THE WISH LIST ESTIMATION

Before you can even begin to think about trading, though, you must first determine what both you and your customer want out of the negotiation—what we call a Wish List. Oddly enough, we often find that people have no clear idea of what they’re looking for. This is often true on the buyer’s side, particularly when a buyer is negotiating on behalf of several people, and they haven’t gotten together to figure out what they all want. And needless to say, if you don’t know what you’re looking for, it’s difficult to find it. Of course, buyers who give little thought to what they themselves expect from a negotiation are likely to give even less thought to what their suppliers might expect. As a result, they are often amazed by the demands made by the other side, even though the sellers may have been asking for the same things for years. In fact, it’s exactly the absence of a clear understanding of what’s being negotiated that so often makes negotiations a tactical, emotion-driven mess, with the erratic tactics of one side countering the erratic tactics of the other. In other words, it’s not the personalities of the players that cause problems, but rather the lack of a clear plan driven by a clear goal.

The Wish List Estimation is designed to help you avoid that mess. It does so by enabling you to answer four essential questions for yourself and for your customer:

1. What items do you wish to be part of the final deal?

2. Which of these items are the most important?

3. How should these items be weighted relative to each other?

4. What are the high and low ranges for these items (i.e., how many and how few of each item, how long and how short should each be, etc.)?

Only when you can answer all of these questions with a high degree of accuracy will you be ready to negotiate. Of course, at this point you’ll find it much easier to answer these questions for yourself than for your customer. Your estimation of what the other side wants is likely to be full of blanks right now, again partly because several people are likely to be involved on the other side, and they don’t know themselves! That is not, however, a problem; in fact, it’s to be expected, and later on I show you how to fill in those blanks. In light of that, though, as I did with the Consequences of No Agreement, I’ll begin the Wish List Estimation with your side of the negotiation.

Your Side’s Wish List Estimation

Ultimately, when you’ve concluded the Wish List Estimation for your side, you will know the items that you want included in the final deal, their ranking and weight relative to each other, and the range from highest to lowest for each. Just to give you a better idea of what I’m talking about, here’s an example:

Typical Seller Wish List Estimation
Rank	Item	Weight	Range (High to Low)
1.	Length of contract	40%	3–1 years
2.	Volume	25%	3–1,000 units
3.	Price	15%	$20–$16
4.	Payment terms	10%	30–45 days
5.	Service	10%	8/5–24/7

In conducting the Wish List Estimation, however, you should take into consideration several things. Among the most important are the concerns of other individuals on your side of the negotiation. For that reason, you should talk to people in your legal department, in product management, in pricing, and anyone else in your organization who has a stake in whatever deal you make to find out what they’re looking for. If you don’t know what they want, it’s going to be very difficult to make a deal that will be acceptable to them. In fact, you’re much more likely to be successful in getting them to approve the deal if you get their input early on in the negotiating process than if you go to the customer, secure an agreement, and then come back and ask people in your organization to accept it.

What items do you wish to be part of the final deal?  As noted above, the first question you have to answer is “What items do you wish to be part of the final deal?” As you’ll see, the answers to this question generally speaking don’t vary very much from one negotiation to another. That is, sellers are usually concerned about the same items, as are buyers, regardless of what’s being sold. These typically include volume, price, length of contract, payment terms, and service. There may, however, be others that you would like to have included in this negotiation. You may, for example, be currently negotiating for a customer’s business in Canada but would also like to have its Latin American business. Similarly, you may be trying to sell your product into a different division of your customer’s company or sell your current customer a new product. Even though such items may not be on the table at this point, you should put them on the list anyway, as you might be able to trade something else to get them later on. Remember that the more items you include on the list, the more potential trades you will have.

Which of these items are the most important?  Before you start to list the items that you want to include in the final deal, you should stop for a moment and think about which are the most important. Unlike the answers to the first question—which tend to be the same regardless of the specifics of the deal—the answers to this question may vary. For example, in the previous Typical Seller Wish List Estimation, the seller is most concerned with length of contract and volume, listing them as first and second in importance. If, however, the seller were experiencing a cash flow problem at the time they were negotiating this deal, they might place more importance on payment terms and price and put those at the top of their list.

Ranking the importance of the items to be negotiated is a vital aspect of the Wish List Estimation for several reasons. First, it’s the fact that not every item is equally important to both sides in a negotiation that provides an opportunity to make value-creating trades. Second, customers tend to say that everything is equally important, so doing the ranking enables you to get beyond that to discover what really is important. And, finally, listing the items in their order of importance forces you to recognize what you absolutely must have and what you can do without.

How should these items be weighted relative to each other?  Having determined what items are most to least important to you, the next step is to determine how much weight each should be given. That is, if all the items together add up to 100 percent, what percentage would you assign to each? In the Typical Seller Wish List Estimation above, for example, length of contract, the most important item, was assigned 40 percent, while the other items were assigned smaller amounts. This is an important part of the Wish List Estimation because, again, it’s the difference in importance that you and your customer place on these items that will enable you to make value-creating trades.

What are the high and low ranges for these items (i.e., how many and how few of each item, how long and how short should each be, etc.)?  Finally, to give you as clear as possible an idea of how much you will be willing, or can afford, to trade, it’s essential that you provide a metric range for each of the items on your list. These can be dollars, percentages, days, hours, people, yes/no, or whatever so long as they are measurable. As you can see in the Typical Seller Wish List Estimation, the range for “Volume” is listed as “3–1,000 units.” Similarly, the range for price is listed as “$20–$16.” Attaching a metric to each item is essential because, unless you do, you have no way of measuring whether you are getting what you wanted.

Creating a range is equally important because it provides you with flexibility when you are making trades. With a range of acceptable outcomes, you have the ability to trade down on one item in exchange for something more important. There are several options for trades here, for example: adding new items to the Wish List, taking out items you don’t need and the other side wants out, or taking the low end of the range for one item in exchange for the high end on another.

Now think about your own negotiation and make a Wish List for your side in the space on page 76.

The Other Side’s Wish List Estimation

Having completed the Wish List Estimation for your side, it’s now time to do the same for your customer.

WISH LIST ESTIMATION
Our Side
Rank	Item	Weight	Range (High to Low)
1.	_____________________	_____________	________________
2.	_____________________	_____________	________________
3.	_____________________	_____________	________________
4.	_____________________	_____________	________________
5.	_____________________	_____________	________________
6.	_____________________	_____________	________________
7.	_____________________	_____________	________________
8.	_____________________	_____________	________________

As with the Consequences of No Agreement, it’s considerably easier at this point to figure out what you want than it is to figure out what the people across the table may want. But that doesn’t mean you can’t determine anything about the other side. If you’ve made deals with this customer in the past, you should have a pretty good idea of what they’ll be looking for. Even if you haven’t concluded any deals with them before, it’s likely that you learned a great deal about them during the sales process. And that knowledge is exactly what you should be focusing on at this point in the negotiation. In fact, you probably know pretty much what they want, although you’re probably less sure about ranking, weights, and ranges. If you don’t know the answers to these questions, that’s fine. Put a question mark next to the things you’re not sure about, and you’ll use those question marks to guide you when you get to the validation stage.

As with the Wish List Estimation you did for your own side, when you’ve concluded the estimation for your customer you’ll know the items that he or she wants included in the final deal, their ranking and weight relative to each other, and the range for each from highest to lowest. Again, to give you a better idea of the end result, here’s an example.

Typical Buyer Wish List Estimation
Rank	Item	Weight	Range (High to Low)
1.	Price	40%	$14–$18
2.	Payment terms	20%	60–45 days
3.	Service	20%	24/7 – 12/7
4.	Length of contract	10%	0–2 years
5.	Volume	10%	1–2,000 units

What items do they wish to be part of the final deal?  As I’ve noted, what the buyer wants in a typical deal doesn’t vary a great deal from one negotiation to another. As with the seller, the items that are usually important to a buyer include length of contract, volume, price, payment terms, and service. Again, however, at this point it’s also advantageous to think about other items that aren’t currently included in this negotiation, items that your customer might be interested in, such as purchasing another one of your company’s products or purchasing your product for another division of his or her company. The more items on the table, the more potential there is for trades.

Which of these items are the most important?  The next question you have to answer is how important these items are to your customer. The customer in the Typical Buyer Wish List Estimation above was like many, if not most, buyers most interested in price, while payment terms, service, and other items were of less importance. It’s likely that you’ll have a good idea from the sales process which items are most important to your customer, but again you can put question marks next to items you’re not sure of and come back to them in the validation stage.

How should these items be weighted relative to each other?  As with the Wish List Estimation you did for your own side, the next question you have to answer about your customer is how much weight he or she places on each of the items on the list. Again looking back at the Typical Buyer Wish List Estimation, you can see that the buyer in that situation considered his most important item, price, to represent 40 percent of the total and assigning lesser amounts to payment terms, service, length of contract, and volume. Estimating how important each of these items is to your customer is essential, because it’s the difference in how important they are to you and to him that will enable you to make value-creating trades. Of course, you can’t know precisely how much weight your customer will place on these items—in all likelihood, they don’t know themselves—but you can estimate them at this point. Later on, I show you how you can confirm those estimates.

What are the high and low ranges for these items (i.e., how many and how few of each item, how long and how short should each be, etc.)?  Finally, as you did in your own Wish List Estimation, to determine how much your customer will be willing, or can afford, to trade, you have to provide a metric range for each item on the list. Again, these can be dollars, percentages, days, hours, people, or anything else that can be represented by numbers. In the Typical Buyer Wish List Estimation, for example, the range for price is listed as “$14–$18” and that for length of contract is listed as “0–2 years.” Attaching a metric to each item on your customer’s Wish List is indispensable because you and your customer need a common metric in order to trade. For example, if your customer is measuring by using the total cost of all units purchased and you are measuring by using unit price, you will have to establish a common metric in order to measure the trade. If you can’t measure it, you can’t trade it, and if you can’t trade it, you can’t measure its value!

Now, go back to your own negotiation and make a Wish List for your customer in the space on page 79.

Using the Wish List Estimation

Your initial analysis won’t look as “clean” as the samples above, which represent a complete analysis, one for which any and all questions have been answered. At this point you’ll probably have more blank spaces than filled-in ones, particularly in the analysis of your customer. It is, nevertheless, a good place to start. Bear in mind that this is a process and that the following chapters show you how to tighten up your analysis and fill in all the blanks. In addition, as you become more accustomed to doing the analysis, you’ll find that you can actually fill in more and more of the information even at this stage.

WISH LIST ESTIMATION
The Other Side
Rank	Item	Weight	Range (High to Low)
1.	_____________________	_____________	________________
2.	_____________________	_____________	________________
3.	_____________________	_____________	________________
4.	_____________________	_____________	________________
5.	_____________________	_____________	________________
6.	_____________________	_____________	________________
7.	_____________________	_____________	________________
8.	_____________________	_____________	________________

Even in its incomplete state, an analysis like the one you’ve just performed accomplishes a number of things. Perhaps the most obvious, if not the most important, is that it enables you to become organized. As I mentioned at the beginning of this chapter, if you don’t know what you want, it’s difficult to go after it. Performing this analysis enables you to determine what you and all those in your organization with a stake in the deal want—and in very clear terms.

The analysis also enables you to help the other side organize itself.

I’ve seen many instances in which customers appear to be playing hardball because they keep coming back to ask for more and more. Sometimes, of course, they are playing hardball. But as often as not, the reason they keep coming back is that they haven’t done this kind of analysis themselves, and it’s only when they’ve discussed an almost finalized deal with their boss or some other stakeholder in the company that they discover exactly what that individual expects to get out of the deal. By conducting a Wish List Estimation for yourself as well as for your customers, you can take charge of the negotiation and manage it to help them achieve what they want by trading for items that are important to you. World-class negotiators actually help both themselves and those on the other side to get as much of their Wish List as possible.

Most important, doing this kind of analysis, as you’ve seen, not only enables you to develop a list of items that can be used to trade with your customer but also shows you which of those items present the best opportunities for trades. Look again at the Typical Seller and Typical Buyer Wish List Estimations, concentrating this time on the differences in importance in weighting and in metrics.

Typical Seller Wish List Estimation
Rank	Item	Weight	Range (High to Low)
1.	Length of contract	40%	3–1 years
2.	Volume	25%	3–1,000 units
3.	Price	15%	$20–$16
4.	Payment terms	10%	30–45 days
5.	Service	10%	8/5 – 24/7
Typical Buyer Wish List Estimation
Rank	Item	Weight	Range (High to Low)
1.	Price	40%	$14–$18
2.	Payment terms	20%	60–45 days
3.	Service	20%	24/7 – 12/7
4.	Length of contract	10%	0–2 years
5.	Volume	10%	1–2,000 units

As you can see here, by showing the extent to which you and your customer place differing importance on the various items on the list, the Wish List Estimation provides you with information and enables you to find those value-creating trades to expand the Agreement Zone.

Dealing with Professional Buyers

Many sellers continue to believe that buyers are only interested in low price. But almost any business-to-business sale in which a professional buyer is involved is likely to be a complex one with multiple criteria to be met on both sides, and buyers are certainly aware of that. Let’s start by looking at the kind of CNA Estimation you need to do when dealing with professional buyers. The following list of supplier performance metrics is from “The Supplier Selection and Management Report 9/01” from the National Association of Purchasing Managers (now the Institute of Supply Management).

• Financial stability

• People

• Supplier performance

• Supplier cost reduction ideas

• Supplier development projects

• Delivery

• Quality

• Product cost

• Order accuracy

• Customer support

• Business relations

  These are the things that buyers themselves use for analyzing their Consequences of No Agreement, and, as you can see, not only is price not the primary concern but it’s number eight on the list! Perhaps even more important, the list shows that professional buyers are concerned about the same kind of CNA issues that we’ve been discussing.

  The story is pretty much the same for Wish List items. Most professional supply managers act on behalf of an internal customer and/or user group, and it’s these individuals who help the supply manager determine the Wish List items that will be negotiated in the deal. For example, someone sourcing technology for a production facility is likely to receive input from the vice president of manufacturing, technicians on the manufacturing floor, and the vice president of technology, as well as from people in other affected departments, such as accounting. And those individuals are likely to want the buyer to concern himself or herself with price, length of contract, volume of purchase, which add-ons or value additions to purchase, warranty issues, and support issues—again, the same kind of Wish List items we’ve been talking about.

  The point here is that professional buyers know even better what they want than do nonprofessionals and are subject to even more pressure because they’re acting on behalf of others. Given that, it only makes sense that in negotiating a deal you should do all you can to help a supply manager achieve as many of his or her internal customer objectives as possible, while at the same time trading for items of importance to you.