Master The Art And Science Of Negotiation PDF

Master the art and science of negotiation by Alexa Lacroix 17/10/2023 For personal use only Part 1 Negotiation fundamentals For personal use only The sales cycle: create demand Theory Capsule ● Are you selling a product ? or solving a problem? ● Create value to claim value: ○ Impact on the...

Master the art and science of negotiation by Alexa Lacroix 17/10/2023 For personal use only Part 1 Negotiation fundamentals For personal use only The sales cycle: create demand Theory Capsule ● Are you selling a product ? or solving a problem? ● Create value to claim value: ○ Impact on the top-line growth (revenue) ○ Impact on the bottom line (net earnings) ○ Non-tangibles: reputation, brand, social / environmental impact ● Success is measured differently depending on the stakeholders Once you have created value for your customer thanks to your product / service and there is compelling event, now it’s time to negotiate… For personal use only Negotiation approach Theory Capsule Hard / soft bargaining or interest-based / collaborative negotiation For personal use only Hard / Soft bargainers Theory Capsule Positional negotiation ● Me vs. You ● My interest vs. Your interest ● Gradual bargain ● Win / lose game For personal use only Interest-based / collaborative negotiation Theory Capsule ● The idea is that through careful preparation a negotiation outcome can be “win” for both sides - developed by Fisher & Ury ● The key is to focus on the interests of the parties ● Often similar interests are hiding behind very contrasting positions ● Unlock your counterparts’ interests by asking probing questions ● Brainstorm value-generating options before committing to an agreement ● Secure a long-term healthy relationship with your counterpart For personal use only Expanding the pie Convert a Position-based negotiation to an Interest-based negotiation Add more elements than just the price Theory Capsule Start expanding the pie during the sales cycle Tease the customer during the sales cycle on what matters A game of creativity For personal use only Expand the pie - ideas to explore Group Work Assets financial, offices, scale, website, revenue share, cost share, royalties, risk share,... Intangibles reputation, brand, IP, IQ, experience, connections, communication/PR, referrals, presence, recognition,... value creation Ecosystem partnerships, ecosystem, relationships, integrations, collaborations,... Tangibles time, ressources, terms, warranties, support, roadmap, packaged services, ramp up, commitment, level of service, early access,… For personal use only Key negotiation keywords: ZOPA & BATNA For personal use only ZOPA: Zone Of Possible Agreement Walkaway position 700 000 € Competitors’ price range Walkaway position 800 000 € Walkin position 550 000 € Customer’s price range Zone Of Possible Agreement Theory Capsule Walkin position 900 000 € your price range Walkin position 1 000 000 € Walkaway position 880 000 € The negotiation will end up somewhere between 700 000 € and 880 000€ For personal use only BATNA Theory Capsule ● Your Best Alternative to a Negotiated Agreement → what you do if there were no deal today? ● Once you know your own BATNA, you will not accept a deal that is suboptimal to your likely walk-away alternative ● Your BATNA can help you plan the point at which you will walk away (your reservation point) ● Knowing your counterpart’s and competitor’s BATNA will help you estimate the zone of possible agreement (ZOPA) For personal use only Part 2 Build a winning proposal For personal use only Golden Rules Theory Capsule 1. Information is power: you will always do better if you are better informed 2. Make your proposal simple to read, simple to understand 3. Present more expensive prices first to contrast with lower prices that come after 4. Present 3 Unique Selling Propositions 5. Bake in easy give-aways 6. Customize to the customer’s context 7. Use odd numbers, no round numbers 8. Always present your proposal directly to the customer – avoid email For personal use only Anchoring Theory Capsule ● First number you hear, becomes the expectation, it is the anchor ● An anchor is “sticky” - anchor carefully after analyzing your BATNA/ZOPA and estimating the other sides’ BATNA/ZOPA ● Anchor first if you know the ZOPA - consider a flexible offer if you don’t ● Base it on reality + margin of negotiation – don’t put it at the walkaway price! ● Emotionally anchor by saying how bad it will be + because ● Soft anchor early – use a range to tease out what is acceptable ● An absence of reaction is not an agreement For personal use only Business & Commercial Decision Criteria Theory Capsule ● The most common are Alignment to Budget + ROI (often less than 12 months) ● Different types of budgets: ○ Capital Expense (CAPEX) ○ Operating Expense (OPEX) ● Align yourself to the clients constraints ● Everyone needs a comparison matrix : Who do they compare you to (in their ecosystem)? For personal use only Bundles / Packages Theory Capsule ● Packages blur the unit pricing and avoid cherry picking ● Packages allows you to keep flexibility in where you put the value ● Avoid entering in a feature by feature discussion ● Start from the need and design a package deal ● Remind the customer that a price is dependant on quantity, commitments, scope of the offer (packages), T&Cs, etc For personal use only The power of options Theory Capsule ● Present 2 or 3 very clear options to unearth what matters to the customer ● Customer will express their priorities ● Professional purchasers might say that they want the best of both options → plan for this For personal use only Key components of a proposal Official ● ● ● ● ● ● ● ● ● ● Description 3 Unique value propositions Scope, hypothesis Core proposal and options – price, discount, savings TCO + total savings Delivery & planning Terms and Conditions: payment terms, contract duration, etc Packages – bundles / options – avoid unit pricing Validity date Next steps Theory Capsule Also included ● Easy giveaways ● Non-negotiable gets ● Negotiation margin on price & other elements ● Options that can be merged ● Mirroring using customer wording ● Perspective-taking using customer eyes to build a simple proposal ● Sense of urgency ● Rapport building with discounts For personal use only Some ideas for easy give aways (software world) ● Annual price (syntec) actualization ● Payment on project start vs contract start ● Secure best / quick delivery Team who worked on a similar project by scope/industry ● Invoicing terms ● Contract duration ● Lock prices for expansions: more users, more modules ● Additional services: premium support, free expertise - limited in time ● Additional users - flexibility ● Test environments ● Trainings kits / Other services ● Languages support For personal use only Part 3 Negotiation Strategy For personal use only Before the negotiation starts… For personal use only Negotiations - key best practices Theory Capsule 1. Information and preparation are power: always know & prepare more than your counterpart 2. Identify what type of negotiator your counterpart is & adjust 3. Your counterpart is human as such they will forget / be emotional / have fears / have a history & biases / bluff / hide information / lie / want to be a star 4. Never make assumptions, ask questions, test hypotheses The negotiating party is at the same time an opponent and a partner For personal use only Identify the power base Theory Capsule No Influence Authority Influence No Authority LOW No Influence No Authority Influence Authority Power base AUTHORITY HIGH Are you negotiating with the ultimate decision maker? LOW INFLUENCE HIGH Source The New Power Base Selling For personal use only Introducing the negotiation cheat sheet… For personal use only During the negotiation For personal use only Timing is everything Theory Capsule ● We make about 20 000 to 35 000 decisions / day ● Decision fatigue is when our decision-making process is impaired ● Decision fatigue is a factor of timing and number of important decisions made ● Prioritise timing based on the desired outcomes ○ Irrational decision-making, default state desired: go for late meetings ○ Rational decision-making: go for early meetings ● If the meeting has to happen at the end of the day ○ Present fewer options ○ Provide default, “popular” and “recommended” options ○ Don’t push for upsells, they will not be valued -> delay for later ● Know when is the best time to call your contact For personal use only Manage the physical space Theory Capsule ● Meet in person to build trust ● Manage the physical space ○ Blend in – if more than 1 person - don’t have your team sit on one side and the customer team on another –blend in ● When negotiating and you are 2 persons : try to sit side by side and the computer in the middle ● At some point during the meeting sit side by side and the computer in the middle For personal use only How to manage requests for discounts Theory Capsule ● Ackerman bargaining technique: start with a large concession and make gradually smaller ones ● Reply to a request for discount with a non-monetary give shows you have reached your floor ● Purchasers might have an incentive to reach a certain level of discount ● Never give 100% of asks ● Concessions should be hard to get but for a reason For personal use only How to handle difficult asks Theory Capsule ● Controlled emotions ● Set the rules at the start - we will tell you when the matters are sensitive / complex ● Explain your position (prepare in advance) - why it matters to you (fairness principle) ● Listen to you counterpart arguments, take notes ● Rephrase your counterpart arguments ● Then: ○ table for later, or ○ brainstorm a potential compromise, or ○ ask for time to think on both sides, or ○ expand the pie to find ways to give them what they want For personal use only Negotiation cycle Theory Capsule Understand objection + reason + interets Explain / defend Frame, Present concession Explore potential compromises – new ideas Take time to reflect, approval process For personal use only Don’t give the easy giveaways first and all of them, you will be left with the hard ones to bargain with Define your modus operandi: play w/ time Theory Capsule ● Time is your ally and your enemy ● Don’t corner yourself with unrealistic internal deadlines ● If you have a sense of urgency, demonstrate that urgency to the prospect & be attentive to reactance ● If the prospects make a difficult ask, change the frequency of your replies (take more time) For personal use only Before or after a competitor? Theory Capsule ● Behavioral scientists analyzed the impact of presentation order on decision making -> the order played a large part in winning ● Going first/last depend on the time between the presentations ○ If you are presenting back-to-back -> go first to shape the buyer’s perception & create biases that put your competitor at a disadvantage ○ If the time is a few days -> go last -> The memory of your competitor will fade, while your presentation will be fresh in the prospect’s mind -> increase the likelihood to be chosen For personal use only Reciprocity principle Theory Capsule ● Universal tendency to feel compelled to reciprocate when given a gift ● Obligations extend in the future ● Overcomes the rule of liking – we repay even people we dislike ● When you do a favor and someone thanks you, don’t say: no big deal, it is normal… The right response is “if our positions were reversed I know you would do the same for me” – this creates the moral debt ● The payback value often outweigh the initial gift value For personal use only key best practices Theory Capsule 1. 2. 3. 4. 5. 6. 7. Set the frame Mix agreeing in meeting and delaying response Use higher authorities for complex issues Put all the issues on the table at the same time - avoir piecemeal negotiations Seek to understand the reason for your counterpart requests: « why » Avoid Cognitive loading happens when too much information is provided Never assume that your counterpart knows your offer as well as you do - remind them of past concessions 8. Help your customer / partner do their work – share your work (xls, etc) 9. Be fair and ask for fairness The negotiating party is at the same time an opponent and a partner For personal use only After For personal use only After a negotiation round Theory Capsule ● Quantify the concessions, discounts, etc – put a € value ● Put difficult issues on the side to negotiate them at the end – bake in some easy ones ● Think about customer’s next objections and competitors objections ● Negotiation ends when one side is convinced that the other side is not going to move further For personal use only Why do high pressure sales calls fail? Theory Capsule ● A powerful principle called reactance ● Reactance is when people feel that free choice is being restricted ● To decrease reactance: 1. Studies found that when a request ended with a “free to accept or to refuse” the compliance rose by nearly 400%. Same for phrases like: “of course, it’s up to you” or “this is a great offer that you can participate in, if you choose.” 2. Decrease the frequency of calls, give the prospect a “break”, label it 3. Overpower reactance with evidence and use reciprocity, liking, social proof, authority to lower the effects of reactance For personal use only Part 4 Connect with your clients For personal use only Body language For personal use only Posture: The power Pose Theory Capsule The manipulation of facial expressions, voice management, breathing and posture can induce diverse emotional feelings (happiness, sadness, anger and fear) Researchers identify two nonverbal dimensions associated with power: 1- high-power postures based on expansiveness and openness 2- low-power poses based on contractive and closed positions The impact of power pose on our and the others’ perception of us is proven In 2010, Amy Cuddy (Social psychologist/professor at Harvard Business School) studied the impact of power poses on our feelings & hormones levels Our hormones level change with the power pose (Cortisol/Testosterone) Our mood is affected by the power pose Amy Cuddy TED talk https://www.youtube.com/watch?v=Ks-_Mh1QhMc For personal use only The outsized influence of body language Theory Capsule The 7-38-55 rule by UCLA psychology professor Albert Mehrabian “What makes us like or dislike somebody?” ○ 7% message is based on the words ○ 38% comes from the tone of voice ○ 55% from the speaker’s body language and face → meet people in person → pay close attention to tone & body language “I heard you say yes but there was a hesitation in your voice” For personal use only Do’s and don’ts Theory Capsule ● Beware of your posture & don’t touch your neck or chin ● Make eye contact ● Be respectful but take up space to project confidence – a neutral position is enough ● Smile, be natural ● Use some hand gestures ● Read your counterpart body language and adapt For personal use only Key negotiations skills Connect Theory Capsule Listen Probe For personal use only Part 1 Connect For personal use only The power of compliments Theory Capsule ● Compliments increase the well-being of both expressers and recipients ● A reluctance to express genuine compliments come from underestimating their positive impact + overestimating how awkward recipients would feel ● Examples: ○ Company performance/leadership ○ Quality/results of the team / process / interactions / PR campaign ○ Compliment behind a person’s back ○ Find and give genuine compliments that alter the recipient’s behavior ○ Avoid compliments that are not genuine or that relate to appearance, personal physical characteristics, sensitive topics For personal use only Mirroring Theory Capsule ● Mirroring = strategic imitation ● Neuro-behavior that humans use to comfort each other ● Speech patterns, body language, vocabulary tempo and tone of voice ● Rarely conscious ● Mimicry is deeply human – a sign that people are bonding, in synch and establishing rapport that leads to trust A mirror signals to another’s unconsciousness « trust me, we are alike » →FBI uses mirroring by repeating the last (critical) 3 words → mirror email signatures, email style,... For personal use only Perspective-taking & Empathy Theory Capsule Empathy is what is your counterpart feeling ● Perspective-taking is what is your counterpart thinking, biases, preferences, fears ● Research shows that perspective-taking results in superior negotiation outcomes than empathy → people want to be understood and accepted → Gather information and project yourself in individuals to gain perspective into what they are thinking → practice active listening, show a sincere desire to better understand What are the emotional & rational obstacles to get the agreement done? For personal use only We love talking about ourselves Theory Capsule ● Harvard University researchers utilized MRI to track brain activity by measuring changes in blood flow ● Their objective: see if talking about oneself increases neural activity in areas of the brain associated with motivation and reward ● 3 brain areas showed increased activity, 2 of which are associated with reward and pleasurable feelings such as sex, cocaine, and good food ● Activation of this system is inherently pleasurable: people are motivated to talk about themselves more than other topics For personal use only Managing emotions Theory Capsule ● Validate your counterpart emotion by acknowledging it ○ It seems / sounds / looks like you feel that we have been xx ○ Let the customer talk ○ Observe without reaction or judgment ● Understand why they are reacting: ill informed/constrained/have hidden interests ● Replace it with a positive and solution-based thought “I am sorry you feel this way, what I propose going forward is” ● If there is too much emotions, take it away and come back with a proposed solution (Understanding is not agreeing) For personal use only Part 2 Listen For personal use only Active Listening Paraphrase Acknowledge (≠ agreeing) Mirror: repeat key words Theory Capsule Maintain eye contact Summarize your understanding Don’t listen alone or record the conversation For personal use only Part 3 Probe For personal use only What is more powerful: a statement or a question? For personal use only What’s the best type of question? Theory Capsule • Open questions: What? How? Why? how? ○ How would you like me to proceed? ○ How can we solve the problem? ○ What are we trying to achieve? ○ How on board are the people not on this call? how does this affect the team? • Closed questions (to be avoided): Yes/No answers • Multiple questions: they offer a choice of answers based around a central theme – what are your primary objectives? More sales? More pipeline? Increased win rate? • Leading questions: what do you expect to happen when you deploy the solution? For personal use only How to ask questions Theory Capsule ● Smooth your way into the discussion ● Plan but do not script, be natural ● Listen first / understand, then ask follow-up questions ● Don’t guess, ask ● Ask one question at a time - Stop when it is too much ● Personalize your questions : use customer wording (e.g. internal project names) ● Label questions “I have a difficult ask”, ‘I need your help with”, “I need to know xyz because abc” “I have a rather difficult ask/question/demand, do you mind if we start with that and then we go to the simpler ones?” “feel free to answer if you can” For personal use only Conclusion Prepare, prepare, prepare Don’t negotiate with your ego: be kind Practice makes perfect Step outside your comfort zone For personal use only