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Often in negotiations I find a party (either on my side or the other side) may presents information that is longer in duration, and possibly reflects negatively on an element in the negotiation. Depending on the situation, sometimes I see part of my role to summarize what I have heard and present the commentary in a more succinct and neutral or if possible a positive light. By having alternatives and framing alternatives properly, a negotiation is more likely to come to a more positive negotiation conclusion. It is important to offer manageable offers and to take into account contrasting offers when multiple issues are involved.
If someone were to tell you that they considered your current price and were willing to increase payment by 10% that might sound much better to you than you asking for a 20% increase and being told by the other side they need to decrease your offer to only 10% over the current price. Thinking about what to ask and how to ask it by properly by framing what your interests are is very important.
Studies have found that given to many options can actually lead to negative results. In a study by Sheena Iyer (Columbia) and Mark Lepper (Stanford) they found that giving gourmet grocery shoppers 6 alternatives of jam resulted in 30% more sales, but when shoppers were exposed to 24 alternatives of jam this resulted in only 3% more sales. Not that six is a magic number, but when working with clients in a negotiation, I usually suggest up to six alternatives. The six are:
The other side’s number
Our starting number
Our BATNA (Best Alternative to a Negotiated Agreement)
Three alternatives between our BATNA and our starting number
In each instance I recommend that a computation be made to justify each of the six numbers. Having gone through this exercise helps our side look for alternatives and be able to justify alternatives depending on the response from the other side. Each alternative considers various variables that impact the computation considering our and what we anticipate as the other side’s interests.
Think of how a realtor shows you houses that are outside of your price range. The realtor does this for several reasons. For example:
- To give you a reality check.
- To let you understand what you can buy within your price range, and why you may not be able to obtain everything you want in your price range.
- By showing you run down homes outside your price range and then well maintained homes in your price range those in your price range look even better.
Or with another analogy at a restaurant with bottles of wine selling at $10, $20 and $30 most might move towards the center and buy the $20 bottle of wine. To increase revenues, the restaurant may offer wine at $10, $20, $30 and $40. The central tendency may now lead to more sales of $30 bottles of wine and greater profits.
In a negotiation being able to offer multiple alternatives may make what you see as most appropriate look even better to the other side.
I was recently involved in a negotiation. My client was at 0 and the other party was at 100. The other party offered 65 to settle the issue. My client has several advisors on this issue. My client explored various rationales presented to him. He had computations available at 10, 15, 25, 30 and 35 (his BATNA) and felt the appropriate number was 15 to settle the case. However to help move the case he presented his rationale, based on his expert’s advice stating that he believed the right number was 15 and why. He also indicated that being a reasonable person. he was willing to resolve the case and he would accept 25. Again his BATNA was 35, but this was not revealed to the other side. Given his strong arguments the other side initially thought they would counter his 25 with 35, but given his approach they accepted his 25. Had the other side offered 35 they likely would have split the difference at 30. My client was able to provide a computation to justify 25 that both parties could live with.
By having alternatives prepared ahead of time and limiting the number of alternatives to a half dozen or so this helps in the preparation for the negotiation. By having prepared for the negotiation and presenting a strong rationale for an alternative (15) other than 0 and offering 25 the other side, the other side could see the reasonableness from my client. This encouraged the other side to move from 65 to the desired 25. The key was the analysis by my client and his experts to develop the computations for 10, 15, 25, 30 and 35 and for the client to be able to articulate these rationales to the other party as to why 15 and 25 were indeed very good offers..
Learn from these examples so that you too can properly frame the negotiation. Here is an excellent article that goes beyond this blog post for your consideration.
Michael Gregory, NSA, ASA, CVA, MBA, Qualified Mediator with the Minnesota Supreme Court is an international speaker that helps organizations resolve conflict and negotiate winning solutions, client to IRS, business to business and within businesses. On point resources are available online at www.mikegreg.com and check out the blog. Mike may be contacted directly at email@example.com or at (651) 633-5311.