Negotiating Intelligently:

Strategic Marketplace Influence vs. Tactical Reactions

The Problem: Biting the Bullet
Its the end of the quarter and you really
need a strong finish to make your numbers.
You ask your Eastern region sales rep to
move a bit lower than usual on price for
this client, perhaps be a bit more flexible
on payment terms, waive the fees for a few
value-adds and beef up the service a bit at
low cost. Its just this one deal, after all,
and you really need those numbers. What
harm can there be in biting the bullet
just this once?

There is no defined negotiation strategy

Where we want to go.

There is no process for executing the

strategy How were going to get there.

and executing negotiations.

A focus on value-creating proactive

trading vs. value-dividing reactive

concessions.
Pre-defined reactions to irrational

behavior by competitors.
Desired outcomes with regards to

pricing of products and support services.

In order to effect a desired change in your
organization, strategies must be built with
all stakeholders involved in the process.
Field sales, account managers, management, training, pricing and product
managers, etc., should all have a say in
order to buy in to the new strategy. The
more stakeholders involved, the easier
it is to engage a longer-term approach to
enhancing margins and market credibility.
When planning for negotiations, the negotiating team refers to the strategy as the
common goal for negotiation outcomes.

without realizing it, many companies have

systematically taught their customers the art
of blackmail. Danny Ertel, Harvard
Business Review, May/June 1999.

1. Customers believe the initial offer was

a lie and dont know where the truth
really begins.
2. We fan the fire of irrational marketplace
competition by setting up bidding wars.
3. We prove through our actions that while
we sell on value, we negotiate on price.

The Solution: Well-Defined

Negotiation Strategy and Process
Many companies train their sales forces
in negotiation tactics. These courses
obviously dont meet the mark because
heads of sales organizations keep sending
their troops back for more training! Other
than a few stories about wins attributable
to tactical training, training does not have
a measurable return on investment. This
training approach to addressing negotiation problems fails for two reasons:

Negotiation strategies should contain, at

the very least, the following:
A common process used for preparing

The problem is that your sales force of 400

is located in the U.S., Asia, Europe, and
Latin America. Each sales rep closes about
25 deals annually for a total of 10,000
deals per year. Transactions average $10K
for a total of $100 million. This bullet
biting is happening up to 10,000 times per
year, sending inconsistent and conflicting
messages to your customers, and equally
as important, to your competition.

When we approach negotiations by

tactically reacting to customers requests,
by merely giving in because they ask us
to do so, seemingly disparate transactions
have the effect of rolling upward and
defining our negotiation strategy. We teach
the marketplace, our customers and our
competitors, who we are based on the
deals we do. By rolling over in negotiations, we run into several problems:

to our customers and our competition by the

way we negotiate? What will the results be?

Building a Negotiation Process

Most companies have a defined sales
strategy and process and an implied or
merely reactive approach to negotiation
strategy and process. If companies are
defined in the marketplace based on the
deals they do (their behavior), this is a
very large disconnect. The most successful
companies have negotiation strategies that
complement their sales strategy and a
negotiation process that connects with
their sales process.
Many negotiation problems, youll find,
stem from sales problems. If youre selling
the wrong thing to the wrong people, for
example, negotiations restructuring will
have limited impact. The first step to fixing
a negotiation problem is to either install or
upgrade an effective sales strategy and
process. Then, move on to negotiation
strategy and process.

Building a Negotiation Strategy

The first step in designing a negotiation
strategy is to build on existing sales
strategy. Then, look forward 6 to 18
months and ask:
What is the consistent message we will send

Every negotiation is different. There are

different people involved, perhaps different
cultures, different variables, consequences,
and market-specific issues that pertain to
each negotiation. A world-class process
must allow for the flexibility of customizing for the unique needs of each negotiation while at the same time offering a common language and approach that becomes
the way your company negotiates.
We deal with the rigors of a global
economy and do deals all over the world.
Having a common language and process
are even more important in order to rein in
the variability we see in global pricing
practices, service issues, and any other
inconsistencies in which your organization
does deals across the board. Simply put,
adopting a well-defined negotiation
process works. Everyone says my deals
are different but the following process has
been successfully employed on every continent (except Antarctica), and in almost
every industry imaginable, from semi-conductors to pharmaceuticals, construction to
consumer products, data management to
insurance. It works with manufacturers,
service providers, and distributors. It

crosses geographical, societal, and

cultural boundaries. It looks like this:
1. Estimate the negotiation strategies of
the customer and competition.

the probability that true behavioral change

will occur. Subsequent business results can
be factually correlated to the effort.
Key steps in proper design and execution:

2. Validate those estimations with market

intelligence.

The strategy is agreed upon by relevant

3. Create true business value by preparing an offer that meets both sides needs
(cooperative aspect).

The stakeholders have learned the

4. Divide the value given concerns for

fairness in the ongoing relationship
(competitive aspect).
Life is simple Its just not easy. Eric
Fellman, The Power Behind Positive Thinking
Long lists of tactics, countermeasures,
responses and approaches are not only
difficult to remember, but they ignore
rational analysis of the structure of the
negotiation. This process is easy to
remember and use. It also allows for
a proper diagnosis of the issues in the
negotiation, thereby increasing proactive
management of it versus merely reacting
tactically to the other sides demands.

stakeholders.
implementation process.
Internal leadership is single-minded in

its support of both.

The single most important issue for
implementation is consistent use of the
strategy and process by management.
When management become coaches
helping others in the organization change
their behaviors, they eradicate much of
the fear associated with doing something
in a new way.

Examples of Success
Following are two examples wherein
negotiation strategy and implementation
process has provided tangible financial
benefits:
In the feed additives marketplace there
are only a few suppliers and a few buyers.
Before implementing the negotiation
process outlined above, there was a high
degree of irrational competition that had
resulted in plants running at low capacities. The overall market was operating at
below margin levels. One would believe
that customers would benefit from such
a market but the contrary was true. With
margin pressure, service, support and R&D
were slashed.
This company began to take a longer term,
multiple round view of negotiations.
With a common direction and approach,
the variability of each deal was minimized.
Rational fact-based discussions were had
with customers. Proper analysis and
planning drove well thought out tactics
in customer negotiations. Pricing levels
rose, as did profitability. Subsequently,
the quality of analysis and support back
to the customer base improved customer
satisfaction.

Implementing Your Negotiation

Strategy and Process
Once the strategy is built, all relevant
stakeholders need to learn how to use
the process to implement the strategy. This
common language and approach (how to
get there) guided by the negotiation strategy (where we want to go) vastly increases

In the data management and decision

support industry, one company had wide
pricing variations throughout the world.
Global customers were receiving different
messages about the negotiability of prices
and subsequent support programs. This
variability had the most important global
customers wondering where the truth
really lay. The inconsistency was not due
to any evil plan but the result of having
several customer teams around the world

negotiating without a common goal and

approach. With agreed upon account
specific negotiation strategies and a
common way of approaching negotiations
around the world, wide pricing variances
were tightened up and global market
messaging was more consistent.
This process approach ultimately had
the added benefit of actually decreasing
the amount of time spent preparing for
and executing negotiations.

SUMMARY
The old-school approach to solving
negotiation problems is to either impose
tight centralized corporate constraints
or to send the sales force to tactical
negotiation training.
A new and more analytical approach
involves bringing together all stakeholders
to:
Define a common goal or negotiation

strategy linked to sales strategy.

Agree on a common negotiation process

or approach integrated with sales

process.
Coach and measure both strategy

use and process implementation.

Measure results.

A key point for implementation of such a

system is that the strategy be centralized
and the implementation be de-centralized
with negotiation decisions being made at
the level closest to the customer.
Finally, there are few solutions to something as dynamic as negotiation, but a
common goal and approach will greatly
increase the outcomes in your favor.
there is no solution or silver bullet for
negotiation but we can increase your odds
Max Bazerman, Harvard Business School
Professor and Think! Partner

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Written by Brian Dietmeyer,
Senior Partner, Think! Inc.
Think! Inc. is an international consulting firm
specializing in negotiation strategy
and implementation process.
www.e-thinkinc.com
Phone: 888-99-Think.

Copyright 2001 by Think! Inc. All Rights Reserved.