Tune Up Your Negotiation Skills Tactics and Strategies

1. Tune Up Your Negotiation SkillsTactics and Strategies Andrew L. Urich, J.D. Associate Professor Spears School of Business Oklahoma State University 405.744.8619 aurich@okstate.edu www.andrewurich.com

2. Making a Connection The World’s Greatest Car Salesman • We like, trust, and believe people who like us.

3. Making a Connection Overcoming Fear Nikita Khrushchev My Sales Philosophy “When you are skinning your customers, you should leave some skin on, to grow again so you can skin them again.”

4. Making a Connection Showing Respect & Building Trust • “My child choked on a chicken bone” • Can you “get off on the right foot?” • What telemarketers don’t want us to know • If they are defensive you may be offensive. • Winston Churchill’s thoughts on the subject

5. Showing Respect

6. Showing Respect

7. Showing Respect

8. Making a Connection Small Software Co. vs. Massive Industrial Powerhouse, Inc. “This product is provided subject to an evaluation condition. In the event that the software is deemed unacceptable by the buyer for any reason, at the sole discretion of the buyer, the buyer shall incur no obligation to make the final payment as described in the above payment schedule.”

9. Making a Connection Concept Summary: • ABC….Always Be Charming. • Show respect and build trust. • “They” are not trying to skin you. • The relationship is the most important thing.

10. Program Introduction & Goals What We Need To Know 1. What is the essence of negotiation? (Not what everyone seems to think) 2. Which negotiation variable has the highest correlation with “winning” negotiations? 3. How do I plan for a negotiation? 4. How do I know when to be satisfied with my negotiation outcome? 5. How do costs and values impact negotiations?

11. Program Introduction & Goals What We Need To Know 6. Can I better manage the concessions I make during a negotiation? 7. How can I adopt a win/win focus without becoming Pollyanna? 8. Appreciate the vital importance of “no.” 9. How does bargaining power impact negotiations? 10. How can I increase my bargaining power?

12. Program Introduction & Goals Leverage Through Negotiation Sales 100 Status Quo Cost of Goods 90 Profit 10

13. Program Introduction & Goals Leverage Through Negotiation Sales 105 Concerted Efforts on Negotiation Cost of Goods 85 Profit 20

14. Program Introduction & Goals What Does it Mean to “Win?” The Bargaining Area $200,000 $215,000 $235,000 $250,000 Buyer Seller Bargaining Area

15. Exercise Negotiation of a Movie Contract On a scale of 1 to 10 please note your satisfaction level when you finish 1 = dissatisfied 10 = extremely happy 1 dissatisfied 5 10 extremely happy

16. Change Your “Mental Model” of Negotiation Have you ever heard anyone say this? “Negotiation is an inefficient waste of time. Can’t we quit messing around and get to the bottom line?” • Saturn • Winner’s curse • The box or the curtain

17. Change Your “Mental Model” of Negotiation Change Your “Mental Model” • Completely new focus: It's the experience, not the terms, that will provide satisfaction to the other party. • Don't look at negotiation as a necessary evil. A) It's an opportunity to discover their bottom line. B) And an opportunity to demonstrate the FAIRNESS of your position.

18. Change Your “Mental Model” of Negotiation Which provides more satisfaction? A) a bad deal mistakenly considered to be a good deal. B) a good deal mistakenly considered to be a bad deal.

19. What matters most? Which of these factors are most highly correlated with successful negotiation outcomes? • Bargaining power • Aspiration level • Skill of the negotiator

20. High Aspirations Research on Aspiration Level • Persons with higher aspiration levels win higher awards. • High aspirants beat low aspirants without regard to skill or power. • Skilled negotiators without power lowered their aspirations.

21. High Aspirations Power of High Aspirations • Reciprocity and Anchoring • Boy Scout circus • Giant teddy bear • Barbeque restaurant • Analysis that does not improve decision making tends to be a waste • Wife’s shoes • Selling up harder than selling down • Pick your clothes dryer • You will not exceed your aspiration. • First offer makes a huge impact. • Who should make the first offer?

22. High Aspirations Factors Restraining High Aspirations • Fear of offending • Time constraints • Fear of failure: A culture averse to failure stifles exploration, experimentation and discovery • It’s more work

23. Analyze Your Level of Satisfaction How Do You Know When to be Satisfied? • Are your criteria arbitrary? • Remember, you never get to see the bargaining area. • Our satisfaction level is based on….. • Our expectation • How we were treated during the negotiation • Are you impacted by how far you moved from their starting point? • Are you impacted by their pain?

24. Analyze Your Level of Satisfaction How Do You Know When to be Satisfied? • Inaccurate measurement can create a false sense of confidence. • Koch examples of Measures & Benchmarking • Energy consumption should be measured against some ideal – not a budget. • Southwest Airlines studied NASCAR pit crews to speed up turnarounds – not other airlines.

25. Exercise …..No Talking Please! • $10,000 has been designated for you to share with another department head. • Person A writes a number on a piece of paper and passes it to Person B. • Person B writes “Yes” or “No” and passes it back.

26. Mental Model & Satisfaction Level Concept Summary: • Raise your aspirations. • It’s not the terms that make them happy– it’s the negotiation experience. • Avoid the winner’s curse. • When they see the fairness they say “yes.” • Being satisfied is a trap

27. Adopt a Value Focus All Values Are Subjective • Values differ between all customers/clients. • Nothing has inherent value. • PEOPLE value things. • Value will vary from person to person.

28. Adopt a Value Focus Bases of Subjective Value • Specific situation • Time • Uses for the product • Personal preference • Alternatives

29. Adopt a Value Focus Bargaining Area Redefined by MBM® PRICE COST VALUE

30. The Power of “No” “NO” Induces Trauma • Develop a positive “NO.” • Being ready, willing, and able to say “no” gives you power. • Knowing when to say “no” gives you power. • Setting Priorities: Risk-adjusted present value of opportunities relative to resources consumed (such as scarce talent or capital)

31. The Power of “No” Rigorously Explore All Alternatives • Harvard’s Methodology: Have you identified your BATNA (Best Alternative to Negotiated agreement)? • Have you fully explored and analyzed your BATNA? • Confidence soars • Identify alternatives so you will feel able to say “no.”

32. The Power of “No” A lot of problems in the world are caused by a person who said “yes” when they should have said “no.” • Southwest Airlines: The King of “No!” • No food • No choice of planes • No assigned seats • No extra baggage • No first class • No shared reservation system • No expensive equipment • Why we need a Sales Manager • Failure to say “no” leads to disaster

33. The Power of “No” Purchasing Manager’s Favorite Trick • How to say “no” when “they” tell you your competitor will say “yes.” ● “They” are testing you ● Your competitor is over promising ● You will lose focus ● With a good relationship, “they” will get over it

34. The Power of “No” Concept Summary • “No” is the key to success. • Practice your “no!” • Slow down • Hmmmm…. • Focus on the relationship not the terms. • Manage emotions • Show respect • Manage their response to your “no.” • Fear • Guilt • They are testing you. • Remember Southwest Airlines. • You don’t want to win them all.

35. Win/win Make the Pie BiggerInstead of Arguing About How to Slice It • Win/win is an attitude. (Fixed Pie Fallacy) • 62% buy into the fixed pie fallacy. • Pay close attention to their concerns. • Increase their “value.” Make it easier for them to buy from you. • Reduce their opportunity cost (because if they deal with you they aren’t dealing with someone else) • Use creativity, diligence and enthusiasm to identify new options – Stephen Covey’s “Third Alternative.”

36. Win/Win Listen First • Are you projecting?--Listen for something unexpected. • “They” know everything you want to know. • Listen for opportunities to make the pie bigger? • Identify their problems before you sell a solution. • Take notes. • Listen twice as much as speaking. • Become an active listener.

37. Win/win Concept Summary: • Win/win is an attitude. • Listen!! • The goal is to increase the value for both sides of the transaction. • Cooperation is better than competition.

38. Evaluating and Building Bargaining Power Understanding Bargaining Power • Don’t underestimate your power. • Don’t dwell on your weaknesses. • The illusion of power • The power of competition • The power of legitimacy

39. Landlord - Tenant Exercise

40. Conclusion and Summary The Ten Most Important Things to Remember • The most important thing—make a connection It’s not about terms—they want a fair deal. 2. The other most important thing— high aspirations. 3. Your satisfaction criteria are arbitrary? 4. You are trading values—cost is irrelevant. 5. Listen first.

41. Conclusion and Summary The Ten Most Important Things to Remember 6. All concessions send messages whether you’re aware of it or not. 7. You always have more power than you think you do. 20% of the power is missing. 8. No!!!!!! 9. Who’s skinning who? 10. Look for Win/Win opportunities.

42. Thank You I appreciate your time and attention. Please keep in touch. Andrew Urich 405.744.8619 www.andrewurich.com aurich@okstate.edu

43. References • Ailes, Roger. You Are the Message. New York. Doubleday, 1988. • Bazerman, Max H. Smart Money Decisions, Wiley & Sons, 1999 • Cialdini, Robert B. Influence: The Psychology of Persuasion, Harper Collins, 2007 • Cohen, Herb. You Can Negotiate Anything. Secaucus, N.J.: Lyle Stuart, 1980 • Covey, Stephen R. The 7 Habits of Highly Effective People. New York: Simon & Schuster, 1989. • Dayton, Doug. Selling Microsoft. Holbrook, MA., Adams Media Corporation, 1997. • Fisher, Roger and William Ury. Getting to Yes. New York: Viking Penguin, Inc., 1981. • Forsyth, Patrick. The Negotiator's Pocketbook. London: Alresford Press Ltd., 1993. • Johnson, Spencer. The One Minute Sales Person. William Morrow, N.Y, 1984. • Karrass, Chester L. Give and Take. New York: Harper Collins, 1993. • Karrass, Chester L. The Negotiating Game. New York: Harper Collins, 1992. • Koch, Charles G., The Science of Success, Wiley & Sons, 2007. • Kozicki, Stephen. The Creative Negotiator. Pyrmont, Australia: Gower, 1993. • Lewicki, Roy J., et.al. Negotiation. 2nd Edition., Irwin, 1994. • Lewicki, Roy J., et. Al. Essential of Negotiation, 4th Ed. McGraw Hill, 2007 • Nierenberg, Gerald 1. The Art of Negotiating. New York: Barnes & Noble, 1995. • Paul, Richard. Critical Thinking. Santa Rosa, CA: Foundation for Critical Thinking, 1993. • Schoonmaker, Alan N. Negotiate to Win: Gaining the Psychological Edge. Englewood Cliffs, N.J.: Prentice Hall, 1989.