ADVANCED TRADING SKILLS

You now have all the tools you need to conduct successful, value-creating negotiations in the majority of situations you’re likely to encounter. There are, however, a few additional tools that it would be advantageous to have for those rare occasions when you may need them. These tools—or advanced skills—will cover the roughly one out of five situations that you haven’t already prepared for.

Postsettlement Settlements

You may, on occasion, find yourself in a situation in which you’ve closed a particularly tough deal but, even though you have reached agreement, still feel that both sides may have left some money on the table, and that it could hurt the relationship. In that kind of situation you might want to suggest to your customer what we call a postsettlement settlement. This is an opportunity to come to the table one last time in an effort to make the deal better. If you choose to do so, though, you should go into the meeting with the understanding that if both sides don’t agree to a new deal, the old one stands. This usually works quite well and often results in a better deal for both sides. Part of the reason for this, I suspect, is that there’s something liberating about going back to the table with an already existing deal as both sides’ CNA, which makes it possible to craft an even better one.

“Parachute Items”—The Fourth MEO

In anticipation of a difficult negotiation or as the result of one, you might want to devise a fourth Multiple Equal Offer. Rather than offer it up front, though, you hold it back to use as a parachute if all else seems to be failing and it looks as if you’re not going to be able to make a deal. If you choose this option, you should make sure that the fourth MEO includes some creative trades, particularly items that aren’t officially on the table, as out-of-the-box trades are often the ones that prompt people to think creatively on both sides. In fact, it’s frequently MEOs like these that allow you to break through impasses, as was the case with the insurance company and the home improvement retailer I mentioned earlier. Doing this can be particularly satisfying, because when it works it’s like having a really great deal emerge from the ashes!

Contingent Contracts, or “Bets”

It’s not uncommon for both sides to come to the table with lots of biased data that they use to confirm their vision of the future. Depending on the situation, this may not be a problem. But negotiating over something that may or may not happen in the future can—and sometimes does—lead to impasse. We’ve found that when you’re negotiating over something like this—such as the price or availability of a new product, volume, or service—a good way of dealing with it, rather than simply arguing, is to “bet” on your version of the outcome. That is, you suggest to those on the other side that you include something in the agreement that says “If this occurs, I pay X, and if that occurs, you pay Y.” These contingent contracts, or “bets,” aren’t only great tools for overcoming impasse but can also be used if the other side is bluffing, because if they are, they won’t be willing to “put their money where their mouth is.”

Define/Correct Impasse

There are essentially only two kinds of impasses. The first, the emotional impasse, occurs when a deal is on the table that’s better than both sides’ CNAs, but they still don’t come to an agreement. Situations like this are usually the result of one or both sides misdiagnosing their CNA. The best way to deal with this is to go back and evaluate the CNAs again, validate them again, diplomatically educate the other side about them, and re-present the offer.

The second kind of impasse is the structural impasse, which occurs when the deal on the table isn’t as good as the CNA of one or both sides, and as a result they can’t come to agreement. Let’s say, for example, that a deal is on the table, but the two sides are $2,000 apart based on their CNAs—the buyer can get it cheaper (for $4,000), and the seller can get a higher price ($6,000). There are two options in this situation. The first is to simply walk away from the deal, and sometimes that makes sense; after all, not all deals should happen. In fact, many times walking away from a deal below market yield makes more money for you in the long run, because you don’t reset your price in the market. (A steel manufacturer customer of ours says that 5 tons of discounted steel can result in 500 tons of discounted steel.) If, however, it’s a deal that should happen, the best way to correct this kind of structural impasse is to attempt to find other items to trade into the deal that create an additional $2,000 of value that can be used to close the Gap. This might include something like incremental business in another division or the client’s picking up a new product line.

Underlying Interest: Risk/Reward

Sometimes, no matter what kind of trade you suggest during this stage of the negotiation, you still feel as though you’re running into a brick wall. Your customer is insisting on something that you just can’t give in on, and there doesn’t seem to be any way out. An excellent way, however, that lets you avoid impasse in a situation like this does exist. That way is for you to ask a series of questions designed to help you understand why your customer is being so insistent: “Help me understand why that’s important.” “How does that have an impact on your personal success?” “How does it have an impact on your department’s success?” “Why is that so high on your priority list?” In asking such questions, you will in all likelihood discover a substantial difference between what your customer is asking for and why he or she is asking for it.

Let’s look at length of contract as an example. Normally, you would want a contract to run as long as possible in order to lower your company’s risk and ensure longer-term cash flow. Your customer, on the other hand, will probably want to keep the length as short as possible to have the flexibility of taking advantage of new and emerging suppliers. In a situation like this, you can argue two versus three years until you’re both blue in the face, but it’s only by understanding the underlying interests involved that you’ll be able to find a way to address them and reach agreement. In fact, once you’ve found out why someone wants something, you can usually find several different ways to fill that need. For example, in situations like this one I’ve often seen deals that include a right-of-first-refusal clause that speaks to the underlying interests of those on both sides of the table. In fact, underlying interest is one of the key aspects of trading in negotiations, particularly in legal and personal negotiation and to a lesser degree in business-to-business negotiation. It is, however, a very useful skill and one that’s taught in most sales courses and basic negotiation texts.

Closing: Hesitation

Finally, you’ve probably run into situations in which a deal is virtually done, but for some reason your customer is hesitating about finalizing it. Assuming that you’ve attained your initial goal to “create joint value and divide it given concerns for fairness in the ongoing relationship,” the chances are that your customer’s hesitation is based on a lack of understanding of their CNA, a misdiagnosis of it, or a feeling that a better offer is still out there. In this kind of situation, the best way to get that slow closer to move is to go back to your CNA Gap analysis and remind your customer of how what you have to offer is better than what he or she can get from going to one of your competitors, doing it themselves, or doing nothing at all.

Dealing with Professional Buyers

In developing and presenting MEOs for a professional buyer, it’s extremely important to use what you’ve learned during the sales process and the validation step to address the concerns of the buyer’s internal customers. This means that you have to make sure that your MEOs exploit the Gap between what you have to offer and what the buyer and his or her customers consider their Consequences of No Agreement. It also means that you must embed trades into your offers not only from the buyer’s Wish List but also from those of his or her customers.

Ideally, you will have the opportunity to present your MEOs to both the buyer and his or her internal customers. If you’re not able to, however, you must be sure to point out to the buyer those trades that you included to satisfy the concerns of others in his or her organization. In the end, not only will both of you have a deal that goes beyond “win-win,” you’ll also have established the kind of mutually beneficial relationship that can continue indefinitely into the future.