8-1 Assignment: Negotiation Tactics and Strategies

Module Overview #8

Module Seven, which focused on ways of dealing with challenges during the negotiation session, sets the stage for Module Eight, which focuses on the business side of the negotiations process: bargaining over direct and indirect cost. Negotiating partners that approach the bargaining process with the mind-set of win/win or win/win or no deal set themselves up for success, which is explored in greater detail in this module.

When correctly implemented, foundational negotiation principles and practices (which we discussed in Modules One through Seven) ensure the closure of the deal. A common ploy often used in the negotiation process is for one party to use gambits designed to gain small concessions. One example of a gambit is nibbling, in which one party requests a minor change to seal the deal. For example, a common practice in union contract negotiations is for the union to ask for a minor increase in the package, such as an added $0.05 to the base rate for all employees to obtain a unanimous recommendation by the union negotiating committee. The management team sees it as a minor concession, as it is only an additional nickel per hour per employee. The term gambit is often used in a chess match, and refers to moves that can be used by one party to gain an advantage over the other. Negotiating gambits can be used by either party and can help the negotiators reach an agreement that both negotiating partners can live with long after the deal has been struck. Additional discussions on the types of negotiating gambits will be discussed in Module Nine.

Negotiators refer back to their well-defined positions to ensure they maintain focus on reaching a deal aligned with the preparation work. It is at this stage of the negotiation process that seasoned negotiators refer back to their ZOPA and BATNA, asking themselves:

· What targeted price or cost can I agree on that is within the acceptable range?

· What concessions can I make if I cannot obtain my targeted price? These concessions should be defined in the BATNA.

· What strategy can I use to help the negotiating partner understand that the targeted price provides an equitable outcome for both parties?

· What has been the historical outcome in previous negotiations with this party, and how can I leverage our previous settlements to help close this deal?

An excellent model that assists in this regard is Adam’s equity theory of motivation. As defined by Kreitner and Kinicki (2013), “equity theory is a model of motivation that explains how people strive for fairness and justice in social exchanges or give-and-take relationships” (p. 213). Feelings of inequity arise when we perceive we are being treated in an unfair manner, compared to past agreements or in relationship with others in a similar situation. For example, assume you have received a 3% merit increase for each of the past four years. This year you perceive you have worked equally as hard as the previous years, but you receive a 2% increase. If you cannot rationalize the decrease, you may perceive that you are not being treated fairly.

Here is another example using this same analogy: You receive a 3% increase, which is equal to what you have received in the previous four years, but you learn that your peers, on average, received a 4% merit increase. Even though you were initially satisfied with your 3% merit increase, you now feel as if you were devalued, since your increase was not as large by comparison (Kreitner & Kinicki, 2013).

Effective negotiators understand the impact of an equitable outcome, anticipate it, and are prepared to reduce perceived inequity felt by their negotiating partners. As they prepare their presentation of their position, it is important that the negotiators prepare the case by taking this principle into account. Knowing the cost of a competitor’s products, the quality of comparable products, customer service levels and technical support of the competitors are just a few examples on how the effective negotiator can balance the scales of perceived inequity when price becomes a determining factor. The definition of value does not rest solely on price; skilled negotiators highlight the indirect cost benefits of other aspects of the sale that could go unnoticed. Examples of additional benefits include free accessories, extended warranty, free training and customer service support for an extended period of time, free installation, free or special delivery, and special payment terms. The objective is to increase the value proposition in the eyes of the buyer so price and price alone is not the only variable in the equation. This week’s optional journal article reading explains this concept quite well.

The contrast principle is another excellent method that can be leveraged to positively influence the prospective buyer by using the concept of positive equity (Opresnik, 2014). In effect, it is a method of reaching an agreement by contrasting the desired outcome (goal, object) with a less desirable outcome (goal, object). For example, if you were in the market for a used car, you may be interested in a car sitting on the dealer’s lot. When you ask the dealer about it, he states that the car was just traded in that day by another customer and the dealership has not yet made it available to the public. An astute salesperson will read your heightened interest in this vehicle and use this information to contrast the value of the car that is unavailable to the public with the ones that are available. The salesperson will highlight the fact that you have an opportunity to purchase a vehicle that may be better than others on the dealer’s lot. This may be an effective way to close the deal, achieving the desired price point.

This week you will work on an assignment about negotiation tactics and strategies using the contrast principle. The contrast principle leverages a psychological concept in the negotiations process, linking your proposal with another example that makes your proposal appear more advantageous to the other party. For example, say you propose a 2% across-the-board wage increase to the union negotiating committee, while last year’s increase was 3%. In this example, assume factual information obtained from the Bureau of Labor Statistics shows the average wage increase provided to union members during the last year was 1.5%. Obtaining such factual information from the Bureau of Labor Statistics and referring to it in this context makes the 2% you are offering look like a solid, good offer.

References

Kreitner, R., & Kinicki, A. (2013). Organizational behavior (10th ed.). New York, NY: McGraw-Hill Publishing.

Opresnik, M. O. (2014). The hidden rules of successful negotiation and communication: Getting to yes! [Skillsoft Books24x7 version]. Retrieved from http://common.books24x7.com/toc.aspx?bookid=76725

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