Art of Selling Revision Notes PDF

1 Part I: The Art of Selling Behavioral psychology: the yes-funnel ​ Ask leading “yes” answer questions. ​ Builds trust and sense of similarity ​ Increased feeling of connection Behavioral psychology: mental-states selling Market response models:...

1 Part I: The Art of Selling Behavioral psychology: the yes-funnel ​ Ask leading “yes” answer questions. ​ Builds trust and sense of similarity ​ Increased feeling of connection Behavioral psychology: mental-states selling Market response models: ​ Sequence of steps or mental states in the buying process. ​ AIDA framework - Attention, Interest, Desire, Action. ​ Appropriate sales messages provide a transition from one mental state to the next. Emotion based selling: The stimulus-response approach: Cognition based selling: The complex approach “Cognition based selling (complex selling) is based on the notion that the customer is buying to satisfy a particular need or set of needs. Thereby, the customer applies intensive cognitive elaboration and aims at making a rational choice. Variants of cognition based “Emotion based selling (stimulus-response selling) builds on the selling result from differences in the nature of the customer problem, naïve assumption that various stimuli as set by a salesperson can the supplier’s approach to solving the problem and the customer’s elicit predictable responses by the customer.” (Ingram et al., 2008) mode of outcome evaluation.” (Jacob 2016) Sales Psychology Main Principles: 1.​ Reciprocity: The principle of reciprocity suggests that when someone does a favor or gives a gift, the recipient feels an obligation to return the favor. This can be leveraged in sales through small gifts or gestures, which can lead to increased customer loyalty and sales. 2.​ Scarcity: The scarcity principle states that people place higher value on items that are perceived as limited in availability. This can be utilized in marketing by highlighting limited-time offers or exclusive products, prompting customers to act quickly to avoid missing out. 3.​ Consistency: Individuals have a strong desire to appear consistent in their actions and beliefs. In sales, this can be encouraged by getting customers to commit to small actions or statements, which can lead to larger commitments over time. 4.​ Cooperation: Cooperation among individuals fosters a sense of community and shared goals. In sales, building cooperative relationships with customers can lead to increased trust and long-term partnerships. 5.​ Labelling: The act of labeling can influence behavior; when customers are labeled positively, they are more likely to act in accordance with that label. Salespeople can use this by affirming positive traits in customers, encouraging them to make purchases that align with those traits. 6.​ Self-fulfilling Prophecies: Expectations can shape outcomes; if a salesperson believes a customer will buy, their behavior may influence the customer to do so. This principle emphasizes the importance of maintaining a positive outlook in sales interactions. 7.​ Pygmalion Effect: This principle suggests that higher expectations lead to improved performance. In sales, treating customers with kindness and respect can lead to better interactions and increased sales. 8.​ Social Proof: People tend to follow the actions of others, especially in uncertain situations. Sales strategies can incorporate testimonials, reviews, and popularity indicators to encourage potential customers to make purchases based on the behavior of others.  2 Summary of above: Example: Cell phone contract Customer Segmentation ​ Yes funnel ​ Cheap with less, a bit ​ Divide plans for a certain customer profile ​ 8 Rules of selling more for more data, ​ Homogeneous group ​ Ethical question of using selling more money for ○​ Ex) Students go for the cheaper tactics unlimited data plan ​ Use critical thinking to devise if ​ Use customer ○​ Ex) More expensive family plan what you’re being sold is valid segmentation for each with benefits ​ The client is not naive and now plan → Understand ​ Psychographic, interests, physical (age, we know some of the tactics how to target the group race, etc.) Best fit for customers (Customer segments and needs): Cognition based selling (complex approach) → Customer buys based on NEED 1.​ Uncover and confirm buyer needs 2.​ Present offering to satisfy buyer needs 3.​ Process continues until the buyer decides to buy Best fit for the customer; consider the problem they are trying to solve: ​ Example Companies: Wurth, SAP, StreetScooter, Masabi ​ Create a complex selling matrix Complex Selling Würth - nails, tools SAP - software StreetScooter - Masabi - ticketing Matrix electric cars service app Customer Problem Clear Less clear Unclear Non existent Sales Logic Match a need Trial & error Design a solution, Educational collaboration encouragement Sales Skills Product knowledge Project management Logistics and Charismatic and skills sustainability, persuasive consultancy skills salesperson Industry Context Retail Project business Long Term relationship Disruptive innovation ex) software supply networks Types of Complex Selling (Algorithmic, Heuristic, Strategic, Consecutive): Algorithmic Heuristic Strategic Constructive (need-satisfaction selling) (problem-solving selling) (consultative selling) (insight selling) Customer -Well structured -less structured -Ill-structured -non-existent problem -clearly specified -non-standard -specification partly open -emergent needs requirements Solution -linear, rational - Interactive - Co-design - Coach & motivate approach -ex) find the optimal item ex) customize - ex) service/product - ex) modify customer from a large product line product/service/bundles development for business model customer Outcome - Quality (superiority) - Satisfaction - Judgemental - Consensus evaluation relationship -At arms length -interactive -relational -ally Sales rep - Strong familiarity with - Project management - Strong familiarity with - Imagination & charisma skills product specificities and skills the customer, his - change agent product line - project consultant business, and strategy - product consultant - Industry consultant Industry - product line selling - Systems selling - manufacturer-supplier - selling disruptive examples - multi-brand distributor - Product business networks innovations  3 “The practice of adaptive selling is defined as the altering of sales behaviors during a customer interaction or across customer interactions based on perceived information about the nature of the selling situation... Salespeople exhibit a high level of adaptive selling when they use different sales presentations across sales encounters and when they make adjustments during the encounters. In contrast, a low level of adaptive selling is indicated by the use of the same sales presentation in and during all sales encounters.” (Spiro & Weitz 1990). Things that affect your ability to think: ​ Shopping while hungry ​ Too many options ​ Your expertise ​ Decide if you use emotional, cognitive, etc. selling techniques Sales training (videos of sales situations): ​ Follow instincts and develop routines ​ Sales people need training to develop their instincts ​ In the moment choose the right thing to say Reality video: Tom James Company ​ Need discovery ​ Ask questions tailored to your client ​ Began with the highest price, then she picked a price and then looked at colors, ect. ​ Talked about price and delivery time to ensure clear communication ​ Work with a common goal, make a win-win situation 7 Steps of adaptive Selling (Moncrief, Marshall 2005): Communication styles (Manning et al. 2014): ​ Supportive: Supportive individuals are empathetic, patient, and good listeners, focusing on building relationships and harmony. They have high sociability and low dominance, preferring collaboration over control. ​ Emotive: Emotive individuals are expressive, enthusiastic, and outgoing, often showing their feelings openly to engage others. They exhibit high sociability and high dominance, taking charge while being warm and personable. ​ Reflective: Reflective individuals are analytical, thoughtful, and detail-oriented, preferring structure and careful planning. They have low sociability and low dominance, typically being reserved and cautious in decision-making. ​ Directive: Directive individuals are decisive, assertive, and task-focused, aiming for efficiency and results. They have low sociability and high dominance, emphasizing control and action over relationships.  4 Types of Questions Overcoming Objections & Closing Techniques (Manning et al. 2014) (Manning et al. 2014) SURVEY Direct approach ​ Discovers basic facts about the buyer’s problem and ​ Simply asking in a straightforward manner existing situation ​ “Can we have your order?” ​ Usually at the beginning of a sale Take-it-for-granted technique PROBING ​ Ask for a minor decision assuming the customer has ​ Designed to uncover pain, and clarify the circumstances already decided to buy and implications surrounding the customer’s problem ​ “Will you tell me the quantities you will be needing?” ​ When you feel the need to more specific information to Either-or technique fully understand the problem ​ Positive Choice between two alternatives that both lead to NEED SATISFACTION an order ​ Designed to move the sales process toward commitment ​ “Do you prefer a lease agreement or purchase outright?” and action; focuses on the pleasure or payoff achieved Step-by-step from the proposed solution ​ Go through a series of easy decisions to prepare the final ​ When you change the focus from the problem to a big decision discussion of the solution ​ “Do you think your set-up should be theatre or class-room CONFIRMATION style?” ​ Used throughout the sales process to verify the accuracy Positive/negative technique and assure mutual understanding of information ​ Making positive use of a negative point exchanged by the salesperson and the buyer ​ “Are you sure you are going to be using this plane at least ​ After important information has been exchanged 25 hours a year?” "Handling Objections" by Malhotra and Bazerman: Investigative Negotiation: Approach negotiations like a detective investigating a crime scene.Focus on understanding the motivations, constraints, and interests of the other party. Principles of Investigative Negotiation: Understand "Why" Behind Requests: ​ Ask why the counterpart desires certain outcomes to uncover underlying motivations. ​ Example: Chris resolving a negotiation impasse by understanding a supplier’s personal obligations. Address and Mitigate Constraints: ​ Identify and alleviate the other party's limitations to unlock value. ​ Example: A CEO discovering a supplier’s shipping constraints and proposing a cost-effective solution. Interpret Demands as Opportunities: ​ See tough demands as revealing valuable insights into priorities and needs. ​ Example: Negotiating penalties for delays into incentives for early completion. Create Common Ground: ​ Find ways to cooperate even with competitors by understanding mutual interests. ​ Example: Pharmaceutical companies cooperating by splitting product requirements. Continue Investigating After a Rejection: ​ Revisit a lost deal to understand why it failed and potentially salvage it. ​ Example: Winning back a client after identifying overlooked product feature preferences. Tactics for Building Trust and Eliciting Information: ​ Share information incrementally to encourage reciprocity. ​ Negotiate multiple issues simultaneously to uncover true priorities. ​ Make multiple offers at once to gauge preferences and signal flexibility. Negotiation vs. Selling: Negotiation requires listening, probing for information, and focusing on the counterpart’s perspective, unlike the one-sided persuasion of selling. Key Takeaways: Investigative negotiation creates value by challenging assumptions, understanding constraints, and building trust. This approach transforms competitive discussions into cooperative opportunities.  5 Cognition vs. emotion Adaptive selling tactics: Seven steps of based selling adaptive selling: Depends on: Need to be flexible and change depending on the situation 1.​ Prospecting ​ Client General framework: ISTEA 2.​ Pre-Approach ​ Situation ​ Impression formation: develop an impression of the 3.​ Approach ​ Buyer’s customer 4.​ Presentation experience ​ Strategy formulation 5.​ Overcoming ○​ Select a strategic objective objections ○​ Formulate a message to achieve objective 6.​ Close ​ Transmission 7.​ Follow-up ​ Evaluation Framework: modify impression, change objective, change message, change communication style Notes of video: ​ Behaviors of high performing sales people ​ Asking questions & forming relationships ​ Survey and confirming questions ​ Types of questions to ask ○​ Problem: Find out what the problem is ​ Survey what is the issue for the customer ○​ Confirm: Make sure you and customer are in agreement ​ Double check the info the customer has told you about the problems ○​ Probing Questions: discover customer’s pleasures and pains ​ Pain: What pain is the problem causing the customer ​ Ex) Doesn’t this problem cost you? ​ Ex) What’s the real cost of this problem? ​ Ex) Is this causing friction between departments? ​ Pleasure: How good it will feel when the problem is solved ​ Ex) What if I showed you a way to solve this problem? ​ “You only solve customers problem when they notice the scope of the problem” Presentation: Questions, questions, questions ​ Survey: Discover basic facts about the buyer’s problem and situation ​ Probing: Discover the pain and clarify the circumstances and implications about the problem; search for more information to understand the problem ​ Need satisfaction: Move the sales process toward commitment and action; focused on pleasure or payoff achieved from the proposed solution; focus on solution not problem ​ Confirmation: Use throughout sales process to verify accuracy and assure mutual understanding of information; use after important information discovered Another video: ​ Ask closing questions ​ Direct approach: Gets quick decision ​ Indirect approach: ○​ Take it for granted: for customers who don’t know if they’re ready to commit ​ You assume they will say yes; reassure them about the benefits ○​ Either/or: if they are indecisive/ you hear a no ​ Either you do this or you do that ​ Add some incentives/ talk about how you solve the issue ○​ Step-by-step: easy answers to little questions ​ Lead up to the big question ○​ Positive/Negative: ​ Use positive & negative labeling ​ Know your customer well ​ Making positive use of a negative point  6 Part II: Negotiation 1st Class: A team negotiation: PEPULATOR Team Negotiation: Pepulator (debriefing) Explanation of game: The prisoner's dilemma ​ 2 Roles: Consolidation team & Polzar team ​ Outcome of game depends on your answer and the ​ 8 rounds of price setting for the market partner’s answer ​ Profit depends on counterpart’s price setting ​ Two suspects arrested by the police ​ Bid placed each round, then make decision ​ Police don’t have enough evidence for the next round ​ Police give the suspects the same deal: confess or stay ​ Goal: maximize total profit across the rounds silent ​ Need to outperform others. Based on individual performance ​ Write price bid on the tickets, then after each round, compare ​ After the game, write a reflection as a team Decision strategies in situations of conflict: ​ Dominant strategy ○​ Regardless of what any other players do, the strategy earns a player a larger payoff than any other. This dominant strategy is always better than any other strategy for any profile of other players actions ○​ Based on purely individual rationality ​ Pareto Optimal Strategy ○​ If it is impossible to make any one individual better off without making at least one individual worse off ○​ Based on group rationality ​ Social Dilemma: collective action simulation in which the dominant strategy (Nash equilibrium) results in outcomes below Pareto Optimum Results from the game: Prisoners dilemma Summary: ​ Defect/Defect: the result where both parties act on individual rationality ○​ Paradoxically their focus on individual rationality makes them fail to reach their individual goal. ○​ Helps make sense of many situations in reality where people act purely selfishly and thereby harm every individual and therefore also society ○​ Illustrates destructive force of mutual mistrust/ pure rational behavior ​ Cooperate/ Corporate ○​ Role of cooperation: reach better individual outcome because cooperation allows them to reach & split a bigger (if not biggest) joint profit ​ Two remaining cases (one betrays, one corporates) ○​ Defective party is the winner. Incentive to betray because you will be better off ○​ Win at counterpart’s success. Counterpart is left to suffer ○​ Destroys trust in the long run ○​ If there’s no long run (end-game strategies) ○​ “Fake” cooperation between 1st and 2nd ambassador meeting to lull the opponent and then exploit them  7 Prisoner’s dilemma: Multiple rounds ​ If the end of the game is known, it is worthwhile to betray in the last round because there will be no retaliation ​ The penultimate round becomes the last one which a decision has to be made ​ By induction, it follows that the dominant strategy here us also permanent betrayal ​ Prediction: People will betray all the time. But this is not the case always ​ Therefore, a game in which both players know the number of turns is to be treated exactly like a one-shot game. Prisoners’ dilemma: No time horizon ​ In infinitely repeated games (single shot), as in an unknown number of repeated games, backward induction does not occur. ​ Repeated interaction allows rewarding cooperation in subsequent rounds, leading to higher total payouts, or retaliating for defection, leading to lower payouts. Prisoners’ dilemma: No time horizon – The tit-for-tat strategy ​ The tournament of champions: ○​ Computer simulation of several hundred strategies to play in a prisoners’ dilemma tournament in 1984 ○​ Each strategy plays against all others. ​ The winning strategy (across all competing ones [AGGREGATE level]) ○​ “tit-for-tat”: always cooperate on the first trial, and on subsequent trials always do whatever the opponent did on the previous trial ​ The winner is a loser (in a given situation [INDIVIDUAL level]) ○​ Because it cooperates on the first trial, tit-for-tat can never do better than its opponent. The most tit-for-tat can do is earn as much as its opponent. ○​ The tit-for-tat strategy seeks to maximize its own gain in the long run by cooperation. Conditions for a successful strategy [cooperation] (Axelrod 1984) ​ Nice: The strategy must be “nice”, that is, it will not defect before its opponent does (this is sometimes referred to as an ‘optimistic’ algorithm). Therefore, a purely selfish strategy will not “cheat” on its opponent, for purely self-interested reasons first. ​ Retaliating: The successful strategy must not be a blind optimist. It must sometimes retaliate. “Always Cooperate” is a very bad choice, as “nasty” strategies will ruthlessly exploit such players. ​ Forgiving: Successful strategies must also be forgiving. Though players will retaliate, they will once again fall back to cooperating if the opponent does not continue to defect. This stops long runs of revenge and counter-revenge, maximizing points. ​ Non-envious: The last quality is being non-envious, that is not striving to score more than the opponent. Prisoners dilemma: real-world applications (beyond selling) ​ Occupation of deck chairs: reserving deck chairs with a towel ​ Braess paradox: You do something you think will simplify (adding mountain tunnel) but people flock to that option, ignoring the others and creates a bigger problem (traffic jams) Conclusions: ​ Dirty tricks destroy trust (deliberate deception, phony facts, ambiguous authority, dubious intentions, psychological warfare, …) ​ Mistrust tends to escalate (selective perception, self fulfilling prophecy, over-commitment, entrapment, …) ​ Behaving like a fully rational agent (a ‘machine’) is often destructive – BE HUMAN! ​ Cooperation pays off in the long run – WORK TOGETHER! ​ Communication is key to achieve cooperation – TALK TO EACH OTHER! 2nd Class “Hamilton Real Estate” Seller & buyer role Negotiation Debrief: Explanation: Step 1: Assess your BATNA ​ Email with the case material Step 2: Calculate your reservation point: ​ 15 min to read case and prepare Step 3: Assess the Other Party’s BATNA and reservation ​ Allowed to write anything you want EXCEPT role value specific information Step 4: Evaluate the ZOPA BATNA (Best Alternative to a Negotiated Agreement): The most favorable course of action a party can take if negotiations fail. It serves as a benchmark to evaluate offers and decide whether to accept a deal or walk away. ZOPA (Zone of Possible Agreement): The range within which a deal can be made, where the parties' interests and acceptable terms overlap. It exists when the buyer’s maximum willingness to pay meets or exceeds the seller’s minimum acceptable price.  8 Step 1: Assess your BATNA ​ How should the seller determine their walk away point? ○​ Price paid, ROI ○​ Depends on how much other properties sold for ○​ Value of the offers ​ Walk away point should be based on your evaluation of the reality you face in the event of a no-deal ​ Ask yourself: what will I do if the current negotiation ends in no deal? ​ Assess BATNA: ○​ Identify all the plausible alternative options you might pursue if you are unable to reach an agreement with the other party. Estimate the value associated with Step 2: Calculate your reservation point: ​ Walk-away point = point of indifference = reservation point or reservation value ​ What is the seller's reservation value? ○​ 38 million + 10-15% increase = 41.8M to 43.7 million ​ What determines the exact value? → risk aversion, optimism ​ What does the reservation value mean / what is the implication? ○​ If buyers final offer is below the RV, seller should walk away from the deal and pursue the BATNA Excursus: Lies and Deception: ​ Lying: explicitly making statement X knowing that it is not true ​ Deception types: ○​ Commission: active misrepresentation of preferences ○​ Omission: passive misrepresentation of preferences ​ Defending against deception: ○​ Ask direct questions, carefully listen for a non-response ○​ Propose a contingency contract (an agreement that leaves certain elements of the deal unresolved until uncertainty is resolved in the future) Step 3: Assess the Other Party’s BATNA and reservation value ​ What is the buyer’s BATNA? What was your maximum willingness-to-pay? What was your RV? ○​ $60 million − Investing the funds into a different project would lead to a $6 million profit − Break-even price is $66 million ​ Conclusion: Why is a BATNA / RV (own; other’s ) important? ○​ Knowing them keeps you from making fundamental mistakes (e.g., accepting a deal below RV is unprofitable) ○​ Tells you how far you can push the other Step 4: Evaluate the ZOPA ​ Any point outside the ZOPA should be rejected by one of the parties Which price did you negotiate? ​ Why these average negotiated prices? (I.e., why not in the middle?): Power? Info advantage! ​ Obtaining Information in Negotiation: ​ What could you have done, as a seller, to assess the buyer’s BATNA? ​ Wise sellers should gather all pre-negotiation information by consulting local politicians, residents, and stakeholders in Hamilton. ​ They should act on key insights: the buyer's strong political connections, reputation for value maximization, and delay in reaching the table. ​ Sellers should ask direct questions about the buyer’s intent, watch for evasive answers, and propose contingency contracts to uncover the buyer’s true motives. ​ Focus on interests, not positions!  9 What if they ask the tough questions? ​ You are the buyer, and the seller asks pointedly “Do you plan to use this property for commercial development?” What is your answer? ​ You need to prepare, in advance, the toughest questions that they may ask you in the negotiation: ○​ Helps avoid lying or giving up too much information ○​ Helps reclaim control of conversation and framing Contingency contracts – Case Study: Imagine an acquisition of a biotech company that has a few drugs on the market generating revenues, plus a newly approved drug with potential to be highly profitable but facing some challenges to its commercial success. The seller will not accept less than $100 million for the ongoing revenue generating business, and the buyer will not pay more than $150 million for that business. If this were the only business in play, the parties would have a straightforward negotiation over a price between $100 million to $150 million. The new drug, however, complicates matters. It will have a major competitor that is already well established. To make matters even more dicey, it is not yet clear how insurers will handle reimbursement for the new drug. The seller has done market studies and has had intensive discussions with insurers and believes the drug will be highly successful. For simplicity, let’s say the seller believes there is a 90 percent chance the new product will add $100 million in value to the company, and a 10 percent chance that it will fail and add no value. The buyer has heard what the seller has to say about the drug’s prospects and has read the seller’s studies, but it has doubts about the seller’s story. Again, for simplicity, let’s say it believes the likelihood of a $100 million valuation to be 10 percent, and the likelihood of a failure to be 90 percent. What is the seller’s lowest acceptable price? What is the buyer’s highest acceptable price? SELLER: $100 million for the established business plus the BUYER: $150 million for the established business plus the 90 percent chance of an additional $100 million = $190 10 percent chance of an additional $100 million = $160 million million → Conclusion: There is no ZOPA! A [contingency value] might bridge the gap in the parties’ valuation of the new drug. The challenge will be for them to come up with a measure of value. But let’s say they agree that if annual sales of the new drug reach $30 million within three years of closing, it is a reasonable bet, but not a certainty, that the drug will in fact add $100 million in value.” Let’s assume the parties “agree to a $125 million base payment at the time the deal closes, and an additional $80 million payment if annual sales reach $30 million within three years. How does this contingency relate to the seller’s How does this contingency relate to the buyer’s lowest acceptable price of $190 million? highest acceptable price of $160 million? SELLER: $125 million for the base payment plus the 90 BUYER: $125 million for the base payment plus the 10 percent chance of the contingency’s value of $80 million = percent chance of the contingency’s value $80 million = $197 million > $190 million, thus OK! $133 million < $160 million, thus OK! Conclusion: In a sense, the [contingency] creates an additional $64 million of value, in expected terms; the seller viewed it as an expected payment of $72 million and the buyer viewed it as an expected cost of $8 million. That value creation is, of course, temporary based on predictions of the future. Eventually, the drug will reach a $100 million valuation, or it won’t, and the value of the company will be whatever it is. But the [contingency] gets the deal done. A. Capturing Value in Negotiation ​ Should you make the first offer? → Always make the first offer because it creates an anchor!  10 The Power of Random Numbers (Tversky & Kahneman, 2004) ​ Subjects were asked to estimate the proportion of African countries in the UN. Before giving their guess a Wheel of Fortune was turned (with numbers from 1 to 100). ​ Anchoring Effect: Arbitrary or random reference points influence decision-making and judgment. ​ Participants in experiments adjusted their estimates insufficiently from these initial anchors, even when they were irrelevant, highlighting how initial information can bias outcomes in various contexts, such as pricing, negotiation, or probability assessments. The Power of the First Offer: A Multilevel Perspective (own research) ​ The First Offer – Is one of the most important antecedents of the settlement price due to the anchor heuristic. Professionals are less influenced by this effect. ​ Reciprocal Behavior – Negotiators mirror each other’s concessionary behavior thus higher own concessions lead to higher concessions of the counterpart. The Power of the First Offer: A Multilevel Perspective Key findings ​ The first offer mentioned in a negotiation influenced every single subsequent offer. ​ Relatively inexperienced students are more strongly influenced by the opponent’s first offer than are professionals. ​ Professionals are similarly influenced by the opponent’s concession, and both groups show a reciprocal concessionary behavior. B. Capturing Value in Negotiation ​ Should you make the first offer? → NO – look at potential cost (winner’s curse)! ​ How aggressively can you anchor? ○​ Keep the entire ZOPA at play ○​ Make an offer that you can justify (and do provide that justification) ○​ Set high but realistic aspirations ○​ Consider the relationship in the context Aspirations and targets – anchors as well… ​ Setting: sales negotiation 4 different negotiation targets given to 4 experimental groups: – unspecific (“Get the most of it!”) – easy (“Reach at least a minimum profit of $4,000.”) – middle (“Reach at least a minimum profit of $4,600.”) – difficult (“Reach at least a minimum profit of $5,400.”) Research question: What is the effect of different negotiation targets on negotiation outcomes? C. Capturing Value in Negotiation How to respond to aggressive offers? ​ Ignore the anchor and counter with your own aggressive offer. ​ Ask for justification of the ‘ridiculous’ offer – but be careful! ​ Respond with an expression of disbelief to show that you think the offer is a nonstarter, then propose moderation. ​ Threaten to walk away or give the other side an opportunity to moderate their demand without losing face. 3rd Class: “High Efficiency Pumps” Negotiation Debrief: ​ Simulate an intercultural sales negotiation between Economics of negotiations: integrative negotiations buyer and seller ​ One-on-one negotiation (written communication) ​ The goal of the negotiation: Both seller and buyer want to maximize their own (economic) benefit (when you have read the case study text, you will know how we measure economic benefit).  11 An integrative setting: opportunity to find win-win solutions ​ A couple decides to go on holiday ​ They first want to travel to a big city and then relax at some beach for one week Negotiation Dilemma: Creating & Claiming Value: ​ "No matter how much creative problem-solving enlarges the pie, it must still be divided; value that has been created must be claimed. And, if the pie is not enlarged, there will be less to divide; there is more value to be claimed if one has helped create it first... There is a central inescapable tension between cooperative moves to create value jointly and competitive moves to gain [claim] individual advantage." (Lax & Sebenius: The Manager as Negotiator) Structure of negotiations: 1.​ Context a.​ Setting b.​ Parties 2.​ Process a.​ Strategy buyer b.​ Interaction c.​ Strategy seller 3.​ Result a.​ Outcome i.​ Profit ii.​ Satisfaction Opportunity to find win-win solutions (Context): ​ The main feature of integrative negotiations is the variability of the win-set: There are solutions that are superior for both parties than other solutions. → This is a context factor. ​ Why are negotiations integrative? Because: ○​ Preferences are not exactly opposed to each other ○​ Sellers and buyers have different resources and abilities ○​ They also may have different evaluations of future developments Integrative Negotiation do’s: Integrative Negotiation don’ts: In order to reach integrative contracts, try to: ​ “Fixed-pie perception”: Negotiations are ​ Find out the true interests that are behind the positions of your partner perceived as being zero-sum games (“I ​ Specify the preferences of your partner will lose exactly what the others will get”). ​ Explain your own interests and preferences to your partner ​ A clash of interests and diverging ​ Exchange package offers (trade-off items) positions are perceived as barriers rather At the same time, to maximize their own profit: than as opportunities. ​ Specify your outside options to the negotiation ​ So keep in mind: In most cases, the ​ Clarify the own position (e.g., with a strong first bid) win-set is variable! ​ Prepare arguments that support the own position  12 A related research project by professor: ​ Over the period of two years, a team of researchers from Trier University and ESCP Business School Berlin investigated the influence of English as a foreign language on creativity in teams in general and in negotiations as a field of application. ​ Within the framework of CREATE-ET, Trier University conducted interactive team experiments in which teams solved different creativity tasks together, randomly either in their mother tongue (German) or in a foreign language (English). ​ ESCP conducted computer-aided negotiation simulations with over 400 students from around 45 countries, in which teams of two, consisting of buyer and seller, negotiated in English on four contractual items. ​ Results show that foreign language competence influences the use of negotiation tactics to conclude a contract, and it also influences the exploitation of the creative (integrative) potential of the negotiation and thus its success. Context variables: Process Variables: Outcome variables: Some results: