Dynamics Of Negotiations

INTEROFFICE MEMORANDUM

TO:

FROM:

SUBJECT: NEGOTIATION CHALLENGES

DATE: 11/27/2007

OVERVIEW

As a sales agent and later, sales manager with a law publishing firm, I have been on both sides of the negotiating table. I've negotiated the price of legal software with our franchise clients, and solicitor boards as also the cost of software from our vendors.

OBSERVATIONS

What I've found most striking is the one commonality in all these processes. Each and every time I've negotiated, people have always stuck on to the first number that has popped up in the course of our discussions. The inclination to "anchor" on this first bit of information, however irrelevant or far-fetched it may be, is an urge, too overwhelming to ignore.

That is the reason why, once I went in to prospect a lead, I wouldn't divulge a number straight away but would talk about the products we offer, the software service contracts, the number of licenses they needed. All these things, though important, price was the underlying issue of discussion and both sides knew it.

Closing a difficult sale is as much about framing or scoping the deal as it is about hurrying to belt out numbers at one another. I've recognized that the first one to give out a number in these deals is not necessarily incentivized for it.

CASE IN POINT

I've always wondered how people come up with these numbers. Once with a client of mine, let's call him Mr. B, I was hard-pressed to point out that the numbers they were throwing at me were of that of a niche competitor in another market (taxes, legal regulations and expenses in that area of operation being different from ours). However Mr. B wouldn't budge and wanted a quote as low as the one advertised by our competitor in the other region.

Downright denying or bolting on the customer is a no-no, as anyone worth his salt in sales will tell you. However I told Mr. B that I'd give in on the software (one-time installation) fee for him, waive it, but could not bring our prices down to those of a sub-standard competitor, our product being a legacy one.

Somehow it worked out; Mr. B was distracted by my accommodation and was sure that his firm would be convinced that this was the "best" deal anyone could have possibly grappled from our firm. It was then that I realized that as a newly appointed legal representative of the firm, his job was not to get the best software at the best price, but he was motivated to get some sort of concession from me so his firm would recognize his effort and give him a pat on the back.

This represents another important learning. The emotional underpinnings of our belief in the idea of our "perceived uniqueness" or rather the singularity with which we perceive ourselves to be: separate, different from the "others" in all manner of pleasantly surprising and wonderfully intrepid ways. Verbose, though it is, the point is that each of us wants that "special" deal, that "little extra", "the B.O.G.O" (Buy One Get One FREE!), something that will reinforce the idea that the deal we were getting is a "good" one, some of us even keep going till we're convinced it is the "best" one we could possibly manage.

LESSONS LEARNED

After my experience with Mr. B, I learnt to define a process, a very rudimentary one, but rather an intuitively simple one:

(1) Never concede on an arrangement or agree on a number before the meeting. Goal-setting leads to goal-seeking and is a self-fulfilling prophecy, especially when there