Industry Collapse: Using Your Negotiation Skills To Guarantee Your StabilityOne can see a great deal of uncertainty in the world financial markets wherever you go - for the first time - irrespective of geographical location.
Warren Buffet said that it is only when the tide goes out that one can see who is wearing no swimsuit. In other words, it is easy to be successful when the economy is doing well; it is only in tough times that we can clearly distinguish quality & commitment.
How can you use your negotiation skills, negotiation training or purchasing training to sidestep losses in the current economic climate?
Use 'Loss Framing'
We are more motivated by evading loss than by attaining the very same gain. Kahneman & Tversky's Prospect Theory work describes how individuals will become risk seeking in an attempt to avoid a loss whilst they are likely to be risk averse when pursuing rewards. In the way that we negotiate, we can make our counterparties aware of the unique items that they stand to lose if they don't move in our direction and otherwise gain if they do.
Create Alternatives
In times of uncertainty it is very important to look at other options so as to strengthen our negotiation position. The ability to create options is important in the context of negotiation and the power of alternatives to concluding a transaction is the primary driver of our negotiation power.
Usually we wait until we recognise that we are not going to make a deal before we begin to think about alternatives. We risk entering into a less than ideal transaction and if we have not investigated all the options. Similarly, thinking about the alternatives available to your counterparty in the negotiation will give you a clear view of their relative position of strength in the negotiation. If they have strong options available then they will be more aggressive and if they don't, they will tend to be more agreeable.
Use Reciprocation
Reciprocation is one of the key principles of powerful persuasion skills, because we are most likely to return to others the form of behaviour that they demonstrate towards us. In times of difficulty it is important that we perform in the interests of the other side if we would like them to perform in ours. Use this principle to your advantage by acting first and invoking the principle of reciprocation. Be careful and make sure that you record the obligation with your counterparty.
Move from price to value
It is important to take the focus off price and concentrate on the Total Cost of Ownership. For any service, product or solution that we buy or sell, there is always an exchange between value & price. If we only engage on the price, the best that we will do is to haggle and it is only when we study the entire lifecycle of the service, product or solution that we trade, that we begin to uncover opportunities for negotiation. Before you state price in negotiation, evaluate your counterparty's long term strategic fit, capabilities, switching costs should they wish to change a business partner, financial steadiness and potential risks or negative consequences that may happen when your counterparty doesn't reach an agreement with you.
Remember that the magic in negotiation is found in the quality of your preparation. In times of economic uncertainty it is key to dedicate sufficient time to preparing for your negotiations.
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