NET(net), Inc.


Claim More Value by Using Your Stick! by szolman

In negotiations, whether we realize it or not, our cooperation increases the size of the pie for everyone (creates value) and our defection defines our slice of it (claims value).

We often develop imaginative ways to create value through the promise of mutual gains and introduce these ‘carrots’ into our negotiation strategy at the appropriate point as to maximize their impact and benefit.  As it relates to cooperation and the use of carrots, most of us consider ourselves fairly effective with this approach. 

What happens when the other party isn’t cooperating, however?  Are we as effective at bringing them back to the bargaining table?   Are we as capable of putting the deal back on the tracks?

Quite simply, what happens when they say no when we really want them to say yes?  How do we move them to our way of thinking?  That is the art of negotiation.  The art of letting *them* have *your* way.

Former Secretary of State James Baker once famously said (and I’m paraphrasing here), Diplomacy is the art of saying nice doggie long enough until you can find a big rock with which to smash it in the head.  If there is no rock, negotiation is pointless…  How many of us negotiate without a rock?  I can’t tell you the number of times I’ve had a client say we’re just going to tell our supplier we want to buy their stuff, but we need a better price.  I nod politely and ask, “or what”?  Puzzled, they ask, what do you mean “or what”?  I explain, and what if they say no?  What if they say this is the best possible discount they are able to offer you?  What will you do then? 

You see, the “or what” is the rub.  Gee Mr. Supplier, we’d like you to give us a better discount.  If you’re not prepared to answer the “or what”, you are just Oliver Twist asking for more.  Seemingly, we are much less prepared to correct behaviors that are counter-productive to our goals and objectives.  The use of ‘sticks’ in a negotiation is every bit as important as carrots, and in many cases, much more so.  When one party cooperates and the other party defects, the defecting party claims value.  When both parties defect, not only is no value created, no value is claimed either.  It stands to reason then, that you can prevent the defecting party from claiming value by defecting.  Sometimes the best way, perhaps the only way to bring a defecting party back to the bargaining table is to defect yourself.

Easier said than done?  Defection in a negotiation is often viewed with a negative connotation, and is also often confused with the end objective.  Some view it as confrontational or even as threatening.  Regardless of how it’s viewed, a defection strategy is often justified.  Defecting from a negotiation can be extremely effective in situations where a supplier is reaching or over playing their hand.

In one case, NET(net) was working with a client who had two viable solutions for a business need, and the preferred supplier overplayed their preference status to the tune of a 40% premium price over the competition.  The client told the preferred supplier that the current price made it impossible for them to be selected, but the supplier refused to lower their price, believing that the client was bluffing.  Instead of haggling, the client sent a polite thanks but no thanks letter, and went into unilateral negotiations with the alternative supplier with the full intent to get a deal done.  The preferred supplier returned the next business day with a market leading price and improved terms and conditions.  This led us to coin the negotiation axiom, “sometimes the fastest way to a yes is to say no”.  This client didn’t bluff.  They had every intention to do the deal with the alternative supplier and the preferred supplier knew it.  It’s not gaming or brinkmanship; it’s defection.  To be effective, it has to be credible, it has to be timed right, and it has to be sequenced appropriately.  When it’s done right, it works.

While we are mostly inclined to be cooperative and we all work hard to find ways to increase the value and mutual gains for all parties involved in a negotiation, the use of sticks on a quid-pro-quo basis is an extremely effective way to control the bargaining table.  Defections from negotiations are sometimes the best and perhaps the only way to break the cycle of supplier lock-in and the incumbency effect of entitlement rights.  See future blog posts on these and other topics.

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