Negotiation Strategies and BATNA

Distributive Bargaining

• Distributive bargaining is a competition to obtain the most of a limited resource
• Understanding distributive bargaining entails knowing when it applies, how to counter tactics, and skills useful during the "claiming-value" stage

Distributive Bargaining Situations

• Target Point: A negotiator's achievable goal
• Resistance Point: A negotiator's bottom line
• Asking Price: The initial price that a seller sets
• Initial Offer: The buyer's counter to the asking price
• Staring points are public, target points are inferred, and resistance points are secret
• It is important to set starting, target, and resistance points before negotiating
• Bargaining/Settlement Range: The spread between resistance points, which can be positive or negative

Alternatives to a Negotiated Agreement

• Negotiators consider their Best Alternative To a Negotiated Agreement (BATNA) and Worst Alternative To a Negotiated Agreement (WATNA)
• Alternatives empower negotiators to walk away
• Attractive alternatives enable higher goals and fewer concessions
• Identifying alternatives before discussions and improving BATNA throughout the negotiation are crucial
• Strong BATNAs influence the negotiation's path

Settlement Point

• Distributive bargaining's goal is settling within a positive bargaining range
• Both parties aim to obtain as much of the bargaining range as possible
• Agreement is reached close to the other party's resistance point
• Parties may settle for less than their target, but hope for more than their resistance point
• For an agreement, both parties must believe the settlement is the best they can get (within a positive bargaining range)

Discovering Resistance Points

• Information is key
• Learning about the other party increases the likelihood of a favorable settlement
• It is important to keep your resistance point, targets, and information about vulnerabilities secret
• Each side seeks to gain and conceal information
• Communication evolves into a complex, coded language

Influencing Resistance Points

• Resistance point is derived from: The value the other attaches to an outcome, the impacts on the other party of delaying negotiation, and cost of halting the negotiations
• When influencing viewpoints, you must address: The other party's understanding of your value for a particular outcome, the costs to you if negotiation is delayed, and the cost to you for halting the negotiation

Weakening Resistance Points

• Reduce the other party's estimate of your cost of delay or impasse
• Increase the other party's estimate of their cost of delay or impasse
• Reduce the other party's value perception of an issue
• Increase the other party's perception that you value an issue
• A more attractive BATNA for the other party leads to a higher resistance point

Tactical Tasks for Negotiators

• Assessing the other party's target, resistance point, and termination costs
• Managing the other party's impression of your target, resistance point, and termination costs
• Modifying the other party's perception of their target, resistance point, and termination costs
• Manipulating the actual costs of delaying or terminating negotiations

Assessing The Other Party

• Identify what the other party wants to achieve and what they are willing to pay
• Indirect Assessment: Obtain information about an issue's factors
• Direct Assessment: Obtain information from the other party
• The other party reveals information when pressed

Managing Impressions

• Screening activities at negotiation's start, direct action later
• Screening activities use general screening activities

Screening Activities

• Concealment is the most common screening activity
• Calculated incompetence can be a useful strategy
• Channel communication through a spokesperson
• Present multiple items, but highlight the few that are most important to you

Direct Action Tactics

• Selective Presentation: Shares needed facts only
• Explain the rational for known facts using logic arguments
• Display emotions
• Take into account Ethical Implications
• It can backfire

Modifying Perceptions

• Make outcomes appear less attractive
• Increase the cost of obtaining outcomes
• Make demands/positions more attractive or less unattractive to the other party
• Interpret what the other party's proposal outcomes really entail

Manipulating Costs

• The ultimate weapon in negotiation is to threaten termination, denying settlement for both parties
• Disruptive action: Public picketing, boycotting, and/or locking negotiators in a room can be effective
• Alliance with outsiders: Engaging outside parties with influence
• Negotiation schedules can be used to increase time pressure

Opening Offers

• The "first-offer advantage" means the negotiator making the first offer gets better outcomes
• When making an offer, consider being precise
• Negotiators can lessen the "first-offer advantage”
• Concentrate on their own target and the other's resistance point
• Exaggerating an opening offer may be good if it provides room to move or confuses the other party
• It may not be good if the the other party ends negotiations or if it is bad for the relationship

Opening Stance

• Determine a competitive or moderate attitude
• Remember that the other party may respond "in kind”
• Ensure visual cues align with the intended stance
• Send a consistent message through the opening offer and stance.

Initial Concessions

• An opening offer and a counteroffer define the initial bargaining range
• The first concession conveys a message on how you will proceed
• Taking a hard line achieves better economic outcomes, but is perceived negatively
• Good reasons for adopting a flexible position:
  • When taking different stances throughout the negotiation, can determine targets and perceived possibilities.
  • Flexibility keeps a negotiation moving, as the other party is more likely to believe a settlement is possible

Role of Concessions

• Concessions are key
• Parties feel best about a settlement involving a progression of concessions
• A reciprocal concession cannot be haphazard
• Link concessions to a prior concession from the other party

Pattern of Concession Making

• When successive concessions get smaller: The concession maker's position is getting firmer and the resistance point is being approached
• Concessions late indicate there is no room left to move

Final Offers

• It is important to convey there is no further room for flexibility at a certain point
• If you will provide no further concessions it must be conveyed, but the other party may feel the existing pattern of concessions is being violated
• One may make a last concession more substantial
• The concession should be large enough to be dramatic yet not so large it appears that the negotiator has been holding back

Closing The Deal

• Provide alternatives, such as alternative packages bearing equivalent value
• Act like a decision has already been made
• Split the difference
  • Summarizing the situation can lead to suggesting this path
• Use Exploding offers
  • Contains a very tight deadline
  • It pressures the other party to come to an agreement quickly
• Use Sweeteners
  • Save a special reason to close
  • Offering "I will give you X if you agree to the deal.”

Hardball Tactics

• Work best against poorly prepared negotiators
• They may backfire
• Many deem the tactics upsetting and outside the bounds
• It is difficult to enact because they involve risk for the person using it, making understanding tactics and how they work, key

Dealing with Hardball Tactics

• Discuss them
  • Name the tactic and offer to negotiate the process prior to continuing
• Ignore them
  • Can be powerful, as the hardball tactics use a large amount of energy to enact
• Respond in kind
  • May be useful when dealing with the person using it is testing your resolve and/or exaggerated positions
• Co-opt the other party
  • It is more difficult to attack a friend than an enemy

Typical Hardball Tactics

• Good Cop/Bad Cop
  • Often yields concessions/agreements, however, the tactic encompasses numerous weaknesses
  • Transparent, especially with repeated use
  • Easily countered; other party can call you out
  • Hard to enact, requires much energy
  • Can alienate the other party
  • Negotiators may get drawn into the "game", failing to concentrate on their goals
• Lowball/Highball
  • Start with an opening offer (too low or high) with no intention of achieving it
  • The other party may reevaluate their opening offer and move closer to their resistance point
  • There is a large risk; the party on the receiving end, may stop negotiating
  • Best offense is not to make a counteroffer
  • Insist the other party begin with a reasonable offer
  • Show the other party you will not be tricked
  • Threaten to leave the negotiation entirely
  • Respond with an extreme counteroffer
• The Bogey
  • Pretend an important issue is actually of little/no importance
  • Most effective when the negotiator identifies an issue important to the other side but of little value to them
  • Deceptive, can be difficult to enact
  • Difficult to defend against; being well prepared for negotiation is useful
  • If the others position opposes expectations, expect a bogey tactic and ask probing questions
  • Question the other party carefully if there is a sudden reversal of position
• The Nibble
  • Used for a proportionally small concession on an item not discussed before to close the deal
  • Party using the nibble did not bargain in good faith
  • The person the tactic is used against, will not feel good about the process
    • Combat with 'What else do you want?'
    • Have your own nibbles prepared for exchange
• Chicken – Combine a large bluff and threatened action to “chicken out” the other party and acquire needed demands
  • The other party involved may have a challenging time distinguishing reality from postured positions
  • Being well prepared and having a good understanding of the situation is essential in identifying where reality ends and the chicken tactics begin
• Intimidation – Attempt to force the other party to agree using an emotional ploy
• Do not allow feeling threatened
• Discuss the negotiation process
• Ignore attempts to be intimidated - Negotiate using a team
• Aggressive Behavior
  • Involves: Pushing for further concessions, asking during preliminary negotiations, and forcing the other party to justify proposals.
  • In order to discuss the negotiation process itself, halt the negotiations
  • Respond by negotiating as a team, ensuring good preparation
• Snow Job
• Involves overwhelming to the extent one cannot distinguish fact from fiction
  • Using highly technical terms to hide questions
  • Can backfire due to creating confusion and consistency issues
  • Ask questions to ensure answers are well understood, and listen for consistencies.
  • Hire technical experts to explain if needed