M.M.

S (I SEMESTER)

SELLING & NEGOTIATION SKILLS

PRESENTED BY PROF. RAMA MANTHA

INTRODUCTION Selling always comes before negotiation. The simple difference between them is timing. With selling you inform people what youve got, what its going to for them and how much it costs. Negotiation follows when prospective customers like what they see, but want to bargain about the prices. So negotiation begins when the prospect wants to buy and you want to sell, but you still have a few details to share regarding terms and conditions. Negotiation is playing an ever increasing role in the commercial world. So, its becoming increasingly important now for sales people, to be both skillful salespeople and negotiators. They also need to match confidence and self esteem, for there are various reasons why a sales person might be anxious to sell. THE PROCESS: The sales process if we examine is a typical interview with seller and buyer interacting with one another ,we get an insight into both parties needs. The sales persons needs will be revealed by their opening statement, presentation of product features and benefits and close of the sale.

THE SALES SKILLS: The following are few sales skills which are required to excel in this field.

Ability to Listen
Along with speaking, a great salesperson knows when to stop talking and listen. They never cut someone off while they are talking, because in doing so they would fail to hear a key element in identifying what that person's needs might be.

Asks Great Questions Problem Solver

Salespeople are naturally inquisitive and know that in order to isolate what the real need or desire is in the buyer, they need to ask questions that will lead them to the answer. They naturally ask questions because they have a desire to help solve their problem. Another natural skill is the desire and ability to solve problems. Great salespeople are always solving problems. The ability to hone in on what the buyer's problem is and offering suggestions that will effectively solve the problem with respect to what products or services you sell, generally results with a sale.

Well Organized
I am not necessarily speaking of your personal surroundings, but more with your thoughts and methods of planning. Sales people have a keen ability to break things down into smaller steps and organize a plan of action. They know how to analyze what their goal is and in what order the steps need to be in in order to reach that goal.

Self-Starter and Self-Finisher

A successful sales person moves forward on their own. They never need anyone to tell them when it is time to go to work because they know that if they do not work they will not earn. They are also very persistent to finish what they start. They achieve their goals, even if they are small ones.

Positive Self Image

Having the attitude that they can do just about anything that they put their mind to is usually very common among sales people. They do not cower from meeting or talking to people or trying something new. They rarely allow negatives that are either spoken to them or about them to effect what they are trying to accomplish because they know who they are and what they are capable of doing.

Well Mannered and Courteous

The best sales people are very well mannered. You may not realize it, but good manners is a way of showing respect for others. People are attracted to those that respect them and mutual respect is fundamental in building lasting relationships with people..including buyers.

Naturally Persuasive
Another very common inherent skill with great salespeople is that they are very persuasive or know how to get what they want. They focus on what they want and they are persistent to keep chipping away until they get what they want. They almost never give up or give in.

Person of Integrity

A salesperson without integrity will have many struggles which will often include hopping from job to job. Honesty in sales is so important and it is almost impossible for this skill to be taught. You or the person you are looking to hire is either a person of integrity or are not. Be as analytical as possible on the evaluation of this skill.

7 Sales Skills to Improve On

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Sales Skill #1: Qualifying Fast to Avoid Wasting Sales Time

Do you chase after your prospects until they tell you yes or no? Do you ever tell your prospects "No", as in "No, I am not going to sell to you"? There are many things in selling that you do not and will not be able to control. The one thing that you do have control over is your time and how you choose to use it. To qualify fast you must have a set of criteria describing who you will and will not sell to. You want to sell to the prospects likely to buy your products, and drop the prospects unlikely to buy (so that you can find more good prospects). Sounds simple, but too many salespeople let sludge buildup in their pipeline, constricting the total revenue that flows out. KEY TIP: Develop a list of sales qualifying criteria that prospect's must meet in order for you to invest your sales time with them.

Sales Skill #2: Motivating Prospects

Qualifying goes beyond budget, authority, and need. You want to sell to prospects who *want* to buy from you. Finding prospects that need our products usually is not difficult. Finding those who really want our products though can be very hard if we wait for them to come to us. Products sold by professional salespeople are more complex and offer more value than commodity products offered through stores, catalogs and brokers. Prospects generally do not know they need such products, until they first discover that they have a problem. This process can take seconds or years depending on the nature of the problem (and the

prospect!). Prospects get motivated to work with you when you help them to discover that you solve their problem better than anyone does else. KEY TIP: Determine which problems that you eliminate or solve for your prospects. Plan and ask questions to uncover and agitate those problems.

Sales Skill #3: Selling to People Outside Your Comfort Zone

Most salespeople who are "people persons", already think that they are good at this. Let me ask you a question. When you last lost a sale, how was your rapport with the key person who decided against you? You can't afford to look away and ignore people that you don't have natural rapport with. The good news is that people like people like themselves. All you have to do to gain rapport is stretch your behavior outside or your comfort zone until you become like another person. KEY TIP: Match speech patterns with people to gain rapport outside of your typical sports or weather conversation.

Sales Skill #4: Reaching Decision-Makers Through Voicemail

There's two ways to make more sales. One is to close more of the prospects you do contact. The other is to get more prospects into the pipeline. When prospecting, you can look at voicemail as either your friend or your enemy. With 70% of your prospecting calls going to voicemail, it is time to make friends with it. Although you will never get even close to getting every voicemail returned, you can get a significant number of your messages returned when treat them as a one-on-one commercials. KEY TIP: Prepare 3-5 separate benefit-focused voicemail messages that you can leave over a period of days or weeks for a single decision-maker before you give up on her. Each message should focus on a single unique customer-focused benefit.

Sales Skill #5: Delivering "I Gotta Have That" Presentations

Let's face it, a lot of business presentations are really boring. Salespeople talk about why their product is great, why their company is great, and the history of their company. Prospects don't relate to this. That's why they look so bored. Great presentations get the prospect's imagination involved. The best way to involve the imagination is through storytelling. Stories rich in descriptive detail get the prospect picturing them using your product and evoke that "I Gotta Have That" reaction. KEY TIP: Study 1-3 of your best customers and develop detailed customer success stories that will put emotional power into your presentations.

Sales Skill #6: Gaining Commitments Instead of Closing

Eliminate "Closing Cheese" from Your Vocabulary. You know what I am talking about: "Would you like that in gray or in black?" or "If I can show you how this will help you will you buy today?". Lines like these are why salespeople are down on the bottom of society's respect list somewhere near lawyers. Learn the power of asking for incremental commitments from the beginning of your sales cycle. It is not an easy shift to make. First you got to get the prospect to show you what they most want (Hint: See Skill #2 above). Then you can negotiate incremental commitments in return for more of your time, information or resources. KEY TIP: Practice asking for simple commitments once someone has expressed a clear want, pain, or desire.

Sales Skill #7: Have More Fun

Sales is fun when you are in control and closing deals. Selling is miserable when you are under pressure to close business. Take the pressure off yourself to close and instead focus on qualifying and motivating your prospects. KEY TIP: Shift the responsibility back to the prospect to solve his own problems, and the pressure to make the sale will be gone. Focus on selling at your best only to qualified prospects and you'll close more and have fun doing it.

Bonus Sales Tip

When you are giving a presentation, selling on the telephone or one-on-one in your prospect's office, picture your prospect as having the words SO WHAT stamped on his forehead. Imagine that for everything you say, the prospect is asking "so what, why should I care?". Remember, prospects only care about how what you are selling can eliminate a problem that they have or help make their business or life better. The answer to this question is always what your product does for them (benefits), not what your product is (features).

COLD CALLS
Cold Calling Pressure ReductioWho likes cold calling? Most salespeople don't like cold calling, and do as little of it as possible. There are a number of reasons why most of us don't like it. One reason is the way we view cold calling. People who don't like cold calling view each call as do or die. They think of cold calling as a war in which they have to win most of the battles in order to win the war. A sales rep good at cold calling is considered a sales god. A sales rep who is poor at cold calling is a sniveling wimp. The reality about cold calling is much different. You don't have to win all nor even most of the battles to win the war. Cold calling is the reconnaissance before any battle begins. Cold calling is not where the sale happens. Cold calling is simply advertising done by sales reps. Yes, I said that you are doing advertising when you are cold calling.

Cold calling is a means of identifying potential prospects for your sales efforts. And the purpose of advertising is to identify or attract potential prospects - in other words to generate leads. Think of cold calling this way. Every time you make a cold call, it is as if you grabbed your prospect by the shirt, shoved a billboard ad for your product in their face, and said "Do you want to buy this?" Obviously, real cold calling is more involved than pressing their nose up to your ad. Specifically, cold calling should be mostly about asking questions rather than a sales pitch monologue. Just like a newspaper ad or a billboard, all you are trying to do when cold calling is to get someone's attention. And if they don't want or need what you are offering right now, that's OK. With your new view of cold calling as advertising in mind, you should focus your cold calling goals a little differently. One of the surest ways to get frustrated in sales (and an ulcer) is to take responsibility for things that are beyond your control as a sales rep. You really cannot control whether the person you are cold calling needs or wants your product. What you can control is how many cold calls you make, and the quality of your techniques while cold calling. Set your cold calling targets and define your success criteria around the number of calls or dials that you will make. Judge the quality of your calls by how well you stick to a cold calling formula that you have defined in advance. If your cold calling goal is set as "To Make $300,000 in Sales Next Month", you are just setting yourself up. This kind of cold calling goal might be useful if you are a tele*sales* person responsible for actually closing business by phone. But in professional businessto-business selling, cold calling is too far removed from the actual close to directly influence such a goal. Instead, you can backwards plan how many cold calling "advertisements" you need to run in order to make $300,000 in sales next month. Use your own or other sales reps activity numbers to figure out how many sales will result *on average* if you make 1000 dials when cold calling. Then you can determine the time period needed to make 1000 dials worth of cold calling advertisements in order to make your sales goals. Look at cold calling as one-to-one advertising and focus on the number of dials you have to make and you'll find cold calling a lot easier to do.

Negotiation Skills
Qualities of Negotiating Power
1. It is relative between the parties. 2. It changes over time. 3. It is always limited. 4. It can be either real or apparent. 5. The exercise of negotiation power has both benefits and costs. 6. It relates to the ability to punish or benefit. 7. It is enhanced by legal support, personal knowledge, skill, resources and hard work. 8. It is increased by the ability to endure uncertainty and by commitment. 9. It is enhanced by a good negotiating relationship. 10. It depends on the perceived BATNA. 11. It exists to the extent which it is accepted. Negotiation is usually considered as a compromise to settle an argument or issue to benefit ourselves as much as possible. Communication is always the link that will be used to negotiate the issue/argument whether it is face-to-face, on the telephone, or in writing. Remember, negotiation is not always between two people; it can involve several members from two parties. There are many reasons why you may want to negotiate and there are several ways to approach it. We all have our own point of views. And these viewpoints form the basis of our goals and objectives. Each time you communicate with a potential client, vendor or employee, you exchange ideas and information. However, your goals are likely to differ. Negotiation, in essence, is the art of compromise. Negotiation skills are vital to the success or failure of your interactions, and ultimately, your goals. Negotiating is one of the key tools you can use to accomplish your goals.

The Seven Pillars of Negotiation Wisdom

1. Relationship What impact will this negotiation have on our personal relationship with other negotiators or our constituents, the parties who stand to gain or lose depending on the negotiation's outcome? 2. Interests What are the reasons that drive our pursuit of particular objectives, and can another party's ideas or resources help serve our interests better than what we bring to the table? 3. BATNA Our Best Alternative To a Negotiated Agreement (BATNA) may be derived from resources we control or influence. We may have choices of parties with whom to negotiate or may be better off relying on ourselves. BATNAs can change during negotiation each time we learn a new piece of information. 4. Creativity Are we to be governed by standard operating procedure, or can our interests be better served by thinking out of the box? If our ideas are the only ones worth taking seriously, it is hard to justify bringing additional parties into a negotiation-- the decision-making process. 5. Fairness Do we feel as if we are being treated fairly? How do other parties feel? If a negotiator feels he or she is not being dealt with in a fair manner, he or she may agree for purposes of bringing the bargaining to a close, but may walk away without having bought into the agreement. 6. Commitment Negotiations can only be called successful if they lead to agreements the parties are committed to fulfill. Learn whether the people at the bargaining table have the capacity to keep the promises they make. Communication Information is the fundamental asset in negotiation. We communicate best by listening. We should keep asking ourselves whether the negotiation process is being used as a successful way of communicating information. By considering which of these deserves more attention in a given negotiation before the negotiation process begins, we are likely to do a better job. The recent past may have presented some shocks, but to be a good negotiator, you have to accept that things may not always go the way you expect. Keep

the seven pillars in mind, and you should be able to respond wisely to the circumstances you face.

Essentials of a Successful Negotiation

1. Know what you want Think through exactly what you want. Be specific and have valid reasons for why you need it. Knowing what you want, and why, will help you to be clearer and more confident. 2. Know what they want Before you start negotiating, it is important to have an idea of what the other party would like the outcome to be, too. So think it through why do they need what you are offering/asking for? And do your research on how can you make them feel like they have got a good deal? 3. Be Fair If what you are asking for is fair and justifiable, e.g., you would like to earn as much as someone you work equally as hard as, then you are much more likely to get what you want. 4. Believe you are worth it You have to believe that you deserve your desired outcome. If you do not, the moment your client or boss questions you, your argument will fall apart because you do not have enough confidence in it. Believe it, trust yourself, and rehearse it. 5. Listen Carefully When your boss/client is talking to you during negotiations, do not use that time to plan your next line of attack. It is more important that you listen to them and see their point of view. They will take you more seriously if you do, even if you disagree with them. 6. Keep it Friendly Negotiating is not about confrontation. It is about two parties reaching an amicable, mutually beneficial agreement. Keep that in mind when you are talking and, even if you do not get what you want this time, view it as good practice for the future. 7. Have an Alternative When you are discussing specifically what you want, as well as what they want, work out what you would be prepared to walk away with if you are not successful. Five Basic Principles 1. Be hard on the problem and soft on the person. 2. Focus on needs, not positions. 3. Emphasize common ground. 4. Be inventive about options. 5. Make clear agreements. Where possible, prepare in advance. Consider what your needs are and what the other person's are. Consider outcomes that would address more of what you both want. Commit yourself to a win-win approach, even if tactics used by the other person seem unfair. Be

clear that your task will be to steer the negotiation in a positive direction. To do so you may need to do some of the following:

Example 1-- Parent-Child Conflict It is Friday, and John and his mother are arguing once again about the teenager's weekend curfew. Mrs. Brown has grown increasingly distressed by her son's continuing resistance to the 11 p.m. curfew she has set. John insists that this is unfair. Both become so angry and frustrated that they storm off to separate areas of the house to avoid each other and further conflict. Example 2-- Workplace Conflict Mr. Steve has been late for work several times in recent weeks. He has failed to turn in several important project outlines on time without explanation or apology, annoying his employer. Until recently, Steves attendance and performance at work had been consistent, motivated and highly productive. Steves recent behavior has been so uncharacteristic that his employer decides to confront him, demanding a meeting the next day. Example 3-- Marital Conflict Roberta and James have the "perfect" marriage, two children and a lovely home. Both work in professions that provide personal satisfaction as well as a comfortably secure income. They have "made it." And they are miserable. Work and family roles have left them with little time to spend together and have increased their areas of disagreement. Roberta and James have become focused on meeting their own needs with little regard for the needs of the other. Resentment, dissatisfaction and conflict are all they seem to share any longer. The Goal of Negotiation-- "Everyone Wins" People resolve disagreements in many ways. Some tend to deal with potential conflict by denying it or trying to avoid it altogether. Instead of confronting and resolving problems, people may let their anger and resentment build while they remain silent. This approach can result in constant personal stress which can lead to illness or poor general health. If disagreements are not resolved, the possibility for more intense conflicts at some later date is increased. Problems seldom improve on their own. Conflict can also be motivated by ego. Solutions are selfishly sought with little regard for the other person. The conflict becomes a "win-lose" situation in which one person "wins" at someone else's expense. The one-sidedness of this "solution" increases the odds of more conflict. "Losers" will defy, test, resist and retaliate against the "winners." Effective negotiation is a two-way process that encourages both sides to actively participate in making decisions. It also provides a way for people to learn to understand each other better and to grow in their relationships. Negotiation helps to create a healthy balance between "giving" and "getting." Everyone becomes a "winner" through negotiation. How can Everyone Win? The key to effective negotiation is clear communication. Communication involves three important skills-- understanding, listening and speaking. You cannot have one skill work without the others. For example, you cannot have good understanding without good

listening and speaking. Negotiation is most effective when people are able to clearly identify and discuss their sources of disagreement and misunderstanding.

Speaking Negotiation begins with a clear, concise explanation of the problem as each person sees it. Facts and feelings are presented in a rational manner from the individual's perspective, using "I" statements. Communication between people will go more smoothly when statements such as "I become very upset when you " are used rather than more aggressive statements such as "You make me mad when you," which blames the other person and puts him or her in a defensive position. Shared concerns rather than individual issues remain the focus of discussion throughout negotiation. The negotiation process will be most effective when people take time to think through what they will say. When possible, plan ahead to meet at a time and place convenient to everyone. A quiet, neutral spot where there are few distractions or interruptions is perfect for open discussion. Listening Listening is an active process of concentrating all of one's attention on the other person. Encouraging the other person to share thoughts and feelings, giving feedback on what has been heard, and maintaining eye contact are skills that show you are interested in understanding what he or she has to say. Active listening assures the other person that he or she is heard, accepted and respected. The ability to listen actively supports open, ongoing negotiation. Thinking ahead or anticipating the course of the discussion are distractions that interferewith listening. Poor attention and listening can lead to misunderstandings, inappropriate solutions and continuing conflict. Understanding Before two sides can look for solutions, a common understanding should be reached. If two people do not understand each other's problems and concerns, then the process of negotiation will either be broken off or will end with solutions that do not work. Active listening encourages understanding. It is important to pay close attention to what someone says as well as to how he or she behaves. Body language, including facial expressions, hand gestures and degree of eye contact, can provide clues about the other person's thoughts and feelings. Show Respect Success rests in accepting the other person despite differences in values, beliefs, educational experiences, ethnic backgrounds or perspectives. Negotiation permits you to examine a problem from all sides, and to promote understanding and interest in the other person without necessarily agreeing to his or her viewpoint. Taking time to listen and to

ask questions makes it easier to learn more about someone's perspectives. Considering different perspectives will increase the range and variety of possible solutions. Genuine interest in other people and in their contribution to finding solutions builds trust. Trust provides a foundation for continuing a relationship. A foundation of trust also eases future efforts to solve problems. Brainstorming It is one way to gather many creative ideas rapidly. This process allows everyone to openly make suggestions without the fear of criticism. At this stage, every suggestion has value and is accepted. After all suggestions have been shared, they are reviewed to determine whether they might coincide or overlap with each other. Negotiation then becomes a matter of choosing a solution to which no one has an objection. Remember, personal goals should not take priority over shared goals. Preserve the Relationship In general, people will try to preserve valued relationships. Negotiation is a nonadversarial approach to resolving conflict in those relationships. There are no "good guys," "bad guys," or "winners/losers." Negotiation is based on equality. No one wields more power or control than another. The individual's ideas, attitudes, values and objectives are recognized and respected as legitimate. Solutions are mutually agreed upon. When is Negotiation Successful? Negotiation is most successful when both sides do the following: 1. Recognize the value of a relationship and have a mutual desire to continue it. 2. Participate actively in the process. 3. Show consideration and acceptance of each other's perspectives, values, beliefs and goals. 4. Separate personality from the issue involved. 5. Work together to develop a solution everyone can accept. Face Negotiation Theory Stella Ting-Toomey's face negotiation theory helps to explain cultural differences in response to conflict. The basic assumption is that all people negotiate face. 1. Face is a metaphor for our public self-image. 2. Face work refers to specific verbal and non-verbal messages that help to maintain and nrestore face loss, and to uphold and honor face gain. Our identity can always be called into question, which inevitably leads to conflict and vulnerability. Facework and corresponding styles of handling conflict vary from culture to culture. Cross-Cultural Communication Theory

It assumes that persons of all cultures are continually negotiating "face," which is their public self-image. This theory also contends that "facework" from cultures that are lowcontext or individualistic such as the United States is quite different from cultures that are collectivistic such as Japan or Korea. Consequently, when face is managed differently, then communication and conflict styles will likewise vary. Face negotiation theory analysis focuses on the type of culture, the type of face maintenance, and the type of conflict management. Summary As life becomes more complex and the world more diverse, your ability to use negotiation skills becomes more important. Negotiation requires time and patience. By practicing the negotiation strategies and skills suggested in this lesson, you can make conflict resolution a regular part of your approach to managing relationships at home, at work and in the community. Negotiation can serve not only to preserve relationships, but also to continually strengthen and improve them. Negotiation Questionnaire 1. Successful negotiators usually set very high goals. True False 2. Most negotiation issues boil down to the price of the object or service to be performed. True False 3. The person doing the selling or persuading has the distinct advantage over the buyer in most negotiation situations. True False 4. Concessions are normally viewed as a sign of weakness in the party making them. True False 5. Ultimatums should be used only as a last resort. True False 6. The personal needs of the negotiators are as important as the "objective" issues. True False 7. Negotiations should be left to highly experienced personnel. True False 8. It is always best to negotiate on your own "territory." True False 9. There are certain items, such as merchandise in a one-price store, which cannot be negotiated. True False 10. As a negotiator, you can never go wrong by assuming the other party is out to get the best possible deal for himself at your expense. True False 11. In all negotiation situations, someone wins and someone loses. True False 12. Deadlocks and impasses are sure-fire signs that one or both parties are being

unreasonable. True False 13. Negotiators often mean something different from what they say. True False 14. It is always best to keep a negotiation on a rational, issue-oriented level. True False 15. Establishing the agenda of the negotiation is probably the most routine phase of the negotiation process. True False 16. The effective negotiator spends more time listening than talking during negotiations. True False 17. Negotiators usually overdo their sensitivity to cues. True False 18. The negotiator who asks a lot of questions is demonstrating that he or she hasnt done his or her homework thoroughly. True False 19. In negotiations, the more I know about you than you know about me, the better I can control the negotiation. True False 20. You should develop a negotiation strategy and stick to it. True False 21. When there is a lot of competitive negotiation taking place in an organization, the organization always loses. True False 22. Knowing what your options are is essential to effective negotiations. True False 23. When a written document is necessary to finalize an agreement, it is best for you to write it. True False 24. I have a distinct advantage if I know your deadline and you dont know mine. True False 25. Deadlocks are to be avoided at all costs. True False 26. Managers demonstrate weakness when they negotiate with subordinates. True False 27. It is best to keep the number of people to minimum in a major contract negotiation. True False 28. In labor relations, negotiating activity should be confined to the bargaining table in order to preserve confidentiality. True False 29. Probably the best test of a successful negotiator is his skill in employing a wide variety of negotiation tactics. True False

Answers 1. T, 2. F, 3. Either, 4. F, 5. T, 6. T, 7. F, 8. T, 9. F, 10. F, 11. F, 12. F, 13. T, 14. T, 15. F, 16. T, 17. F, 18. F, 19. T, 20. Either, 21. T, 22. T, 23. T, 24. T, 25. F, 26. F, 27. Either, 28. F, 29. F

Give yourself one point for each response that matches those provided by professional negotiators. The higher your score, the more you reflect the mindset and behavioral patterns of professional negotiators.

Case Study-- Conflict Management Problem We have a product team that does high quality work. Everyone in the team is competent and highly committed to the success of the company. Yet, some issues have developed over time and there are repeated conflicts among a few of the members. There has been arguing and heated debate. I am afraid that the recurring conflicts will cause morale to drop, and subsequently result in decreased commitment and productivity. Challenge Can you get the team to manage conflict more effectively so that morale and productivity are not affected?

TYPES OF NEGOTIATION IN ORGANIZATIONS Depending upon the situation and time, the way the negotiations are to be conducted differs. The skills of negotiations depends and differs widely from one situation to the other. Basically the types can be divided into three broad categories. Types Parties Examples Involved 1. Different levels of 1. Negotiation for pay, Management terms and working 2. In between conditions. Day-to-day/ Managerial colleagues 2. Description of the job Negotiations 3. Trade unions and fixation of responsibility. 4. Legal advisers 3. Increasing productivity. 1. Management 1. Striking a contract 2. Suppliers with the customer. 3. Government 2. Negotiations for the Commercial Negotiations 4. Customers price and quality of 5. Trade unions goods to be 6. Legal advisors purchased. 7. Public 3. Negotiations with financial institutions as regarding the availability of capital. 1. Adhereing to the laws of the local and national government.

1. Government 2. Management Legal Negotiations 3. Customers 1. Day-to-day / Managerial Negotiations

Such types of negotiations are done within the organization and are related to the internal problems in the organization. It is in regards to the working relationship between the groups of employees. Usually, the manager needs to interact with the members at different levels in the organization structure. For conducting the day-to-day business, internally, the superior needs to allot job responsibilities, maintain a flow of information, direct the record keeping and many more activities for smooth functioning. All this requires entering into negotiations with the parties internal to the organization.

2. Commercial Negotiations Such types of negotiations are conducted with external parties. The driving forces behind such negotiations are usually financial gains. They are based on a give-and-take relationship. Commercial negotiations successfully end up into contracts. It relates to foregoing of one resource to get the other. 3. Legal Negotiations These negotiations are usually formal and legally binding. Disputes over precedents can become as significant as the main issue. They are also contractual in nature and relate to gaining legal ground. IS NEGOTIATION NECESSARY ? Negotiation, at times can be a lengthy and cumbersome process. By asking whether it is necessary, time may sometimes be saved and unnecessary compromise avoided. On occasions, a request to negotiate may best be met by pointing out that the party making the request has no standing in the matter. If a manager has the undoubted authority to act, making a decision rather than negotiating about it may be the best tactic. Alternatively, there are cases in which the best response to a request or a claim is to concede it without argument. Why waste time negotiating if the other party has a good case and there are no adverse consequences in conceding ? Unnecessary negotiation, followed, perhaps, by a grudging concession of the other partys claim, will lose all the advantage that might be gained with a quick unexpected yes. An alternative to a simple yes or no when a difference of view occurs is to skip negotiation and proceed immediately to some form of third party intervention. An alternative to a simple yes or no when a difference of view occurs, is to skip negotiation and proceed immediately to some form of third party intervention. On the most formal basis, this might imply a decision to take a dispute to court : informally, two managers who quickly realize that they cannot reach agreement about a working problem may jointly agree to stop wasting time in argument and refer the matter to a senior manager for resolution. The Negotiations Process The Difference Between Integrative and Distributive Negotiation

There are two types of negotiation: "integrative" and "distributive." Integrative negotiations are those typically referred to as "win/win" negotiations: all sides are looking for a solution that maximizes joint gain and allows everyone to walk away feeling like they won something. They involve looking at the issues being negotiated from multiple angles, considering multiple issues at once (thus allowing for trade-offs), and honestly trying to "expand the pie" rather than divide it. Anyone who imagines that they might see or do business with their fellow negotiator in the future should be attempting to negotiate in this way. Integrative negotiations foster trust and good working relationships, and leave all parties feeling good, not just one. Distributive negotiations, on the other hand, are typically described as "win/lose" negotiations one party gets what they want, and the other party gives something up. Think of negotiating for your car you either get that extra $1000, or the dealership does. If you feel you got a good deal (and squeezed that salesman), you "won." If you walk away feeling like you paid too much money, you "lost." This type of negotiating does not lead to good long-term relationships. The parties interests are often opposed (or seem to be opposed this may not prove to be the case once you start getting creative), and usually good feelings are not plentiful when the negotiation is over. Integrative vs. Distributive Negotiations Characteristic Outcome Motivation Interests Relationship Issues Integrative Negotiations Win / win Joint gain Congruent Long-term Multiple issues Distributive Negotiations Win / lose Individual gain Opposed Short-term Single Issue

Heres a story (probably familiar to many of you!) that demonstrates the difference between integrative and distributive negotiations: Two sisters were fighting over the last orange in the fruit bowl. They went back and forth, each girl insisting that she should get it and both refusing to give up. They were about to agree on cutting the orange in half when their aunt walked in and realized what was going on. She turned to the girls and asked them each why they wanted the orange. As it turns out, one wanted to eat the orange, and the other wanted the peel for an art project she was working on. Once they realized this, they were able to "split" the orange in such a way that both got exactly what they wanted. The girls were engaged in distributive negotiations (though

it probably felt like bickering to them), while their aunt was suggesting an integrative solution. As you might have guessed by now, partnership negotiations should always be integrative. The goal in any partnership should be maximizing all parties abilities to advance their collective mission, and to enable both to better serve the community, deal effectively with their economic obligations and pressures, etc. One organization should not want to "win" at the expense of the other. You want joint gain, not just individual gain, and while your specific motivations for pursuing the partnership may be different, the spirit behind your interests should be congruent. Most importantly, you are entering into a long-term relationship with your prospective partner(s), and you want this to be a good relationship. The only way to build trust and expand the pie (or the orange) in a negotiation situation is be integrative. You must do this from the beginning. Once you start down the "distributive path" it is hard to change directions, as you establish a dynamic of competition and distrust. The moral of the story: be integrative!

NEGOTIATION SKILLS WHAT NEGOTIATION IS AND WHY IT IS IMPORTANT Negotiation: can be defined as a process of bargaining by which agreement is reached between 2 or more parties. We all negotiate every day in a wide range of work and social situations. It is important to know how to negotiate for a number of reasons: Effect on Profits During the negotiation course, we will explore why negotiating skills are important for you to be successful in business and in life. The importance of negotiation to your business is vital and the impact of good or bad negotiating can be shown as follows: COMPANY A COMPANY B SALES 10m 10m COSTS 8m 8m PROFITS 2m 2m Assume Company A has sales people and buyers who by improved negotiating techniques increase sales by 5% and reduce costs by 5%. COMPANY A COMPANY B SALES 10.5m 10m COSTS 7.6m 8m PROFITS 2.9m 2m By achieving relatively modest improvements in buyers. and sellers. performance, the effect is an increase in profits of 0.9m. This represents a 45% increase over the previous profit figure.

Effect on Customers Successful negotiations can lead to increased profits, but can also lead to greater customer satisfaction. For example, you are buying a second car and you see a car advertised in the paper for 14,500. You decide to make an ambitious offer to see how they react. You offer 11,000 and they accept your offer immediately. How do you feel? Most people feel two things in quick succession: 1. I could have done better 2. There must be something wrong with the car Think of this next time you are negotiating for your business with a customer or supplier. Are you .being fair. by offering your best price first time? What impact has your action had on the way the other side feels? The objective of successful negotiation is not necessarily to charge the highest possible prices for your products, or to pay the minimum price possible for your supplies, but to creatively put together solutions to problems that ensure: ! The best possible outcome for your business. ! Clients and suppliers who are happy to do business with you. ! A reputation for being a tough negotiator while earning the respect of those with whom you negotiate. STYLES OF NEGOTIATION. ADVERSARIAL VERSUS CO-OPERATIVE BARGAINING Our style of negotiation will be influenced by the style of the other party. If both sides are adversarial, there will be little trust between the two parties, however, if one side decides to be co-operative, there is a danger the other side will use this apparent sign of weakness to their advantage. Co-operative bargaining has the advantage of being a more efficient style of negotiation, however certain rules have to be followed by both parties, for it to work. Let us look at the 2 styles of bargaining and their features: Features of adversarial bargaining ! Each side takes up a position and defends it ! Opening bids are set at unrealistic levels; too high or too low, in order to give room for manoeuvre ! Movement is small or non-existent until later on in the negotiation ! Tactics are used to gain short term advantage ! Too much emphasis is placed on trust. .This really is my best price!. ! Information is withheld, or misrepresented ! The outcome is often win-lose, or lose-lose ! The more aggressive negotiator usually does best ! This style does not encourage long term, mutually beneficial relationships ! Neither side asks enough questions, or explores alternatives in sufficient depth Features of co-operative bargaining ! Each side recognises that the other has needs and feelings and accepts implicit

rules ! Objective measures are taken of what is fair and reasonable ! Trust is not an issue as either side is willing to share information ! This style is friendly, but not soft. There is a willingness to trade concessions ! There is a clear, communicable strategy ! Bad behaviour is punished ! This style involves creative problem solving ! It encourages long term, mutually profitable relationships ! Each side asks more questions and explores alternatives, rather than taking up fixed positions ! The usual outcome is win-win .The objective of negotiation should not be a dead opponent.: Napoleon PLANNING THE NEGOTIATION In any kind of negotiation the planning stage is probably the most important. Too often in negotiations we go in badly prepared and end up giving concessions that reduce the overall profitability of the final deal. The importance of planning is in having a very clear idea before entering into the negotiation. 1. What are my objectives? 2. What does the other side wish to achieve? 3. What information will influence the final outcome of the negotiation? 4. What concessions can I make? 5. How am I going to achieve my objectives? 6. What part will other people play in the negotiation? Generally, the more time that is spent in planning and preparing for the negotiation, the more beneficial will be the final outcome. Objectives Before entering into the negotiation, you need to have a clear idea of your objectives and try to work out those of the other side. Ask yourself the following questions: 1. What exactly do I wish to achieve from this negotiation? 2. Which of my objectives: a. Must I achieve? b. Do I intend to achieve? c. Would I like to achieve? 3. What options or alternatives would be acceptable to me? 4. What are the other sides. objectives? 5. How does the other side see the negotiation? Information It has often been said that information is power. In any negotiation, there will be 4 types of information that is important to the final outcome. 1. What information do I have that the other side has also? 2. What information do I have that the other side does not have? 3. What information do I need to have before negotiating with the other side? 4. What information does the other side need before it can negotiate with me?

This can be particularly important when negotiating with people who concentrate on price issues. What other things are important to this person? What pressures does he have on him to conclude the deal? How well is his company doing at the moment? How important is it that he deals with my company? etc. The early phases of negotiation consist of both sides finding out more information before talking about a specific deal or set of alternatives. For example, if you find out the other side has a time deadline that only your company can meet, it may give you the chance to negotiate on more favourable price. If you know that the other side has recently expanded their production capacity, you may be able to negotiate more favourable terms in return for a commitment to buy certain volumes over an agreed time period. By spending time as part of your preparation in listing what you already know and what you need to know, you will give yourself a better chance to negotiate well on your company.s behalf. Concessions Negotiating is a process of bargaining by which agreement is reached between two or more parties. It is rare in negotiation for agreement to be reached immediately or for each side to have identical objectives. More often than not, agreements have to be worked out where concessions are given and received and this is the area where the profitability of the final outcome will be decided. When preparing for negotiation, it is advisable to write down a realistic assessment of how you perceive the final outcome. Find out the limits of your authority within the negotiation and decide what you are willing and able to concede in order to arrive at an agreement, which satisfies all parties. Concessions have two elements; cost and value. It is possible during negotiations to concede issues that have little cost to you but have great value to the other side. This is the best type of concession to make. Avoid, however, conceding on issues that have a high cost to you irrespective of their value to the other side. 8 When preparing for negotiations, ask yourself the following questions: 1. What is the best deal I could realistically achieve in this negotiation? 2. What is the likely outcome of the negotiation? 3. What is the limit of my authority? At which point should I walk away? 4. What concessions are available to me? What is the cost of each concession and what value does each have to either side? Strategy Planning your strategy is important in negotiation. Once you know your objectives, you need to work out how you are going to achieve them. It is also useful to try and see the negotiation from the other side and try and work out what their strategy will be. During the negotiation there will be opportunities to use various tactics and you need to decide on which of these you feel comfortable with and recognise the tactics being used by the other side. Ask yourself the following questions: 1. How am I going to achieve my objectives in this negotiation? 2. What is the strategy of the other side likely to be?

3. What tactics should I use within the negotiation? 4. What tactics are the other side likely to use? Tasks If you go into negotiation with a colleague or colleagues, you need to decide during the preparation phase: 1. What role will each team member take in the negotiation? 2. How can we work together in the most effective way? Some teams of negotiators appoint team leaders, note takers, observers and specialists, each with their own clearly defined authority and roles to perform. Having a clear understanding of roles within the negotiation will make the team approach much more effective. 9 PREPARATION CHECKLIST Questions to ask prior to entering into negotiations Objectives 1. What exactly do I wish to achieve from this negotiation? 2. Which of my objectives: a. Would I like to achieve? b. Do I intend to achieve? c. Must I achieve? 3. What options would be acceptable to me? 4. What are the other sides. objectives? 5. How does the other side see the negotiation? Information 1. What information do I need to know about this negotiation? 2. What information does the other side need to find out? 3. What information does each side have that will influence the outcome of the negotiation? Concessions 1. What is the best deal I could realistically achieve in this negotiation? 2. What is the likely outcome of the negotiation? 3. What is the limit of my authority? At what point should I walk away? 4. What concessions are available to me, what is the cost of each concession and what value does each concession have to either side? 10 Strategy 1. How am I going to achieve my objectives in this negotiation? 2. What is the strategy of the other side likely to be? 3. What tactics should I use within the negotiation? 4. What tactics are the other side likely to use? Tasks (Team Negotiations Only) 1. What role should each team member take in the negotiation? 2. How can we work together in the most effective way? 11 PREPARING FOR NEGOTIATIONS. LIKE, INTEND AND MUST POSITIONS

The best deal, like: 1 2 3 4 5 6 7 8 9 10 11 12

The acceptable deal, intend: 1 2 3 4 5 6 7 8 9 10 11 12

The worst deal, must: 1 2 3 4

7 8 9 10

5 6

11 12

DEVELOPMENT EXERCISE 1. CASE STUDY Sr. Luigi Franconi owns a fast food Pizza Parlour just outside of London. Last year he had an audited turnover of 193,750, producing a net profit after tax of 36,750. The shop has been trading for seven years and is located in a good position, opposite a busy shopping mall and 800 metres away from its. nearest rival, McDonalds. Sr. Franconi wants to sell the business as a going concern and has advertised it at a price of 175,000, inclusive of: ! Stock, worth on average 5,000 ! Kitchen Fittings worth, according to Sr. Franconi 25,000 (These cost him 35,000 when new 18 months ago.) ! Restaurant Fittings costing 19,000 3 years ago ! The freehold valuation of the restaurant ! The.goodwill. of the business You own 2 Pizza fast food restaurants in the area and you wish to build your business through acquisition, so long as the businesses you acquire are the right price and in the right location. Your current restaurants are making good money and you believe you have the right formula for success . strict financial controls, plus pizzas that your customers like. You have tried to buy other fast food restaurants but the deals fell through because their owners would not agree your best price. You are looking at another restaurant in town in addition to Sr. Franconi.s which seems to meet your requirements. One problem you have is with finance. You cannot finance the deal yourself. You could just about finance the deal yourself but this will probably cause you cashflow problems. A better alternative would be to agree a deal with Sr. Franconi where you pay 50% of the money up front and pay the balance over 2, or preferably, 4 years. Before you have your meeting with Sr. Franconi you need to plan and prepare for the negotiation which will ultimately take place. To help you in this process answer the following questions below: DEVELOPMENT EXERCISE 1. CASE STUDY Questions 1. Assuming Sr. Franconi.s price seems to be relatively cheap for a profitable pizza business in this location, what must you not do and why? 2. Think of your objectives for the forthcoming negotiation. Describe your Like, Intend and Must positions. 3. What information must you find out about Sr. Franconi.s business before you begin to negotiate? 4. What concessions are available to each side? 5. What should your strategy be for the forthcoming meeting?

DEVELOPMENT EXERCISE 1. CASE STUDY Questions 1. Assuming Sr. Franconi.s price seems to be relatively cheap for a profitable pizza business in this location, what must you not do and why? 2. Think of your objectives for the forthcoming negotiation. Describe your Like, Intend and Must positions. 3. What information must you find out about Sr. Franconi.s business before you begin to negotiate? 4. What concessions are available to each side? 5. What should your strategy be for the forthcoming meeting? Suggested answers 1. Despite the asking price looking good, beware of agreeing to the asking price. A negotiator should and will always challenge an opening bid, however tempting it may appear. Look at it from Sr. Franconi.s point of view. He must have a reason for wanting to sell the business and is likely to have some leeway on price. Some people fear annoying, or upsetting the other party by challenging their opening bid. They worry it may cause deadlock. A skilled negotiator can challenge the other side.s terms and conditions without antagonising the other side. That is part of the skill of negotiating. 2. There are no right and wrong answers to this question. If agreement is reached and both parties are satisfied, then a win-win outcome is the result. However, the first step in the planning process is to identify the issues being negotiated. What are they? Issues are likely to include: Overall asking price Valuation of stock Valuation of fixtures and fittings (Kitchen and restaurant) Goodwill Timing of the purchase Payment terms Non-competition clause Your must position is probably where you would agree to pay the asking price, financed by yourself, accepting Sr. Franconi.s valuations. You may be willing to forget the noncompetition clause and seek to close the deal within a month. Your like position could be an offer of 168,000, financed by paying 84,000 up front and the balance over 4 years at 21,000 per year. This would include a non-competition clause whereby Sr. Franconi agrees not to open up a similar restaurant locally within the 4-year period. Agreement could be reached to speed up the timing of the deal, depending on the necessary legal requirements being met. Your intend position, will be somewhere between the must and like positions. It could be, say, an agreed price of 172,000, financed by paying 86,000 up front and the balance over 2 years at 43,000 per year. There may be scope for a shorter non-competition clause of say 2 years and some flexibility on the timing of the deal. 3. Information would need to include:

 How long the business has been up for sale The reasons for Sr. Franconi.s decision to sell what appears to be a profitable business The physical state of the premises, stock and fixtures The costs of any necessary repairs How valuations on stock and fixtures were calculated Any local development plans that could affect future revenue and profit The quality and accuracy of the financial information on the business? How quickly Sr. Franconi needs to complete the sale What interest other potential purchasers have shown Sr. Franconi.s attitude to part funding the purchase 4. Concessions relate to the key issues being negotiated. Likely concessions will include: Price Payment structure Timing of purchase Non-competition clause 5. Your strategy is your decision. If you are looking for Sr. Franconi.s help with financing the business it is probably best to approach the negotiation in a positive, \friendly way. Do your homework prior to your meeting and prepare your list of questions carefully. You may wish to visit, or have the restaurant visited by someone else to get a feel for the quality of service and food and possibly feedback from other customers. Find out more about the location and future development plans. Prepare your opening bid and the arguments you need to back it up. HOW TO STRUCTURE NEGOTIATIONS People who are successful negotiators have a well thought out strategy before going into the negotiation, are well prepared, self confident and structure the negotiation, so that they remain in control of the negotiating process. The recommended structure for negotiations is: ESTABLISH THE ISSUES BEING NEGOTIATED GATHER INFORMATION BUILD A SOLUTION Stage 1. Establish the issues ! Begin by agreeing an agenda for the negotiation. What needs to be discussed and agreed? Who will be involved and what will be their role? What timescales are we working towards? What are the major issues that need to be agreed? ! Many negotiators make the mistake of negotiating too quickly ! Skilled negotiators spend 20% more of their time asking questions and looking for alternatives ! Professional negotiators will want to gain your commitment on issues, such as

price, early on in the negotiation ! You should never commit yourself to anything until you have established everything that is being negotiated ! Negotiators will often bring up an issue at the end of the negotiation, when you are vulnerable and likely to agree to a . one sided . concession, in order to conclude the deal ! Skilled negotiators will often ask the other side for their . shopping list . before beginning the negotiation and refuse to accept any last minute additions to the list ! Issues will include things like price, delivery schedule, payment terms, packaging, quality of product, length of contract etc. ! At this stage issues are kept general and no concessions are made or agreements reached Stage 2. Gather information This is a vital part of the negotiation There are 4 kinds of information 1. Information you have that you are willing to give to the other side 2. Information you have that you are unwilling to give to the other side 3. Information the other side has that they are willing to give you 4. Information the other side has that they are unwilling to give you ! You need to decide, before the negotiation, how much you are willing to share information and what your own information requirements are ! This will set the climate for negotiation and will determine the amount of trust that exists between both parties ! Skilled negotiators are able to ask a range of open, closed and follow up questions and are able to listen effectively ! Skilled negotiators wait until they have all their information requirements, before making concessions Stage 3. Build a solution ! Having gathered information the next stage is to begin to put together a solution ! Usually this will take the form of the selling side putting forward a proposal, or opening bid ! The opening bid should be ambitious, but defensible ! You should always challenge an opening bid and refuse to let an unacceptable bid on the table ! There will then be a process of bargaining and concessions will be traded and movement take place, until, hopefully, agreement is reached ! Concessions should not be given away for free and you should be wary about conceding on issues for which you are not prepared

PERSONAL POWER AND HOW TO INCREASE IT

One of the main differences between negotiators is how confident they feel when negotiating. Typically, the more confident we feel, and the better we are prepared, the more successful will be the outcome of our negotiations. Personal power comes from many sources. To build up and increase our confidence as negotiators we need to step back and analyse the sources of our personal power and compare them with those of the people with whom we are negotiating. Power is not absolute. In most negotiating relationships the power balance moves with time as the negotiation progresses. Here are some typical sources of power: Information power Information power comes from having knowledge that will influence the outcome of the negotiation. Planning and research can increase our information power, as can asking the right questions before we reach the bargaining phase of the negotiation. Reward power Reward power comes from having the ability to reward the other party to the negotiation. It could be the power a buyer has to give place an order for goods and services, or the power a salesperson has to give good service and solve problems Coercive power Coercive power is the power to punish. This is seen most commonly in the buyerseller relationship, but can be a feature of other types of negotiation. Situation power Situation power is the power that comes from being in the right place at the right time. A customer is desperate to place an order and you are the only source ofsupply in the short term. Having an effective network and keeping in touch with what is happening can increase your situation power. Expertise power Expertise power comes from having a particular skill which you can apply and which can influence the outcome of the negotiation. Improving negotiation skills helps you win better deals. Other areas of expertise could also help the outcome of the negotiation. Referent power Referent power comes from being consistent over time. If people see you as having a clear consistent strategy as a negotiator, you will increase your referent power. Having standards that you stick to and being consistent will help to increase your referent power. In the eighties, Margaret Thatcher wasn.t universally popular, but was respected by many for being consistent in her views and behaviour. In the end she failed because her approach was too rigid and she was unable to adapt to changing circumstances. DEVELOPMENT EXERCISE 2. PERSONAL POWER Looking at the sources of power, above, write down where you feel you have strengths in your negotiating relationships and write down your areas of weakness. Having done this, write down ways you can maximise your strengths and minimise

your weaknesses. STRENGTHS

WEAKNESSES

Ways to maximise your strengths and minimise your weaknesses

BEHAVIOURAL ANALYSIS People negotiate differently and behave differently during the negotiation process. We can observe different styles of negotiation and how different types of behaviour can affect the outcome of negotiations. In commercial negotiations, some people negotiate quickly and take risks, others take their time and try to avoid risk. Some buyers are very loyal, others will automatically shop around. Some negotiators can be quite intimidating to the point of being rude; others are quite passive and easily manipulated. This makes selling and negotiating a real challenge. To negotiate with all these different buyer types we need to be able to adapt our behaviour and be flexible in our approach. To begin this process we will look at 2 aspects of buyer behaviour; assertiveness and responsiveness. People who are assertive are confident and know what they want. They are not afraid to put forward opinions and are willing to listen to the opinions of others. They are not afraid of conflict and will be more than happy to argue their case. People who are highly assertive can be seen as being aggressive while people who lack assertiveness are often passive and get taken advantage of. There are times

when it is appropriate to be more or less assertive and we need to recognise when these times are. Responsiveness means the extent to which people are willing to respond to us and our questions. Some people are highly responsive and will give lots of information about themselves, their problems and needs. Others are unwilling or unable to respond in this way and we see these people often as being negative or difficult. We are all different and some of us are naturally assertive and some of us are not. Salespeople tend to be quite responsive, but sometimes we lack assertion. An example of this is during negotiations. When customers put us under pressure to reduce prices or give discounts we find it difficult and uncomfortable and worry about damaging the relationship with the buyer. There are four basic styles of behaviour and these are determined by the way, in which people relate to one another.

Low ANALYTICAL

High DRIVER

High

AMIABLE low

EXPRESSIVE

DRIVER . .The Director. Assertive, but not responsive. .Task., rather than .people. oriented. Decisive and determined. Controlled emotions. Set on efficiency and effectiveness. Likes control, often in a hurry. Firm, stable relationships. Stubborn, tough. Impatient. Inflexible, poor listener. EXPRESSIVE . .The Socialiser. Assertive and responsive. Reactive, impulsive, decisions spontaneous, intuitive.

Placing more importance on relationships than tasks. Emotionally expressive, sometimes dramatic. Flexible agenda; short attention span, easily loved. . AMIABLE . .The Supporter. Not assertive but responsive. Dependent on others. Respectful, willing and agreeable. Emotionally expressive. Everyone.s friend; supportive; soft-hearted. Low risk taker, likes security. Group builder. Over sensitive. Not goal orientated. ANALYTICAL . .The Clinician. Not assertive, not responsive. Precise, orderly and business-like. Rational and co-operative. Self-controlled and serious. Motivated by logic and facts. Not quick to make decisions. Distrusts persuasive people. Like things in writing and detail. Security conscious. Critical, aloof, sceptical. Excellent problem solver. Likes rigid timetables. HOW TO DEAL WITH BEHAVIOUR STYLES Some ideas for dealing with the different types DRIVERS ! Plan to ask questions about and discuss specifics, actions and results. ! Use facts and logic. ! When necessary, disagree with facts rather than opinions. Be assertive. ! Keep it business-like, efficient and to the point. ! Personal guarantees and testimonials are least effective . better to provide options and facts. ! Do not invade personal space. EXPRESSIVES ! Seek opinions in an area you wish to develop to achieve mutual understanding. ! Discussion should be people as well as fact oriented. ! Keep summarising . work out specifics on points of agreement. ! Try short, fast moving experience stories. ! Make sure to pin them down in a friendly way. ! Remember to discuss the future as well as the present. ! Look out for the .impulse buy..

AMIABLES ! Work, jointly, seek common ground. ! Find out about personal interests and family. ! Be patient and avoid going for what looks like an easy pushover. ! Use personal assurance and specific guarantees and avoid options and probabilities. ! Take time to be agreeable. ! Focus discussion on .how.. ! Demonstrate low risk solutions. ! Don.t take advantage of their good nature. ANALYTICALS ! Take action rather than words to demonstrate helpfulness and willingness. ! Stick to specifics . analyticals expect salesmen to overstate. ! Their decisions are based on facts and logic and they avoid risk. ! They can often be very co-operative, but established relationships take time. ! Consider telling them what the product won.t do . they will respect you for it, and they will have spotted the deficiencies anyway. ! Discuss reasons and ask .why?. questions. ! Become less responsive and less assertive yourself. DEVELOPMENT EXERCISE 3. BEHAVIOURAL STYLES 1. Analyse each behavioural style and for each, answer the following questions: ! How would you recognise each behavioural style? ! How would you sell to them? 2. You may refer back to your notes during the exercise NEGOTIATING TACTICS Most successful negotiators recognise that the way people involved in negotiations behave does not always reflect their true feelings or intentions. We are going to look at negotiating tactics that may be used by you or on you. Whether or not you choose to use these tactics, it is vital to understand 3 things: ! these tactics work ! they can be being used on you, and can be used by you ! once they are recognised as tactics, their effects are reduced, or eliminated You may feel that there is no need in your particular case to negotiate or resort to .tactics. in negotiation. This is a matter of personal choice. In general, tactics are used to gain a short-term advantage during the negotiation and are designed to lower your expectations of reaching a successful conclusion. There are many tactics available to negotiators. Here are some you may recognise. Pre-conditioning This can begin before you even get together, or start your negotiations with the other party. Let us take a sales example: You telephone for the appointment and the other side says, aggressively: Don.t bother coming if you are going to tell me about price increases. You.ll be wasting your time and I will be forced to speak to your competitors. When you do arrive you are kept waiting in reception for half an hour, without

being told why. As you walk through the door into the other person.s office they indicate for you to sit down, but don.t look up. Instead, they sit leafing through your competitor.s brochure, in silence, ignoring your efforts to make conversation. You are given an uncomfortable low chair to sit in that happens to be directly in line with the sun, shining into the office. At this stage, how confident do you feel? The monkey on the back Some negotiators have the irritating habit of handing their problems to you so that they become your problems. This is the monkey on their back that they want you to carry around for them. A classic example is the person who says I have only got 10,000 in my budget. This is often used tactically to force a price reduction. Here is what you can do. When one side says I have only 10,000 in budget, look worried. Say something like: That is a problem. As you are no doubt aware, the cost of our systems can be anything up to 20,000 and I really want to help you choose the best system that meets your needs. Does that mean that if one of our systems has everything you are looking for, but costs 20,000, you would rather I didn.t show it to you? The monkey is now on the other person.s back and they have to make a choice. If the objection is genuine and the budget figure is correct, you must try to look for an alternative that meets your needs as well as theirs. If they genuinely can only spend 10,000 that is not a tactic but the truth. In dealing with tactics the first decision you must make is whether it is a tactic or a genuine situation. If it is genuine, you have a problem to solve, rather than a tactic to overcome. The use of higher authority This can be a most effective way to reduce pressure in the negotiation by introducing an unseen third party and can also be effective in bringing the negotiation to a close. I need to have this agreed by my Board of Directors. If they agree to the terms we have discussed, do we have a deal? Be careful to use this device sparingly so that the other side does not begin to feel you have no decision . making authority yourself. One way of countering this tactic is to say before the bargaining begins If this proposal meets your needs, is there any reason you would not give me your decision today? If the other side still wishes to resort to higher authority appeal to their ego by saying Of course, they will go along with your recommendations, won.t they? Will you be recommending this proposal? Nibbling Negotiations can be a tiring process. As the point draws near when an agreement is likely, both sides exhibit a psychological need to reach agreement and get on with something else. You are very vulnerable as the other side reaches for their pen to sign the order form or contract to concede items that don.t significantly affect the final outcome. Oh, by the way, this does include free delivery, doesn.t it? or Oh, by the way, the price of the car does include a full tank of petrol? 30

Nibbles work best when they are small and asked for at the right psychological moment. Like peanuts, eat enough of them and they get fattening. Good negotiators will often keep back certain items on their .want list. to the very last minute when the other party is vulnerable. Watch out for this. The good guy and the bad guy You may have come across this tactic before or else seen it used in films or on television. This is a tactic designed to soften you up in the negotiation. For example, you are negotiating the renewal of your service contract with the Buying Director and his Finance Director. You present your proposal and the Buying Director suddenly gets angry and walks out in disgust muttering to himself about how unfair you have been and how the .relationship. is well and truly over. You pick up your briefcase and are being shown the door when the Finance Director smiles at you sympathetically and says I.m terribly sorry about that. He is under a lot of pressure. I would like to help you renew your contract, but he really will not consider the price you have suggested. Why don.t I go and talk to him for you and see if we can agree a compromise? What is the bottom line on the contract? If you give me your very best price, I will see what I can do. The best way of dealing with this tactic is to recognise the game that is being played and assess exactly what the quality of the relationship is. You may be able to say something like: Come off it, you are using good guy, bad guy. You.re a superb negotiator, but let.s sit down and discuss the proposal realistically ... If you don.t have this kind of relationship, stand firm and insist on dealing with the bad guy, or else bluff yourself and give a figure that is within your acceptable range of alternatives. One way of combining .good guy, bad guy. with .higher authority. is by saying things like Well, I.d love to do a deal with you on that basis, but my manager refuses to let me agree terms of this nature without referring back and he refuses to talk to salespeople. Give me your best price and I will see what I can do ... 31 Body language It is important in negotiation to react verbally and visually when offers are made. You may have seen the more theatrical negotiators hang their heads in despair or accuse you of being unfair and souring a perfectly good relationship when you present your proposal. Human nature is such that we can believe and accept these outbursts against us and our negotiating position becomes weaker as a result. Ensure the next time you are in a negotiation that you react to the other party.s offer. If you show no reaction, they may be tempted to ask for more and more and you will lose the initiative in the negotiation. Also, it is almost certain that their opening offer is higher than the figure for which they are prepared to settle, so it is important that you clearly signal your unwillingness to accept the opening position. If you reach the point below which you will not go, it is important that you show this with your body language. News readers, when they have finished reading the news, have a habit of picking up their script and tidying up their papers. This tells

the world that they have finished their task and are preparing to leave. Similarly, when you make your final offer, it can be very powerful to collect your papers together and indicate with your body that it really is your final offer. Put your pen away, sit back in your chair and remain silent. Look concerned and keep quiet. If your voice says final offer but your body is saying let.s keep talking, the other party will disregard what you say and keep negotiating. The use of silence During the negotiation, you may make a proposal and find the other party remains silent. This can be very difficult to handle and often signals .disapproval. to the inexperienced negotiator. Just as nature abhors a vacuum, so silence induces the need in people to talk. If you have a proposal to make, make it and ask the other side how he, or she feels about it. Having asked the question, sit back and wait for the answer. Whatever you do, don.t change your offer as this could seriously weaken your position. The vice A common technique used by negotiators when presented with a proposal is to say You.ll have to do better than that. This can be a very powerful statement, especially when used with broken record. The most powerful way of dealing with this is to ask them to be more specific. Whatever you do, don.t weaken your negotiating position in response to the vice by giving anything away, too easily. This will only encourage repeat behaviour. 32 The power of legitimacy People believe what they see in writing. We all assume that if a thing is printed or written down, it is non-negotiable. This is what can make price lists so powerful. If you have to present a customer with a price increase or you wish to encourage an early order to beat a price increase, show something in writing such as an office memo from your boss announcing the increase. This will have a far greater impact than just saying your prices are about to go up. When presented with a price tag in a shop, ask to speak to the manager and make him an offer. You could be surprised at the results. The low key approach Don.t appear too enthusiastic during negotiations. Over-enthusiasm during negotiations can encourage skilled negotiators to review their strategy and demand more. If you are in a negotiation and the other side is not responding to your proposal, recognise this could be a tactic and avoid giving concessions just to cheer them up. Salespeople like to be liked and will often give money away in a negotiation, if the other side appears unhappy. For example, if you are buying a car avoid saying to the seller things like: This is exactly what I.m looking for. I really like the alloy wheels. Develop a low-key approach. Say things like: Well, it may not be exactly what I.m looking for but I may be interested if the price is right 33 MOVEMENT AND CONCESSIONS

Making the First Move Asking questions and listening effectively are important skills both in selling and negotiating. The first phase of negotiation involves both parties in agreeing the background to the negotiation and .fishing. for the opening demand or offer. It is often better to present the opening demand or offer in terms of a hypothetical question, as this allows the negotiator to retreat to his initial position if necessary. The opening offer will probably be at or just about the level of the negotiator.s maximum expectation, giving him room to manoeuvre, but not so high that the offer lacks credibility. Do not attempt to .win. at this stage, but hold sufficient back so that you are able to move, if necessary, at a later stage. This is a difficult period in the negotiation process and a professional negotiator will often use silence or other pressure techniques to solicit information from the other party. Further Movement and Concessions During negotiations, it can be in the interest of each side to keep asking questions and raising objections. Many excellent negotiators are low reactors who will move very slowly in negotiation. However, given that the opening position of each party differs, then there has to be movement and concessions if a deal is to be struck. Negotiators will tend, at first, to discuss extra demands, trying to get the other side to agree to these without offering anything in return. They will be reluctant to give information or will defer decisions in order to increase the pressure on the other person. When an offer does come, it will often be on the basis of a quotation based on the minimum quantity at the lowest possible price. In all this, the negotiator is attempting to dominate the interview, pressing for maximum advantage, and trying to force the other person to concede on a major issue. The skilled negotiator will ask the other side for a complete list of all his, or her requirements, and will not concede on a single issue until he knows the nature of the whole package. He will then begin to trade concessions, starting with the smaller, less important aspects of the package. Negotiators should avoid making one-sided concessions which will severely weaken his final position and could affect the overall profitability of the deal. 34 When movement comes, it begins slowly, then can be very rapid as both parties sense a deal being on the cards. Movement does tend to be discontinuous with either party moving and the other holding up the agreement at any one time. This leads to short periods of deadlock, which can be brought to an end in different ways. Some of these are: ! Period of silence. Wait for the other party to speak. ! Agree to a concession. Always trade concessions by saying If I do this, you do that. ! Adjournment to review positions. ! Agree to leave certain issues to one side for later and concentrate on the rest. Identify areas of common agreement. ! The use of the relationship with the other side to break the deadlock.

Signals to be aware of that could mean the other side wishes movement to take place could include: ! Trial movement. One side uses words like What would you say if ...? or uses hypothetical examples ! Summarises the position to date and asks Where do we go from here? ! One side calls for adjournment. ! Appeals to the other side.s better nature. ! Asks for more information. ! Uses .crowding. techniques to force movement, e.g. aggressive behaviour, sets deadlines and time limits, threatens use of competition. The use of concessions is a vital part of building a profitable relationship for both parties in the negotiation. Earlier, we discussed the different .elements. that could constitute the final deal. The use of concessions enables negotiators to build a mutually profitable deal that is not one-sided in the other side.s favour. 35 Bargaining When it comes to bargaining try to get the other side to commit themselves first. For example: SCENARIO 1. Demand: .I.m willing to reach some sort of deal, but I want a 10% discount. Offer: .Okay, I.ll agree a 10% discount, but we.ll have to look at a longer-term agreement. Response: .Well, thanks for the 10% but the 1 year contract we have already agreed will have to stand. SCENARIO 2. Demand: .I.m willing to reach some sort of deal, but I want a 10% discount. Offer: .Okay, we may be able to look at our discount structure, but to do that we.ll need to agree a 2 year contract. Response: .Okay, well 2 years may be possible, but can we go to the full 10%?. In the first scenario an offer of 10% was made, but what was asked for was vague. Responding to a specific demand like this we need to be vague, but positive: Okay, we may be able to look at our discount structure. and our counter demand needs to be specific: but to do that we.ll need to agree a 2 year contract Remember, when you bargain, offer vague, ask specific. 36 DEALING WITH PRICE Overcoming the price objection Price is an issue in most negotiations. We need to deal with the price issue confidently, but with an understanding of the needs of the other side. Here are some notes to help you deal with price: ! Be specific. Say the exact price rather than ....well, it will be about 3,000 .... ! Keep eye contact. It makes you look confident ! Make your tone of voice confident and your body language confident and relaxed ! Use silence. Once you have stated your price, stop talking and wait for the other side to speak. Give them time to think

! Deal with price objections and defend your price, but don.t over argue your case ! Close down your body language ! Focus on price and benefit differences ! Begin the bargaining phase THE CLOSING STAGES The closing stages of any negotiation are vital to the overall success of the final deal. There will come a time when both parties can sense an outcome is possible, and each negotiator needs to be careful not to be too eager to close or else the other party will be tempted to hold back for further concessions. Once a likely outcome is seen, either party may define outstanding issues, compare arguments and objections, review the position to date and agree a deadline for agreement. If one side avoids making these decisions, the other must probe to fine out the reason and deal with it effectively. Negotiators must be careful at this stage to identify tactical delay which deliberately attempts to force further concessions. The best solution to aim for is one where both parties feel they have done well despite having to concede on certain issues. This is often called a win-win solution. Once either side feels they have arrived at the final deal, it is important to signal this to the other party. Body language can say as much about what you are thinking as speech. If you have made your final offer, look as if it is your final offer. Simply gathering up your papers, looking at the other side directly in the eye and saying That is my final offer can do this, and silence can be a powerful tool in convincing them you mean what you say. Be wary of .splitting the difference.. If you offer to split the difference, you have, in effect, given the other side a concession that is one-sided. You have said you are prepared to move without asking for commitment in return. The final consideration is when you have done the deal and both parties are in agreement. Record the details and agree with the other parties involved that your interpretation of events matches theirs. That way there will be no unexpected comeback in the inevitable post-negotiation period when either side reviews how well or badly he has done. Again, this will be minimised if the solution you have arrived at benefits both parties. The closing stages need to be approached with caution. It has been shown that the majority of concessions are given or traded in the last 5% of the time allocated for negotiation. That means, if you negotiate for 1 hour the last 3 minutes are when you are most vulnerable. 38 THE 40 MOST COMMON MISTAKES IN NEGOTIATION 1. Failing to prepare effectively for negotiation. 2. Underestimating your own power. 3. Assuming the other party knows your weaknesses and strengths. 4. Being intimidated by the status of the person with whom you are negotiating. 5. Concentrating on your problems rather than those of the other party. 6. Forgetting the other side has things to gain from agreement as well as

yourself. 7. Making assumptions about what the other side wants. 8. Having low aspirations for yourself. 9. Giving too much credence to time deadlines set by the other side. 10. Assuming the other side is aware of the short and long-term benefits of reaching agreement. 11. Being intimidated by rules set by the other side. 12. Misunderstanding tactics used by the other side. 13. Talking too much. 14. Failing to listen effectively. 15. Believing everything the other side says about you, your service, your competition etc. 16. Being forced into discussing price too early in the negotiation. 17. Revealing your .hand. too early. 18. Aiming too low with your opening bid. 19. Accepting the first offer. 39 20. Giving away concessions for nothing. 21. Conceding an important issues too quickly. 22. Making concessions too easily and raising the other sides. expectations. 23. Feeling guilty about asking for a concession. 24. Making concessions before knowing all the other sides. demands. 25. Failing to make concessions conditional on final agreement being reached. 26. Making concessions of equal size to those on offer. 27. Paying too much attention to .price. rather than .value.. 28. Discussing issues for which you are not prepared. 29. Being inflexible. 30. Losing sight of the overall agreement when deadlock is reached over minor issues. 31. Responding to a high demand with a counter offer instead of challenging the validity of the high demand. 32. Assuming deadlock means agreement is not possible. 33. Feeling deadlock is only unpleasant for you and not the other party. 34. Trying to be liked during the final stages. 35. Bluffing without having a strategy ready should your bluff be called. 36. Taking things personally. 37. Offering to .split the difference.. 38. Being intimidated by This is my final offer! 39. Not preparing .Head Office. for the possibility you may need to walk away. 40. Carrying out a .post-mortem. with the other side. 40 DEVELOPMENT EXERCISE 4. ENVIRONMENTAL PRODUCTS LTD. A role playing exercise for a team meeting To carry out the role-play, break the team into 2 groups and hand each group a copy of one of the role-play briefs.

! Separate the teams and allow 40 minutes preparation time. ! Refer the teams to the preparation checklist, earlier in this book. ! When they have prepared, pair off individual group members and allow them 40 minutes to come to some sort of agreement ! Their objectives are to reach agreement if possible, based on the information in their briefs ! After 40 minutes, bring the whole group back together and review their results ! Carry out a discussion on the styles of negotiations used and the positive and negative effect of their behaviour on the eventual outcome ! Encourage the team to produce an action plan for use in their future negotiations, in order to develop their skills further. 41 ENVIRONMENTAL PRODUCTS LTD. Commercial Director.s Brief ! You are the Commercial Director for Environmental Products Ltd, a waste paper company. You buy waste paper and convert it into recycled paper products, which you sell to major retailers throughout Europe. ! You are aware that the owners of The Yorkshire Gazette, a Leeds based newspaper, are looking for a buyer for their waste newsprint and you know the quantities are likely to be substantial. You estimate they can probably supply you with around 15 to 20 tonnes of waste paper per week. You need this business because you have recently invested heavily in new plant and machinery, and have a good deal of excess capacity. ! You have contracts with several other Newspaper Publishers, who have as a byproduct of their production process, part-rolls of newsprint. This paper is very high quality and much sought after by companies like your own. Your company needs regular supplies of this paper and you are given a performance-related bonus based on the tonnage you are able to buy, so this could be an important contract for you personally, as well as your company. ! The average market price for this kind of product is currently 49 per tonne. You would expect to negotiate a price of between 45 and 54 per tonne, depending on the quality of the product and the regularity of supply. ! Your transport costs are quite high. You have the capability of collecting the waste paper in 5 or 12 tonne loads; however, it costs you 3 per tonne less to collect 12 tonne loads, so you would seek to ensure this is the case. ! Your company has recently had cashflow problems and therefore you must try to negotiate a deal, which gives you not less than 30 days to pay for the waste paper you purchase; 60 days would be even better. Failure to achieve good payment terms could create problems with your Finance Director. ! You need to try and get their commitment to a long term agreement, however, you are concerned that the price of this material will fall over the next few months, so would need some flexibility to renegotiate price, built into any agreement you make. ! You have 40 minutes in which to conclude the negotiation. 42 ENVIRONMENTAL PRODUCTS LTD.

Production Director.s Brief ! You are the Production Director for the Yorkshire Gazette and several other regional newspapers, which are printed, from your production plant in Leeds. You use, typically, up to 5,000 tonnes of newsprint a year. ! Because of your production process, 20% of each roll of paper cannot be used and has to be disposed of. This paper is clean and contains no contamination, so is much sought after by waste paper companies who re-pulp it and convert it into other paper products. ! You use around 100 tonnes of paper per week, leaving you with an average 20 tonnes of waste paper, per week, to dispose of. Storage space is at a premium. You have sufficient space in your warehouse to store no more than 34 tonnes of waste paper at a time, and you would like to have the paper removed once per week. If it is not collected on time and your storage capacity is full, you have to pay 40 per tonne to have the waste paper disposed of. ! You were recently let down by your current contractor and had to dispose of 30 tonnes of paper because they failed to pick up the waste paper on time. Your company had to pay 1,200 to dispose of the excess waste and you lost 1,740 in revenue. Your Managing Director has made it clear he does not want this to happen again. ! With hindsight it would have been better if you had negotiated some sort of penalty clause with your current contractor, but unfortunately you didn.t. Also, you have just been informed that he has gone bankrupt, so you need another contractor and quickly. You currently have 18 tonnes of paper in your warehouse. ! Your current contractor has been paying you 58 per tonne, which is a good, as the price of paper is falling. You are aware that prices of between 49 and 54 per tonne are being paid for paper at the moment, depending on quality and regularity of supply. You would hope not to have to agree to less than 51 per tonne under current market conditions. It would be good if you could agree a fixed price for, say, a year. ! Cashflow in your business is vital, and therefore you need to demand weekly payment for the waste paper. You have been paid weekly in the past, and you would like this to continue, but this may prove difficult. You have an immediate problem in that your only choice of supplier for the foreseeable future is Environmental Products Limited, with whom you are negotiating. ! You have 40 minutes in which to conclude the negotiation. DEVELOPMENT EXERCISE 5. ACTION PLAN Working with your manager, prepare an action plan to cover a 3 month period from completing this manual. Set yourself objectives and review dates.