These are dynamic, high-powered people.
I staged a high-stakes negotiation concerning a financial product.
All of the sales people were given a clear reservation price,
what some might call a bottom line.
Don't dare sell the product for less than this amount.
The sales people then had to negotiate with a picky client
who claimed to have other options.
I became interested in two people who were both on the seller side.
Doris immediately set a target or stretch goal, and
made the opening offer in her negotiation with a client.
She was cordial, engaged, and direct.
Darren did not set a goal.
He was passive and let the client talk first.
Darren quickly made a large concession and
the client drove him all the way down to his bottom line.
In the end, Doris structured a highly profitable deal and
gained the trust of the client.
Darren signed a deal that he regretted.
I do a lot of simulations in my negotiation class.
And I see two kinds of negotiators.
Those who hope to get at least their bottom line and those who reach for
the stars.
I want everybody to reach for the stars.
And if you do these three things
you can best position yourself to succeed in negotiation.
Number one: set a target point.
Number two.
Estimate the ZOPA.
Number three.
Make an opening offer.
Let's start with setting a target point.
Your BATNA tells you when to walk.
Not when to sign.
What this means is that you don't settle for
the first set of terms that is better than your BATNA.
Doris set a clear target point.
Darin did not.
Doris positioned herself to reach her goal.
Darin agreed to the first offer that was better than his bottom line.
Your target point should be based on three things.
Your interests, market conditions and
information about the counter-party's BATNA.
With regard to interests, you've gotta ask yourself what is really important to you.
And, guess what?
Sometimes it's not all about the money.
For example, in a job negotiation you might want flexible work hours,
certain administrative assistants, and a particular geographical location.
Your interests should drive your target.
Market conditions,
most people do not conduct sufficient research regarding their negotiations.
You wanna have better data.
Or at least as good a data as the counter party.
Here's a case in point.
At the start of her overnight shift, Lily Ledbetter, a manager at the Goodyear Tire
and Rubber plant in Gadsden, Alabama found an anonymous note in her mail box.
Scribbled on the note was her monthly pay, along with the pay of three men
who started in the same position as her in the same year.
She discovered that she was underpaid.
The men were earning 15 to 40% more.
The Counter-Party's BATNA.
Folks, this is the golden jewel.
If you knew what the Counter-Party's BATNA was, you have all of the leverage.
Unfortunately, most people fail to do any research on the other party's BATNA,
when information about market conditions and competitors is often available.
Of course, you will never know the other party's BATNA.
But even thinking about their BATNA can
lead to a dramatic improvement in your own outcome.
Two, estimate the ZOPA.
The ZOPA or Zone Of Possible Agreement is the positive or
negative overlap between your reservation price and that of the counter-party.
Let's say, for example, that you would pay up to $190 for
the sellers double triple bypass ticket,
let's say that the seller is secretly willing to accept $150.
This means that the ZOPA is any price north of 150 and
south of 190, it's a $40 ZOPA.
Third make the opening offer.
The most common question I get in negotiation is,
should I open first or let the other party open?
Folklore says let the other party open first.
Science says there's absolutely no support for this idea.
In fact, the person who make the first offer has a strategic advantage.
Why?
First offers act as anchors.
They have gravitational pull.
Did you know that we can predict the outcome of a negotiation with reasonable
accuracy just by knowing the first two offers
on the bargaining table that are in the ZOPA?
If you are going to make the first offer, what should it be?
The ideal opening offer should be on or near the other party's reservation point.
Why?
If you make a wild ass offer,
that's a technical term, this results in the Chilling Effect.
[SOUND] If you don't ask for enough this results in the winners curse.
By making an offer on or near the other parties reservation point
you don't insult them because they're secretly willing to pay that amount.
But it also means you're not a chump.
Wait a minute, suppose they make the opening offer and not you.
What to do?
Best practice?
Make sure you immediately counter offer with your opening offer.
Do this in a relational fashion, not in a positional fashion.
For example, thank you for sharing your ideas with me.
I've also spent some time preparing a set of terms
that would be very attractive for me.
I will warn you that my proposal is different from yours but
I offer it in the spirit in structuring a deal.
Okay, let’s sum up.
First, do as much research as you can to set a target.
Open first but only if you are prepared.
Immediately re-anchor if they open first.
Plan your opening offer and carry it out.
Finally, never ask, is this negotiable?
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