We’ll do our best to address them in upcoming issues. (peter@pbsconsulting.com)

Remember, almost everything in life is negotiable.

Peter B. Stark & Jane Flaherty

When most people encounter a shark, their number one goal is to get away from the shark. No one likes to deal with a jerk. The problem is, to get away from a shark in a negotiation, many people tend to give in. It is a simple strategy – give the shark, bully or jerk something they want and then GET OUT.

The problem with this strategy is that this is the worst thing you can do when negotiating with a shark. Giving in only rewards the shark and increases the chances they will rely on bully tactics the next time they negotiate with you. The best strategy is to get closer to the shark. We have three different strategies that will help you do that:

Strategy Number One is designed for negotiators who represent the behavioral style of the Directors, who are also sometimes known as the Reds. When these types negotiate with sharks, we recommended leaning forward in the table, or taking a step closer to the shark if you are standing and saying something like, “John, most people get frustrated and intimidated when you raise your voice…but I need you to know something…it kind of excites me. I love working with people who have passion and you have it. Buddy, give me a hug.” The key to this tactic is to tell it like an Amiable would.

Strategy Number Two is designed for the Amiables, who are sometimes known as the Blues. People of this negotiating type could catch the shark off guard and say, “Most people don’t feel the need to raise their voice at me, but you do. I am curious: why?” Most likely the shark will not even answer your question. Since they don’t want to answer your question, they probably will not use the bully tactic on you again.

Strategy Number Three is to ask for it. When a shark begins to bully you, ask this person to promise you that at least once in the negotiation, they will lose it and raise their voice at you. Asking for it renders their tactic useless.

When you master these three tactics, you are going to discover that it is actually fun to negotiate with sharks. It is also important to remember that sharks tend to have less strategies and tactics in their negotiating repertoire. Because of this, when you master the ones they do use – like raising their voice, swearing or getting in their counterpart’s face – they become less effective in attaining their goals.

Click here to view a video describing these three strategies in greater detail.

Our homework for you is to go find a shark and have some fun!

We wish you great success in all your negotiations!

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