Market Crunch: Using Your Negotiation Skills To Guarantee Your Survival

One can sense a great deal of insecurity in the world financial markets wherever you go - for the first time - irrespective of geographical location.

Warren Buffet said that it is only when the tide goes out that you can see who is wearing no swimsuit. In other words, it is easy to be thriving when the markets are booming; it is only in tough times that we can easily distinguish quality & commitment.

How can you use your negotiation skills, negotiation training or purchasing training to sidestep losses in the current economic situation?

Use 'Loss Framing'

We are more motivated by avoiding loss than by achieving the very same gain. Kahneman & Tversky's Prospect Theory work describes how individuals will become risk seeking when trying to avoid a loss whilst they are likely to be risk averse when pursuing rewards. In the way that we negotiate, we can make the other side aware of the unique items that they stand to lose if they don't move in our direction and otherwise acquire if they do.

Create Alternatives

In times of difficulty it is very important to create alternatives so as to strengthen our negotiation position. The ability to create options is important in the context of negotiation and the strength of alternatives to concluding a deal is the key driver of our negotiation power.

Usually we wait until we know that we are not going to make a deal before we begin to think about alternatives. We risk entering into unfavourable transaction and if we have not explored all the alternatives. Similarly, thinking about the options available to your counterparty in the negotiation will give you a clear understanding of their relative position of strength in the negotiation. If they have strong options available then they will be more aggressive and if they don't, they will tend to be more accommodating.

Use Reciprocation

Reciprocation is one of the key principles of powerful persuasion skills, because we are prone to return to others the sort of behaviour that they display towards us. In times of economic uncertainty it is vital that we perform in the interests of the other side if we would like them to act in ours. Use this principle to your benefit by acting first and using the principle of reciprocation. One note of caution and make sure that you record the obligation with the other side.

Move from price to value

It is key to take the focus off price and concentrate on the Total Cost of Ownership. For all services, products and solutions that we buy or sell, there is always a trade off between value & price. If we only engage on the price, the best that we will do is to barter and it is only when we study the entire lifecycle of the service, product or solution that we buy or sell, that we begin to uncover options for negotiation. Before you even state price in negotiation, examine your counterparty's long term strategic fit, capabilities, switching costs should they wish to change a business partner, financial steadiness and potential risks or negative consequences that may occur when your counterparty doesn't reach an agreement with you.

Don't forget that the magic in negotiation is found in the quality of your planning. In times of economic uncertainty it is vital to commit adequate time to preparing for your negotiations.

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