Negotiating skills 1

The MAANZ MXpress Program
Negotiating Skills 1
Dr Brian Monger
Copyright September 2013.
This Power Point program and the associated documents remain the intellectual property and the
copyright of the author and of The Marketing Association of Australia and New Zealand Inc. These
notes may be used only for personal study associated with in the above referenced course and not in any
education or training program. Persons and/or corporations wishing to use these notes for any other purpose
should contact MAANZ for written permission.

MAANZ International
• MAANZ International, is a Not for Profit,
internet based professional and educational
institute which has operated for over 25 years.
• MAANZ International offers Professional
Memberships;
• Marketing Courses (Formal and Short)
• And Marketing Publications
• www.marketing.org.au
2

Dr. Brian Monger
• Brian Monger is the CEO of MAANZ International and a
Professional marketer and consultant with over 40 years
experience.
Marketing In Black and White 3

What is Negotiation?
• Successful negotiation is the process by which two or
more parties arrive at a mutual agreement, by means of
discussion and bargaining, within an agreed time scale.
• Negotiation is usually the final stage in the selling
process. Once the customer has agreed that your
product is the one he wants, both parties often have to
negotiate the price, terms of the agreement or both.
This is where good negotiating skills become essential.
In the chapters which follow we will show you how to
prepare for a negotiation and the steps you need to go
through to reach a successful conclusion.

Types of Negotiation
• There are four possible outcomes to a typical negotiation:
• It is tempting to think that a successful negotiation (from
the salesperson's viewpoint) is one where the salesperson
wins. This may be true where the negotiation is a one-off
transaction, for example a house purchase, where you are
unlikely to come across the other party again.
• However, most negotiations will be a part of a longer term
relationship. You will usually do a transaction with a
customer in the hope of winning more business from that
customer in the future. You cannot therefore afford to upset
your customer and make him feel that he has 'lost' the
negotiation.

• A successful negotiation is one in which both parties to
the negotiation are satisfied with the result - a win/win
situation. This is what you should be striving for.
• To succeed in a negotiation, both parties must want to
reach an agreement. If you discover early on that the
other party is reluctant, or worse, not interested, then it
would be much wiser to abandon the negotiation. On
the other hand, walking away from a negotiation has
long been used as a high risk bargaining move. This
approach is not one that should be taken in normal
business negotiations. By keeping the channels of
communication open, you leave room for consideration
of alternative proposals.
MAANZ International 6

• Also, it is not wise to play the 'tough guy' with
a hostile attitude. The other party may simply
refuse to negotiate under those circumstances.
Your objective is to sustain the other party's
desire to negotiate, not to subject him to so
much pressure that he feels he must give in.
These approaches are counter-productive.

Building a Long Term Relationship
• The most successful marketers tend to recognise
that their job is not to sell products, but instead to
create relationships. Developing long-term
relationships with customers not only provides a
source of competitive advantage, but can be much
more profitable than a hit-and-run approach in
which the only goal is to make a sale at a point in
time. Negotiation strategy plays a critical role in
the establishment of such relationships.
Specifically, there is a direct connection between
a positive sum or win-win negotiating strategy
and the seller's ability to foster customer loyalty.

• Customers who perceive a negotiation to be
one-sided have little incentive to give the seller
any future business. Even if the deal seemed
fair at the time, dissatisfaction can develop
during implementation, especially after a
customer has had some time to reflect. Sellers
must recognise that the relationship is as
important as the literal provisions of the
negotiated contract.

Two-way Interaction
• Negotiation involves two-way interaction in
which both parties seek attributes. Either side can
walk away if their needs are not being minimally
satisfied by those on the other side. Investments
are being made by both sides, and each party must
perceive the give-and-take to be equitable.
Relationships also tend to get more personal over
time. If an atmosphere of trust is not created
early on, with benefits and burdens mutually
shared, the job of the seller becomes more
difficult with each new negotiation involving a
particular customer.

• The uncertainty that surrounds businesses today also affects
on-going negotiations. Rapid changes in technology, the
economy, production costs, competition, government
regulation, and market size are increasingly commonplace.
In fact, the only constant in modern business would seem to
be change.
• Such turmoil can alter the fundamental relationship between
a seller and buyer in a very short amount of time. The seller
who takes too much advantage of his or her organisation’s
negotiating position today will most likely pay for such
short-sightedness in the not-too-distant future.

Negotiations Begin Internally
• Before examining the nature of the negotiation
process between buyers and sellers, it is worth
considering what is happening inside the selling
organisation. For sellers to achieve a competitive
advantage in the marketplace, a number of key
activities must be well co-ordinated. Research
and development, production, finance,
distribution, and marketing departments must
collaborate in offering product value to
customers. This collaboration is usually achieved
through a process of internal negotiation.

Internal Negotiation
• For example, the research department may
develop a product, but the production
department must determine its feasibility. The
finance department must ensure that the funds
are available for development, and the
marketing department must assess demand and
competition. From the drawing board to the
shipping dock, the firm engages in an
interactive accommodation and co-ordination
among its members.

• A common breakdown in this co-operative relationship
occurs because of the competitive pressures salespeople
encounter in striking a deal. Members of the sales
force are under great pressure to achieve both their
personal goals and the goals of the sales department, to
satisfy the customer's objectives, and to maintain a
competitive posture with respect to the opposition.
• Often a salesperson will "get out front" not only of the
production or financial capacity of his firm but of the
pre-existing sales commitments of his or her own
department.

• Not uncommonly, the salesperson makes the deal,
leaving the details (qualifying the customer's
credit worthiness or ensuring production or
delivery capability) to the relevant departments.
As a result, the firm finds the cart has been placed
before the horse. The prospective buyer may
have an uneven credit history, may demand costly
product changes, or may insist on impractical
production or delivery schedules. These and
other conditions may result in this sale or future
sales unravelling because of poor communication
with the other internal players in the firm.

• The salesperson must understand the on-going operational
commitments of his or her own firm when formulating sales
objectives. By recognising the firm's limitations, the
salesperson can initiate discussions with a buyer that focus
on determining what is possible, and in the process define
what is negotiable. Problems can be minimised if the sales
department follows a few simple guidelines:
• Allot time for negotiations with other functional areas of
the firm.
• Develop and maintain co-operative relationships with other
departments.
•

• Determine the relationship between specific items
in the sales agreement and areas that typically
require internal negotiation.
• Verify assumptions regarding the firm's ability to
fulfil terms of the sales agreement.
• Recognise issues in the sales agreement that pose
internal credibility problems.
• Manage salesforce enthusiasm in a disciplined
and productive manner.
• Stay abreast of internal changes that may affect
relationships with customers.

• Keep superiors current on developments in major sales
agreements as they occur.
• Be knowledgeable of customer histories as they relate to
issues requiring internal negotiation.
• Help customers and internal people find creative
alternatives when roadblocks develop.
• The salesperson who is an effective internal negotiator is
also apt to have more success in customer negotiations. He
or she is likely to have more leverage
• in bargaining with customers and may well be able to go
further in satisfying their needs. With this in mind, let us
turn to a more detailed discussion of the customer
negotiation process.

The Nature of Customer Negotiations
• Negotiation is concerned with needs of buyers
and sellers. Both parties gain from a
transaction. The customer acquires a product
or service that meets needs, and the vendor
makes a sale. The possibility of mutual gain is
what brings the buyer and seller together. The
amount of gain realised by either party creates
the conflicts that must be negotiated. Conflict
occurs because the parties find themselves
competing for some of the same gains.

Customer Negotiations
• In all cases, negotiation involves both science and art.
The scientific aspect involves systematic approaches
for resolving conflicts between two parties. The artistic
side concerns interpersonal skills, the ability to
convince and be convinced, and judgement regarding
which tactics to use and when to use them.
• There is no typical negotiation. A particular negotiation
can involve any number of people and focus on any
number of issues. It can be, formal or informal, lasting
hours, weeks, or months. Most important, the process
involved is dynamic, not static or fixed. The positions
assumed by each party at the outset can differ
significantly from those held at the close of the process.

Customer Negotiations
• These dynamics are strongly influenced by a number of
structural and situational characteristics.
• A primary consideration is the extent to which the buying
and selling representatives have the formal authority to
negotiate. How much clout do these representative have in
terms of the issues under negotiation? Are there conflicts
within the seller organisation (or buyer organisation in
industrial markets) on some of these issues?
• Another consideration is the degree of interdependence
between the buyer and seller. Both parties need each other,
so the real issue concerns where the balance of power lies.
Power is a function of dependency. That is, the more the
seller is dependent on the buyer, the more power the buyer
has.

Interdependence
• Dependency is determined by how much one party needs the resources
(i.e., products, services, or revenue) controlled by the other party and the
availability of those resources from alternative sources. If the buyer is
purchasing a critical item from a vendor who is the only available source of
supply, the buyer's heavy dependency enhances the seller's negotiating
power.
• Negotiation can be further characterised by the number of issues involved.
The willingness to pay or receive a certain price may interact with other
issues. The existence of multiple issues to be jointly resolved through
negotiation permits the parties to enlarge the size of the total pie before
determining how much each side is to receive.

Multiple Issues
• It is a real challenge to determine which trade-offs the other
party will be inclined to make when multiple issues are
involved.
• Also, the existence of time constraints should be noted. By
optimally using the time frame available, the disadvantages
of hasty negotiation by one party can be averted. In
addition, the degree to which the negotiation is public is
important. If different terms are worked out with various
customer accounts, the ability to negotiate flexibly with any
one account is affected by how much other customers learn
of the tactics used and final terms agreed upon.
Competitors are also in a position to benefit from learning a
firm's negotiation strategy.

Negotiations can be Repetitive or
Nonrepetitive
• Further, negotiations can be repetitive or
nonrepetitive. That is, will this be a one-time
sale, or might there be frequent negotiations in the
future? Repetitive bargaining usually finds the
parties adopting a more co-operative stance.
Separately, the marketer should evaluate the
presence of any linkage effects, that is,
circumstances in which a particular negotiation
and its outcome are linked to other negotiations.
Obstacles can sometimes be overcome by using
linkages creatively.

Location
• Finally, the location of the negotiation is a factor.
There may be a psychological benefit, as well as
an ability to control the agenda of the
proceedings, when the party negotiates on its
home turf.
• One side can enhance its own bargaining position
by negotiating in an environment in which
support people are readily available.
Alternatively, negotiating on the other side's turf
allows one to learn first-hand about the needs and
capabilities of the other party.

Three Categories of all Negotiations
• While many books have been written on
negotiation and countless theories exist about
how to be effective, there is general agreement
on the three categories that all negotiations fall
into. These are:
• Situational
• Principled
• Positional

Situational Negotiation
• Situational negotiation is the preliminary exploration of
mutual interests, often via a third party. This is the first
stage of negotiation, and takes place prior to the 'face-
to-face' meeting. It is often designed to find out
indirectly what the other party to the negotiation wishes
to achieve, and to influence them subtly. This tactic is
used a lot by governments and other public bodies. The
aim of this is to lessen the reaction in the financial
markets that could be expected if the interest rate rise
were to take place suddenly and without prior warning -
the type of thing which could spark off another
stockmarket crash.

Situational Negotiation
• Companies often use situational negotiation
with their shareholders before announcing
their annual results. If the results are going to
be bad, by leaking rumours a few months
before the results are announced, the company
can usually ensure a much more favourable
reaction from shareholders than they would if
bad results were announced taking everyone
by surprise and causing the share price to fall.

Principled Negotiation
• This type of negotiation was developed at
Harvard University and encourages the parties to
focus on the underlying principles rather than the
fixed positions or personalities involved. It
depends on each side considering the options in
an atmosphere of mutual acceptance and
searching for common ground. It occupies a
place between situational negotiation and
positional negotiation (described below), making
the final stages of reaching a satisfactory
agreement much more acceptable.

• The four rules of principled negotiation are as
follows:
• Keep the subject of the negotiation separate
from the personalities involved;
• Focus on the respective interests;
• Search for options to benefit both sides;
• Stick to objective guidelines.

• Principled negotiation combines the best of soft
and hard approaches to negotiation. Soft
negotiation, where participants are friends and
give away bargaining pieces without counting the
cost, is the opposite of a hard approach where one
takes a position and aims for nothing less than
victory. The first will eventually lead to some
grumbling that the other party owes something in
return for the other's generosity (if those involved
are not friends it may lead to a more serious
dispute). The second one could end in a
longstanding grudge.

• Future business relationships are not built on those sort
of foundations. As we saw earlier, the aim should be
for a /win/win' agreement, with both sides feeling that
they have worked hard and found common ground both
are happy with, gaining a satisfactory outcome. This
creates a sound foundation for working together in the
future.
• If the atmosphere of mutual acceptance is lost during a
principled negotiation, or if either side resorts to abuse
or insult, the type of negotiation changes to:

Positional Negotiation
• Positional negotiation occurs when each side clearly
states its own position without regard for the position or
interests of the other party. Personalities play a major
role in this type of negotiation, and one side is aiming
for victory over the other side.
• Positional negotiation has been widely used by Trades
Unions in their discussions to win more pay, has
increased public awareness of this type of negotiation.
It is not unusual to find discussions in deadlock, when
what is supposed to be a negotiation becomes a dispute.

Positional Negotiation
• Answers to problems can be found by backing
away from confrontation to find common ground,
often by a third party, brought in with the specific
task of arbitrating between the two parties.
• This type of negotiation is less likely to occur in
conducting business, where both parties are
looking for a win/win situation. However, it does
occur in situations where one party to the
negotiation is in a much stronger position than the
other party.

• For more information about MAANZ International and articles
about Marketing, visit:
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• http://smartamarketing.wordpress.com
• http://smartamarketing2.wordpress.com
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• Email: info@marketing.org.au
• Link to this site ‐ ‐ http://www.slideshare.net/bmonger for
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