Your Weekly Walkaway - Why negotiate if you can just accept the deal that's in front of you?
The Weekly Walkway highlights negotiation in its ‘good’, ‘bad’ and sometimes ‘downright ugly’ forms. Newsletter Issue No. 12 (2nd December 2022)
What to expect?
Remember: You are a negotiator!
You are always managing some form of conflict, a difference in opinion or interest.
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Quote of the week
“When the final result is expected to be a compromise, it is often prudent to start from an extreme position.”
― John Maynard Keynes, The Economic Consequences of the Peace
Tactic of the week
The Congratulations
Your counterpart tells you you are a good negotiator. Why would they do this? You might be seeing the ‘congratulations’ tactic. They are maybe trying to increase your feeling of satisfaction…
Why?
They have a great deal and are worried you may feel you could have done better. If they do have a great deal, they have more to give.
If you get congratulated, refrain from basking in their praise and question what more you could still get.
Thought of the Week
Why negotiate if I can just accept the deal that's in front of me?
One question we often get asked is
Why should I negotiate if I can just accept the deal that's in front of me?
There are two scenarios to consider:
Scenario 1
If it is the opening offer from the other party, you absolutely should be negotiating without any hesitancy. They have put an offer on the table, it's an opener, and even they do not expect you to accept it. The proposal is there to test the water and gain your reaction. They have a lot more in the tank to offer you, and they are holding back.
If you accept it, you're going to be kicking yourself because you might be satisfied right there and right then that you have done the deal. However, later on, that day or maybe the day after, you're going to be annoyed and angry with yourself and be asking yourself why didn't you ask for more. Why didn't you push them further? What else were they prepared to give me? And you’ll never know because you didn’t negotiate with them.
Scenario 2
If you are halfway into the negotiation, there's even more at stake as to why you should continue negotiating. If we are to consider negotiation to be a game, a sport, something to be enjoyed when you understand how to play the game, then like any game or any sport, you want your opponent to be good, to be decent, to be returning the serve as it were. They make a proposal to you, and you counter-propose, building on their proposal and in an ideal world, they then counter-propose back to you, building upon your proposal. I would say you almost have an obligation to negotiate and not to accept the offers that have been put on the table until you are someway into the negotiation. By continuing to negotiate rather than accept what is in front of you, you will unlock value for you and your customer/supplier.
Three factors to consider over and above just getting the deal done:
1. Satisfaction.
At the very core of negotiation is the concept that you make the other party work for what it is that they are gaining from you. If they have to work for something, then they will feel they have earned it. If they have earned it, they will value it, and that feeling of value will be far greater than if you just tell them it is of value to them.
The output of all this work and gaining of value is the overarching feeling of satisfaction. Make your customers feel satisfied with the outcome of their negotiation with you, and you have achieved more than just a deal. You have a customer who will negotiate with you repeatedly in the best sense of the word.
2. Educating them that you will always ask for something in return
By negotiating and continuing to negotiate, you slowly educate your customers/suppliers that they need to have something to negotiate with you. Every time they call you up and ask for something, they know you're going to ask for something back in return, and they will start to have a little crib sheet of things that they could you. Lost cost/higher value carrots. Therefore you start to have conversations with your customers that are very much ‘If you can do X, then I can do Y. This becomes your default setting for negotiation and gaining things from each other.
3. You have the right to negotiate
Finally, don't forget that you have the right to negotiate; you have the right to save money or increase the profits in your deals. In fact, your negotiations are the opportunity to achieve these goals.
Many people are put off by the fear of negotiating with the customer or the supplier; they are worried the other party will see the negotiation and negatively react. 'Why are earth are they pushing for more?’ Well, in this day and age, with costs going up the way they are and inflation the way it is, this is ever more the truth;
Everybody has the right to negotiate.
So when you ask yourself, why should I continue negotiating and just accept the deal before me? The answer is:
You owe it to your customers, you owe it to yourself, and you owe it to your business to negotiate.
Their Week
Why Porsche's Red Bull negotiations fell apart
Porsche's F1 dream appears to be over.
By JADEN DIAZ-NDISANG NOV 27, 2022
https://www.si.com/fannation/racing/f1briefings/news/f1-news-why-porsches-red-bull-negotiations-fell-apart-jd22
After months of speculation about Porsche's interest in joining forces with Red Bull, the German brand found itself unable to secure an agreement.
Considering the magnitude of the Porsche name, there was great excitement about the possibility of their introduction to Formula 1 as an engine supplier.
However, this anticipation was met with the harsh reality of Porsche's position in its negotiations with Red Bull - this being that Porsche had little to offer.
On paper, of course, the iconic Porsche brand seems an attractive proposition to any F1 team.
The issue for Porsche was that they were not negotiating with any F1 team - they were approaching the reigning World Champions…
Zoom Out
Two words: “Porsche Hubris.”
It is all about the balance of power. Porsche is used to holding the power cards in their negotiations with suppliers and, indeed, customers. Redbull is the established team to beat in Formula One and holds all the power in this negotiation, so why on earth would they give up 50% of a stake in the team to a new engine provided, regardless of the fact it was Porsche? Wouldn’t It make more sense for Porsche to introduce their engines with Red Bull junior racing team Toro Rosso to prove themselves and their negotiating power? Perhaps Porche’s corporate ego wouldn’t allow it?
Redbull had their B.A.T.N.A (Best alternative to a negotiated agreement) sorted because, frankly, what’s wrong with the engine they already have? And so they could happily walk away from this negotiation!
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