Vendor Negotiation

Negotiation is a dialogue between two or more people or parties intended to reach a mutually beneficial outcome, resolve points of difference, to gain advantage for an individual or collective, or to craft outcomes to satisfy various interests.

Here are some other ways to think about negotiation:

• Negotiation is, simply stated, formalized discussion between two parties or organizations.
• Negotiation refers to the process we use to satisfy our needs when someone else controls what we are seeking. Other words sometimes used to describe negotiation are: bargaining, exchanging, and haggling.
• Negotiation has traditionally been thought of as the process of attempting to satisfy your wants, by giving up something you now have in exchange for something else you want.
• Negotiation and conflict are closely related. Sometimes we negotiate to avoid conflict. Other times, we use negotiation to resolve conflict.
• Negotiation applies to everyday exchanges in business or personal life where agreement is reached over buying and selling, exchanging services or property, resolving differences, or engaging in mutually desirable projects.
• There are many examples, from such simple tasks as deciding with colleagues where to have lunch to such complex issues as discussing with a builder the cost of constructing a new home.

Negotiations Styles

Compete (I win – You lose)

People who pursue competitive style follow their own needs – yes, even when this means that others do not benefit from the same. They usually don’t want to cause others to suffer and lose; they are just so single mindedly focused on their shorter term gains that they pillage recklessly through negotiations like a pirate. They often put to use whatever power and tactics they can come up with, including their personality, position, economic threats, brand strength or size or market share. At its extreme negotiators call their behavior antagonistic or psychotic.

Accommodate (I Lose – You Win)

The reverse of competing. For accommodating style negotiators, the relationship is the ultimate goal. Accommodating profiles think that the way to winning people over is to give them what they want. They don’t just give products and services; they are liberal with information too. Accommodators are usually very popular with their colleagues and opposite party negotiators.

Avoid (I Lose – You Lose)

This is commonly referred to as “passive aggressive”. People who routinely use this style really abhor conflict. Instead of talking to you directly about the issue, avoiders may in its place try to take vengeance without you even being aware of it. The avoid style can be a characteristic reaction to high compete negotiators. Sellers will frequently call less often on high compete buyers (i.e. avoiding Competitive buyers) – and may decide to invest marketing money and share their best ideas and top promotions with buyers who make themselves available (those who are not evading the sales person).

Compromise (I Lose / Win Some – You Lose / Win Some)

Too many people mix up the word ‘Compromise’ with ‘negotiation’. In actuality, compromising is typically little more than haggling and splitting the difference, with no deep consideration or value creation having taken place. Compromising often includes one or both negotiators settling for less than they want or need, usually resulting in an end position of roughly half way between both party’s opening positions. In the lack of a good justification or properly exchanged trades, half way between the two positions seems “fair”. What compromising ignores however, is that the people that take the most ultimate positions tend to get more of what is on offer, and the path they’re walking on with blinkers on doesn’t permit the share to be expanded.

Collaborate (I Win – You Win)

A lot of people mix up “Win/Win” or the collaboration style with the compromising style. This is most certainly not the case. “Win/Win” is about ensuring both parties have their needs or goals met, while generating as much mutual value as time and resources allow. “Win/Win” negotiators develop through the other profiles, developing into collaborative negotiators. This means collaborative profile negotiators can relapse to one or two of the other styles when hard-pressed or when the situation demands it. Collaborative profile negotiators are obstinate that their needs must be met – and they recognize that the other party has needs that must be met too.

Negotiation Strategies

Negotiation theorists usually differentiate between two types of negotiation. Different theorists use different labels for the two general types and distinguish them in different ways.

• Distributive Negotiation – Distributive negotiation is also sometimes called positional or hard-bargaining negotiation. It is inclined to base negotiation on the model of haggling in a market. In a distributive negotiation, each side often take on an extreme position, knowing that it will not be acknowledged, and then utilize an amalgamation of guile, bluffing, and brinkmanship in order to yield as little as possible before reaching a deal. Distributive bargainers envisage negotiation as a process of allocating a fixed amount of value.
• Integrative Negotiation – Integrative negotiation is also sometimes called interest-based or principled negotiation. It is a collection of techniques that aims to build on the quality and the possibility of negotiated agreement by offering a substitution to conventional distributive negotiation techniques. While distributive negotiation presumes there is a fixed amount of value (a “fixed pie”) to be divided between the parties, integrative negotiation often aims to generate value in the process of the negotiation (“expand the pie”). It draws attention to the fundamental interests of the parties rather than their random starting positions, approaches negotiation as a collective issue as opposed to an individual battle, and persists upon compliance to objective, principled criteria as the base for agreement.

Tactics for Negotiation Process

Tactics are a critical element of the negotiating process. But tactics are often not apparent because if they were, the other side would anticipate them and they would not be resourceful. They are usually subtle, not easy to identify and used for numerous purposes. Tactics are more commonly used in distributive negotiations and when the spotlight in on taking as much value off the table as possible. Many negotiation tactics are present. Below are a few commonly used tactics.

• Auction: The bidding process is designed to create competition. When multiple parties want the same thing, pit them against one another. When people know that they may lose out on something, they will want it even more. Not only do they want the thing that is being bid on, they also want to win, just to win. Taking advantage of someone’s competitive nature can drive up the price.
• Brinksmanship: One party aggressively pursues a set of terms to the point at which the other negotiating party must either agree or walk away. Brinkmanship is a type of “hard nut” approach to bargaining in which one party pushes the other party to the “brink” or edge of what that party is willing to accommodate. Successful brinksmanship convinces the other party they have no choice but to accept the offer and there is no acceptable alternative to the proposed agreement.
• Bogey: Negotiators use the bogey tactic to pretend that an issue of little or no importance to him or her is very important. Then, later in the negotiation, the issue can be traded for a major concession of actual importance.
• Chicken: Negotiators propose extreme measures, often bluffs, to force the other party to chicken out and give them what they want. This tactic can be dangerous when parties are unwilling to back down and go through with the extreme measure.
• Defense in Depth: Several layers of decision-making authority is used to allow further concessions each time the agreement goes through a different level of authority. In other words, each time the offer goes to a decision maker, that decision maker asks to add another concession in order to close the deal.
• Deadlines: Give the other party a deadline forcing them to make a decision. This method uses time to apply pressure to the other party. Deadlines given can be actual or artificial.
• Flinch: Flinching is showing a strong negative physical reaction to a proposal. Common examples of flinching are gasping for air, or a visible expression of surprise or shock. The flinch can be done consciously or unconsciously. The flinch signals to the opposite party that you think the offer or proposal is absurd in hopes the other party will lower their aspirations. Seeing a physical reaction is more believable than hearing someone saying, “I’m shocked.”
• Good Guy/Bad Guy: The good guy/bad guy approach is typically used in team negotiations where one member of the team makes extreme or unreasonable demands, and the other offers a more rational approach. This tactic is named after a police interrogation technique often portrayed in the media. The “good guy” will appear more reasonable and understanding, and therefore, easier to work with. In essence, it is using the law of relativity to attract cooperation. The good guy will appear more agreeable relative to the “bad guy.” This tactic is easy to spot because of its frequent use.
• Highball/Lowball: Depending on whether selling or buying, sellers or buyers use a ridiculously high, or ridiculously low opening offer that will never be achieved. The theory is that the extreme offer will cause the other party to reevaluate his or her own opening offer and move close to the resistance point (as far as you are willing to go to reach an agreement). Another advantage is that the person giving the extreme demand appears more flexible he or she makes concessions toward a more reasonable outcome. A danger of this tactic is that the opposite party may think negotiating is a waste of time.
• The Nibble: Nibbling is asking for proportionally small concessions that haven’t been discussed previously just before closing the deal. This method takes advantage of the other party’s desire to close by adding “just one more thing.”
• Snow Job: Negotiators overwhelm the other party with so much information that he or she has difficulty determining which facts are important, and which facts are diversions. Negotiators may also use technical language or jargon to mask a simple answer to a question asked by a non-expert.