The vast majority of those in the US are terrible at negotiating. First off, most don’t have much experience with it. Beyond the infrequent purchases of homes and cars and the occasion promotion/new job, our culture is built more around deciding whether or not to pay listed prices. Attempt to negotiate the price of a box of cereal next time you are at Walmart if you don’t believe me. Second, most people lack any training on how to prepare and execute an effective negotiation. Reading one article won’t magically turn you into a master negotiator, but a few pointers can definitely set you in the right direction
Preparation is Key
An ancient proverb states that a journey of a thousand miles begins with a single step. Well, they are wrong. It starts with getting the right footwear, planning the best route, and making sure you are prepared for issues before they come up. Too often people throw themselves into negotiations before properly preparing for the negotiation to come. There are a few key pieces everyone should explore before attempting to negotiate.
When should I walkaway
The purpose a negotiation is to end better off than you would have been if you hadn’t made a deal. The first thing you need to identify the point where walking away from a deal is better than making a deal. This is often referred to as you reservation point. Your reservation point can be a specific price or it can be an important interest that you feel needs to be represented. For instance, sometimes the timing of a sale is more important than the price. Your reservation point could very well be a specific timeframe as opposed to a specific price.
Alternatives = Power
To help best understand your walkaway point, you need to think through your alternatives – meaning what are your alternatives if the deal falls through. Your strongest alternative is referred to as your BATNA (Best Alternative To a Negotiated Agreement). The stronger your BATNA, the stronger your reservation point will be. The stronger your reservation point, the more power you will have in a negotiation. Lastly, the more power you have in a negotiation, the better your outcome will likely be.
Focus on the Goal
The last key consideration before you negotiate – Goals. You need to identify what you actually want from a negotiation. What are you hoping to get? When you negotiate: Focus on your goal! Too often, people focus on the reservation point and lose value by doing so. Instead, remember and focus on what you are hoping to get from a negotiation, and your outcome will be stronger.
Know Thy Enemy
The last key to preparing for a negotiation – think through the other parties’ positions. What is their reservation point? What is their BATNA? Finally, what is their Goal? You may not have exact answers for these questions, but by thinking through each of these questions, you will be better position to get a better deal from that party.
Summary
The first step to being a more effective negotiator is in preparation. Identify your reservation price, generate alternatives and identify your BATNA, identify you goal, and then think through this information for the party with which you are negotiating. Your negotiations will go more smoothly, you will be a more effective negotiator.
Dr. Dave Howe
Assistant Professor of Management
