VALIDATING THE WISH LIST ESTIMATION


Interestingly, getting information from your customers to validate your Wish List Estimation is considerably easier than doing so for your CNA Estimation, and for one simple reason. While your customer is, understandably, not likely to be too comfortable talking about what might happen to them if they don’t make a deal with you—assuming, of course, that they’ve even given it any thought—they’re usually more— even if not completely—comfortable in saying, “These are the items that I want in the final deal.” As one of our purchasing clients says, “How will you get what you want if you don’t ask for it!”

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Preparing Questions for Your Customer

As noted in the last chapter, validating your customer’s Wish List Estimation essentially means getting good answers to three questions:

  1. Are these the right items?

  2. What is most to least important?

  3. How important are the top few items?

Again, however, there are numerous ways to solicit information, and the more obvious you are, the less likely it is that you’ll get the information you’re looking for. Even if customers are more likely to answer questions about their Wish List, it’s still advantageous for you to soften the questions a bit. What you have to do, then, is look at the list of items your customer is most likely to be concerned about, rephrase the three questions above, and, as necessary, ask follow-up questions. Here’s the list again, as well as some examples of different ways to ask the questions:

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

Typical buyer Wish List Estimation validation questions.  To answer the question: “Are these the right items?”

  • “I understand that in the upcoming negotiation you would like to talk about price, volume, length of contract, service, and volume. Is that right?”

  • “Is there anything missing?”

  • “Is there anything here that shouldn’t be?”

To answer the question: “What is most to least important?”

  • “OK, now that I have a clearer list, can you help me to organize it in terms of items most to least important to you?”

  • “I understand that they’re all important, but if you had to rank them highest to lowest on your priority list, how would you do that?”

To answer the question: “How important are the top few items?”

  • “Now that I see that price, length of contract, and service are the most important issues to you, how important is each?

  • “If you had to weight the top three, how heavily would each be weighted? I mean, would price be 50 percent and the others 25 percent each, or would it be some other combination?”

Generally speaking, getting the answers to these questions enables you to determine how accurate your initial estimates were and, if necessary, adjust those estimates to reflect what you’ve learned. More specifically, the first question makes it possible for you to make sure that you and your customer are on the same page in terms of what items the customer is primarily concerned with. The second and third questions get those on the other side to recognize that some items are more important than others and, accordingly, which are critical and which might be traded away. Remember, trades come from the two sides valuing several items differently.

Here’s an example of how this works in practice. I was consulting with a client in Chicago—a consumer advertising agency—that was negotiating the purchase of an equity share in some Internet-based human resource technology from a professor and his wife from the Midwest. The professor and his wife had developed the technology themselves and at the outset told the agency that they were interested in discussing only one item: how much the agency was willing to pay them for a share of the technology. That they were acting as if the technology were a commodity was bad enough. But to make matters worse, like most of us who have developed something ourselves, the professor and his wife were overvaluing the technology by a considerable amount.

Sitting down in a planning meeting with the agency, we began by reviewing our goal to “create joint value and divide it given concerns for fairness in the ongoing relationship.” We then conducted CNA and Wish List Estimations for both ourselves and for the professor and his wife. It was very clear, though, that before we could even get to the issues of ranking, weighting, and the rest, the first thing we had to do was to get them to think beyond merely price. To do that, based on our estimations, we prepared a long list of questions for them.

But we also had to find a way to ask the professor and his wife our questions, so we suggested getting together for what we called a “prenegotiation” meeting to work through some fact-finding and joint investigation. We—the ad agency and Think!—clearly defined this as an official part of validating the blueprint, which is something very few people do. It worked to our advantage, though, because it allowed the other side to feel freer and more conversational. So even though they insisted, “There’s not much to talk about—either you pay our price or you don’t,” they agreed to the chat.

When we did get together, these were some of the questions we asked:

  • “Other than price, what else will be negotiated at the final settlement?”

  • “How about equity?”

  • “How will we handle cash flow? How will it be distributed?”

  • “What about subsequent releases of technology?”

  • “How will we handle consulting projects that come out of this technology?”

  • “How will we handle training projects that come out of this technology?”

  • “Who will carry the insurance?”

  • “Whose server will the technology sit on? Who will handle service?”

By asking these questions and others like it, we were able to start the professor and his wife thinking about items other than price. At the same time, we asked some well-thought-out questions about their consequences of not reaching agreement with us, and we released some strategic information about our consequences of not reaching agreement with them. By the time the meeting was over, we had gone a long way toward broadening the negotiation and redistributing power. In fact, we all felt good about this prenegotiation meeting, which, as it turned out, was actually the most strategic aspect of the negotiation—as it typically is—and benefited both sides.

As with learning any new process, there are of course pitfalls that you should try to avoid. One of the most common pitfalls in preparing Wish List validation questions is overcomplicating them. If the questions are too complicated, you get overcomplicated answers that yield little useful data. Alternatively, if you ask questions that are too broad, you wind up with too much general data. Ideally, you should ask simple, but specific, questions, as these are the ones that are most likely to elicit the data you really need. Remember that ultimately what you want to know is what they want, what is most to least important to them, and how important the top few items are.

Validating the Other Side’s Wish List Estimation

Now that you have a better idea of how to validate the Wish List Estimation, it’s time for you to apply the process by preparing some questions for your own negotiation. Go back to the Wish List Estimation in Chapter 5, in which you estimated those items you thought the other side would want included in the final deal.

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Now, taking into account the information and advice you received from talking to your colleagues, review the estimates carefully, and honestly challenge yourself on what could still be improved. Then, use the outline below to develop a list of questions to validate your estimation of the other side’s Wish List.

WISH LIST ESTIMATION

The Other Side

Rank

Item

Weight

Range (High to Low)

1.

_____________________

_____________

________________

2.

_____________________

_____________

________________

3.

_____________________

_____________

________________

4.

_____________________

_____________

________________

5.

_____________________

_____________

________________

6.

_____________________

_____________

________________

7.

_____________________

_____________

________________

8.

_____________________

_____________

________________

Wish List Validation questions—the other side.

To answer the question: “Are these the right items?”

  • “I understand that in the upcoming negotiation you would like to talk about __________. __________, __________, __________, __________, and __________. Is that right?”

  • “Is there anything missing”

  • “Is there anything here that shouldn’t be?”

To answer the question: “What is most to least important?”

  • “OK, now that I have a clearer list, can you help me to organize the items in terms of most to least important to you?”

  • “I understand that they’re all important, but if you had to rank them highest to lowest on your priority list, how would you do that?”

To answer the question: “How important are the top few items?”

  • “Now that I see that __________, __________, and ________ are the most important issues to you, how important is each?

  • “If you had to weight the top three, how heavily would each be weighted? I mean, would price be 50 percent and the others 25 percent each, or would it be some other combination?”

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Dealing with Professional Buyers

You’ll recall that in earlier discussions of professional buyers I pointed out that such buyers normally work on behalf of internal customers and that those customers are satisfied not by sourcing the cheapest product available but by having all their needs met. So when you’re preparing questions to validate your Consequences of No Agreement, you should take these stakeholders into account and think about what their needs are and how this purchase will affect them. Ask the buyer about their CNA—not only about your competitor’s price but about value-added support, upgrades, global access, and other issues.

Similarly, when you’re preparing questions to validate your Wish List Estimations, you should think not only about price but about all the various items on the customer’s Wish List. As already noted, it’s best if you can get access to the buyer’s internal customers. But—particularly if you haven’t been able to—showing that you’ve taken the time to analyze their CNA and Wish Lists by embedding information into your validation questions enables you to subtly anchor professional buyers to a more thorough CNA analysis as well as to all the elements of their Wish List.

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Strategic Negotiation. A Breakthrough Four-Step Process for Effective Business Negotiation
Strategic Negotiation: A Breakthrough Four-Step Process for Effective Business Negotiation
ISBN: 0793183049
EAN: 2147483647
Year: 2003
Pages: 74

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