Industry Breakdown: Using Your Negotiation Skills To Safeguard Your Stability

One can see a great deal of insecurity in the world financial markets wherever you go - for the first time - regardless of where you find yourself in the world.

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 economy is doing well; it is only in tough times that we can easily discern quality & commitment.

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

Use 'Loss Framing'

We are more motivated by evading loss than by attaining 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 more likely to be risk averse when seeking 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 gain if they do.

Create Alternatives

In times of uncertainty it is very important to create alternatives so as to support our negotiation position. Creating options are important in the context of negotiation and the strength of alternatives to concluding a transaction is the primary driver of our negotiation power.

Usually we wait until we know that we are not going to be able to do a transaction before we start thinking about alternatives. We risk entering into unfavourable transaction and if we have not explored all the options. Similarly, thinking about the alternatives 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 good alternatives 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 most likely to return to others the form of behaviour that they demonstrate towards us. In times of economic uncertainty it is key that we act in the interests of the other side if we would like them to act in ours. Use this principle to your advantage by acting first and invoking the principle of reciprocation. One note of caution and ensure that you register 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 any service, product or solution that we buy or sell, there is always an exchange between value & price. If we only engage on the price, the best that we will do is to barter and it is only once we start to investigate the entire lifecycle of the service, product or solution that we buy or sell, that we begin to uncover opportunities for negotiation. Before you state price in negotiation, examine your counterparty's long term strategic fit, expertise, switching costs should they wish to change a business partner, financial stability and potential risks or negative consequences that may occur when your counterparty doesn't reach an agreement with you.

Remember that the magic in negotiation is found in the quality of your preparation. In times of economic uncertainty it is key to commit enough time to planning your negotiations.

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