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Monday, June 21, 2021

Executive Education

5 Bargaining Strategies for Success

Bill Sanders, Chief Executive Officer of Mobus Creative Negotiating

Adapted with permission from CREATIVE CONFLICT: A Practical Guide for Business Negotiators (June 15, 2021, HBR Press) by Bill Sanders and Frank Mobus.

In the scene below, from the comedy classic Monty Python’s Life of Brian,1 our hero is on the run from a phalanx of Roman soldiers. He races into a crowded marketplace, spies a vendor’s stall, and grabs an artificial beard—the perfect disguise. All he needs to do is make a deal for it.

Brian: How much, quick!

Harry the Haggler: Ah—twenty shekels.

B: Right. (Slaps a coin on the counter.)

HH: Wait a minute, we’re supposed to haggle!

B: I haven’t got time—

HH: Look at it. Feel the quality! That’s none of your goat.

B: All right, I’ll give you nineteen then.

HH: No, no, no, come on, haggle properly. This isn’t worth nineteen.

B: You just said it was worth twenty!

HH: Oh dear, oh dear. Come on, haggle!

B: I’ll give you ten.

HH: That’s more like it. Ten? Are you trying to insult me? Me with a poor dying grandmother? Ten?

B: (Urgently.) All right, I’ll give you eleven.

HH: Now you’re getting it! Eleven! This cost me twelve! You want to ruin me?

B: (Frantic.) Seventeen?

HH: No, no, you go to fourteen now.

B: All right, I’ll give you fourteen.

HH: Fourteen? Are you joking?

B: Fifteen!

HH: Seventeen. It’s my last word. I won’t take a penny less, or strike me dead!

B: Sixteen.

HH: Done! Nice to do business with you.

As you can see, a measured, strategic outlook will help in even the most basic price negotiations, where speed and simplicity are primary. (Our friend Harry, above, excels at building a rapid-fire value proposition.) It’s even more beneficial in advanced bargaining, where talks move beyond price to an array of other issues, as is typically the case in supply chain or account management. And it’s absolutely imperative for any move across the continuum toward a broader, more comprehensive, more valuable deal.

We deploy five negotiating strategies in our planning process:

  1. Leverage building. While people dependably react—or overreact—to the power wielded by the other side, they often underestimate their own. One way to strengthen your position is to look at the deal from the other person’s standpoint. Critical questions: How much strength do I have coming into this negotiation—could it be more than I thought? I know I’m feeling heat to close the deal, but what pressure is the other party under? How can I create more options for myself—or narrow options for them?
  2. Discovery. To assess your leverage you’ll need data—and the more the better. Done well, discovery will reveal the other side’s flexibility. Critical questions: Who can help me with reconnaissance and inside information? Before we get down to numbers, how can I guesstimate the zone of possible agreement (ZOPA)—“ the range of options that should be acceptable to both sides”?2 How can I learn more about my counterpart’s needs and vulnerabilities without confiding too much about my own?
  3. Target-setting. Setting high expectations is a prerequisite for getting a better deal. When you put those expectations forward, you’ll need a logical narrative to support them. Critical questions: What do I want to get out of this deal? Where should I anchor my opening position, and how can I support it? What’s my bottom line—the least I’m willing to accept (as a seller) or the most I’m willing to pay (as a buyer)? Can I afford to walk away from this deal? Do I have a strong best alternative to a negotiated agreement (BATNA)?
  4. Concession-making. Knowing when and how much to concede is a core element of negotiation. Critical questions: Should I ever make the first concession? How large should my concessions be? How can I carve out more negotiating space? If\ the bargaining stalls, should I agree to split the difference?
  5. Identifying issues. Not every deal can be made on price alone. Critical questions: What can I gain through more favorable terms and conditions (T’s & C’s) to make up for concessions on price? What values do I bring to the table beyond a competitive price? How can I map those values to define the total cost of ownership, or TCO? Can this deal be expanded to make it better for both sides?

Bargaining is rooted in power. It revolves around who has more of it and how they choose to yield it. While power is clearly at the core of leverage building, it overlays the other strategies as well:

  • Discovery links to the power of information
  • Target-setting to the power of commitment
  • Concession-making to the power of reciprocation
  • Identifying issues to the power of creativity

Our strategies aren’t rigidly linear. They interact and overlap, and you may find yourself skipping ahead or reversing course as a negotiation unfolds. But neither is the ordering random. One common mistake is to set targets before weighing the power/pressure balance and gleaning as much information as you can. Jumping the gun can lead to wild misestimates of the ZOPA. As a result, a seller may open way too low or, less commonly, unreasonably high.

This ties to a broader point: The lion’s share of strategizing takes place before you sit down to bargain. Creative negotiators are strategic planners. You can’t count on inspiration at the bargaining table. Establishing your leverage, formulating your questions, setting targets and fallbacks, honing your concessions all need to be initiated in advance. Admittedly, much of our preparation will be speculative, to be tested in the tactical battle to come. As you learn more, you’ll likely adjust or refine your approach. Even so, we can testify that positive outcomes are directly correlated to the quality and quantity of prep work.

Planning entails more than ideal-world analysis. (As they say in the military: “If your plan is working perfectly, it’s probably an ambush.”) Beyond plotting your position and graphing your angle of attack, you need to ready yourself psychologically for the other side’s curveballs and your own internal resistance. For example, you’ve put in the research and come up with a credible anchor price—it’s aggressive but not crazy. But come time to pull the trigger, in the heat of contention, you’re thrown off balance and wimp out with a more reasonable number. To avoid conflict, you junk your plan and hope for the best. If the other side is more firmly steeled to see their own plan through, you’ll likely finish second.

In bridging from planning to execution, our mental models must be primed for the fray. You might emulate Harry the Haggler. No matter how Brian responds, Harry has his counter down cold. When Brian falters, Harry prompts and prods him to do a better job. While the scene is satirically farfetched, it speaks to something real—it’s impossible to bargain without some minimal collaboration, at the least a joint engagement in the process. Helping the other side negotiate becomes even more of a necessity as we move along the continuum, from the back-and-forth of haggling to the give-and-take of advanced bargaining and creative deal making. In his insistence on arriving at a mutually satisfying outcome, Harry is thinking like a negotiator, all the way.

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Bill Sanders
Bill Sanders is Chief Executive Officer of Mobus Creative Negotiating, a firm founded by the late Mobus. Mobus's nationally recognized experts provide public seminars and private, in-house corporate training, coaching, and consulting to Fortune 500 companies. Together with Frank Mobus, he reinvented negotiating practice at more than half the Fortune 500–and gained an in-depth understanding of what it takes to flourish in 21st-century business.

He received his doctorate in physical chemistry from The Pennsylvania State University. Sanders continues to consult with National Football League franchises in the area of statistical analysis. Over the last 30 years, this work has helped ten head coaches become Super Bowl champions.

Bill Sanders is an opinion columnist for the CEOWORLD magazine. You can follow him on LinkedIn.