Building a Framework for Negotiation

What affects a negotiation — - A sense of urgency - A friendly relationship between the two sides - In an unclear negotiation, neither side knows what a good deal looks like - Gender differences - Differences in status and rank

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1. Preparing for the negotiation

BATNA: the best alternative

Best Alternative to a Negotiated Agreement — the best alternative is what else is possible if the negotiation falls through. Your BATNA doesn't depend on what counts as fair, what you've paid for something, or what you think you can get out of the negotiation; it is simply your fallback if there's "no deal".

Consider every alternative and pick the best one — that is your BATNA.

Identify your "no deal" alternative in advance.

Always have a BATNA.

RV: Reservation Value

This is the worst deal you're willing to accept. A seller's RV should be above their BATNA; for a buyer it's the reverse.

This is my "walk-away price".

Guard against information asymmetry

Listen — pay very close attention to listening. Negotiation is about exchanging information; sometimes the other side is happy to share, sometimes not.

Ask directly. The more direct you are, the harder it is for the other side to hide; direct questions are hard not to answer. Pay close attention when they don't answer, and have a plan ready for when they don't.

Adapt. Adjust on the fly as information is revealed, changing your plan and expectations. If… then…

Form expectations about your negotiating partner's BATNA and RV

Calculate the ZOPA, the Zone of Possible Agreement

The zone of possible agreement is the set of deals every party is willing to accept, lying between the buyer's and the seller's RVs.

2. Improving: strategies for managing information

The more information you have, the stronger your position, so you need a clear strategy for managing it.

Listen — the more you talk, the harder it is to listen.

Ask questions: reasonable questions, sharp questions, questions nobody can dodge.

Respond to new information and put forward new proposals.

What if the other side asks something I don't want to answer?

Prepare in advance: what questions might they ask?

How will I respond?

Thinking through your answers ahead of time helps you hold your "moral bottom line" and not lie.

3. Improving: setting the frame of the negotiation

4. Set a goal: without a goal, it's too easy to give in as soon as the price beats your BATNA.

5. Frame the negotiation's boundaries for others The famous story from Roosevelt's campaign

The anchoring effect: when we name a price, the other side will adjust, but not stray too far from the anchor. Anchoring information is extremely powerful — for example, fair market value or the first offer you hear. Statistics show that the higher the opening offer, the higher the final price.

3. When should you make the first offer?

When you have an information advantage. If the other side is a big industry player, you may not have that advantage, and it's best to wait a little.

If prices are moving against me, make the first offer; if they're moving in my favour, wait.

4. Justify your offer — give a reason

5. Consider goodwill — after all, many negotiations aren't one-off deals.

6. Reacting to the first offer If you're surprised by the first offer and find it too aggressive or too generous… you can ask further questions, or haggle hard and watch their reaction to probe their real price. 5. Two different negotiation strategies Value-claiming strategy Guard information strictly Make firm demands

Value-creating strategy Communicate clearly Be creative and flexible

Whichever kind of negotiator you are, that's the strategy to choose.

Being well prepared makes it easier to become who you want to be.