Archive for the ‘negotiation tactics’ Category

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How Sales Negotiators Can Defend Against The Good Cop / Bad Cop Tactic

Tuesday, March 10th, 2009
Sales Negotiators Need To Have A Defense Against The Good Cop / Bad Cop Tactic

Sales Negotiators Need To Have A Defense Against The Good Cop / Bad Cop Tactic

I like movies. I especially like police movies. I’m guessing that one of the reasons that I like movies with police in them so much is because it’s almost a given that sometime during the movie the police heroes will resort to using the “Good Cop / Bad Cop” negotiating tactic. Every sales negotiator out there should be smiling right about now…

I guess I should take just a moment and make sure that we’re all on the same page here. The Good Cop / Bad Cop tactic is a decoy tactic and here’s how it works. The other side has at least two people. One takes a hard line and makes unreasonable demands on you. He / she also appears to be unyielding – you’ll get no concessions from them. The other person is much nicer. He / she is willing to be your friend, is a little embarrassed about his / her partner’s hard stand, and just wants to work with you to reach a deal.

Umm, the key thing to realize here is that you’re being presented with a show: both of these people are working together. They hoping to get as much out of you as possible. The goal is to get you to believe that you were lucky to get as much as you did considering just how tough the “bad cop” was.

So what’s a sales negotiator to do when you come up against a good cop / bad cop team? There are some simple ways to deal with the bad cop:

  1. Let the bad cop talk and talk. In many cases his / her own side of the table will end up getting fed up with them.
  2. Hit the big red button and complain to your / their higher authority.
  3. Leave! (This always gets their attention)
  4. Turn the tables and in public put the blame on the other side of the table for the failure to make more progress in the negotiations.
  5. Bring your own good cop / bad cop to the table.

Have you ever encountered a good cop / bad cop team when you’ve been negotiating a sale? How bad was the bad cop? How good was the good cop? How did you counter this tactic? Did the tactic work on you? Leave me a comment and let me know what you are thinking.

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Negotiating Self Defense: Countering The Reverse Auction Tactic

Thursday, January 22nd, 2009
Sellers Need To Defend Themselves Against Buyers Who Use The Reverse Auction Negotiating Tactic

Sellers Need To Defend Themselves Against Buyers Who Use The Reverse Auction Negotiating Tactic

I’ve always liked superheros. From my earliest days of reading comic books to my current-day trips to the movie theater to see Spiderman and Iron Man, I just don’t seem to be able to get my fill of superheros.

I believe that superheros, although fictional (probably – however I still have hope), can teach us a lot about how to become better negotiators. One lesson that all superheros seem to learn in superhero school is that in order to be successful in a fight, they always need to have good self defense skills.

In negotiations, sellers need to have a good defense against one negotiating tactic that a buyer can use which is called the “reverse auction”. It works like this: let’s pretend that you wanted to build buy a new car. You visit three different car dealers and get three different offers. As you can imagine, each of these offers will contain a confusing mix of different financing and option packages.

Your next step will be to call a “reverse auction”. You go back to each dealer an tell them that you’ve visited the other two dealers. Each dealer will then proceed to tell you why they are the best and why you should avoid buying from the other dealers. After you’ve had a chance to talk with all three dealers, you now understand the subtleties and the options associated with buying the car that you want.

With all of this new information, you are now able to more clearly refine your specifications because the alternatives have become clear. You can now specify the specific financing and option packages that the dealers can bid on.

You will end up selecting the dealer who can provide the best price while providing the most car for that price. By using a reverse auction, the buyer was able to learn a great deal about buying a specific new car and was able to trade off options that he/she originally did not know existed.

All of this is great if you are a buyer, but what if you are the seller (or the dealer in the case of our example)?

It turns out that although it may initially appear as though the buyer is holding all the cards when they are using the reverse auction tactic, that’s not really true – you still have a great deal of negotiating power.

Your greatest strength comes from the simple fact that the reverse auction takes a great deal of the buyer’s time in order to do correctly. They have to identify sellers, collect bids, evaluate, revisit to collect information, and then revisit again to negotiate a final deal. All this takes time that they may not have to give.

What you need to do is to present yourself as being the seller who best understands that the buyer’s needs are. If you can convince him of your credibility then you’ll be well positioned to close the deal.

Here are a few tips that will help you come out ahead when your buyer decides to us the reverse auction tactic on you:

  1. Be Last: You want to be the last person that the buyer talks with, not the first. This may allow you to short-circuit the reverse auction process.
  2. Use Your Best: When dealing with the buyer, you want to use either your best negotiators or at least make sure that you are well prepared for the discussion (no distractions!).
  3. Give In Slowly: This is always a good tip – do not hurry to make concessions to the buyer.
  4. Sell, Sell, Sell: Make sure that you sell the buyer on your strengths and benefits.
  5. Use Limits: Clearly communicate to the buyer that the scope of your authority is limited in this deal to the bottom-line figure.
  6. Use Experts: The buyer is desperately looking for somebody to believe in so that they can be convinced that you are the right one to buy from. Make sure that you provide the expert that they need to find.
  7. Use Innovation As A Back-Up: Life is unpredictable. Sometimes a reverse auction will start to go badly for you. In these cases, you need to make sure that you have a new and innovative approach that you can whip out if this happens – lifetime free oil changes anyone?
  8. Find The Decision Maker: You can talk with the buyer until you are blue in the face, but it will be all for naught if you haven’t done your homework and made sure that they really are the final decision maker. Check before you invest the time and energy.

Have you ever been in a situation where a buyer used the reverse auction tactic on you? Did you feel as though they had the power in the negotiation or that you had it? Was time a key factor that the buyer was dealing with? Were you able to convince them that you were the expert? Leave me a comment and let me know what you are thinking.

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Negotiation Tactic: The Reverse Auction

Thursday, January 15th, 2009
The Reverse Auction Negotiation Technique Is A Powerful Tool For Buyers

The Reverse Auction Negotiation Technique Is A Powerful Tool For Buyers

In the world of negotiations, there are few tactics as old and as well thought of as the “reverse auction”. This is a powerful negotiating technique that allows a buyer to get the sellers to offer their best pricing for the most amount of work. Not bad if you are a buyer, eh?

Here’s how a reverse action works for you if you are a buyer: let’s pretend that you wanted to build a house. You go out and get three different offers from three different home builders. As you can imagine, when you get the bids they will contain a confusing mix of different options and time frames.

Your next step will be to call a “reverse auction”. You invite all three builders to meet with you. You have them show up early and have them wait in the same room before they meet with you. After they’ve had a chance to sit and glare at each other for a bit, you then call them in to meet with you one by one.

Each builder will then proceed to tell you why they are the best and why you should avoid selecting the other builders. After you’ve had a chance to talk with all three builders, you now understand the subtleties and the risks that are involved in building the house that you want.

With all of this new information, you are now able to more clearly refine your specifications because the alternatives have become clear. You can now provide the builders with an updated proposal that they can bid on.

You will end up selecting the builder who can provide the best price while providing the most house for that price. By using a reverse auction, you were able to learn a great deal about building a house and you were able to trade off options that you originally did not know existed.

Why does a reverse auction work for a seller? Simple, there are four reasons:

  1. Competition Works: when you allow sellers who are competing against each other to “see” each other, it increases the level of competition.
  2. Apply Pressure To Management: the reverse auction technique allows you to move beyond the salesperson that you are dealing with and actually put pressure on the company’s management.
  3. Almost There Syndrome: each of the sellers has already put a lot of time and effort into responding to your original proposal. This means that they all think that with just a little more effort they can close the deal.
  4. It’s Concession Time: you know that sellers are more adverse to losing a deal during negotiations than earlier in a deal. This means that they may make concessions that they normally would not.

This negotiating technique is not without its downside. You need to keep in mind that whichever seller you select is going to feel as though they were put through the ringer. They will probably resent the auction process and will want to make up for being forced to bid a low price.

What this means to you is that any changes that you want to make to the contact after it has been signed will probably end up costing you dearly. Additionally, the seller may end up delivering the product to you late and may even shave some corners on the quality of what gets delivered.

Have you ever had a chance to use a reverse auction during a negotiation? Was it successful? Were you happy with what was delivered in the end? Have you ever had to compete in a reverse auction process? Did you win? How did you feel if you did win? Leave me a comment and let me know what you are thinking.

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Use The “Reverse-Godfather” Approach To Win A Negotiation

Tuesday, December 30th, 2008

Some Negotiations Are Like Visiting The Godfather - Just A Bit Scary

Some Negotiations Are Like Visiting The Godfather - Just A Bit Scary

In the classic movie, The Godfather, Marlin Brando utters the unforgettable phrase “I’ll make him an offer he can’t refuse.” Clearly Brando’s character Don Corleone is operating from a position of negotiating power as the head of an organized crime family. However, is there anything in this phrase that us mere mortals can use?

It turns out that, with a twist, yes there is something here for us negotiators. Specifically, what we can do is make the other side of the table an offer that they MUST refuse. Now why would you ever do such a thing?

This is a powerful negotiating tool and when used correctly it can produce amazing results. When you make an offer to the other side that you know that they just have to refuse, what you really are doing is setting the stage for when you make offers later on. These future offers will look reasonable in comparison to the offer that they refused.

During a negotiation, time is one of your most valuable tools. The more time that you have, the more power that you have. Making an offer that the other side must refuse will buy you more time that will allow you to spend it exploring additional alternatives that may end up being acceptable to both sides.

Interestingly enough, this technique can also be used to either stall the negotiations or even perhaps cause the negotiations to break down and come to a complete halt. You may want to do this if it turns out that moving the negotiations to a different time would be more favorable to you. This may allow you to create a better set of arguments that will result in a better outcome for you in the end.

If we could read the other side’s mind this whole negotiation thing would go much quicker. Since (most of us) can’t do this, making an offer that the other side must refuse will help you to bound the negotiations and get closer to finding out what the other side views as being an acceptable offer.

What’s interesting about making a clearly unacceptable offer is that it will interrupt the flow of the negotiating conversation. When the other side starts to believe that perhaps no agreement may be able to be reached, they are often likely to drop their “negotiating face” and talk candidly with you.

This is your best chance to discover their real motivations – sorta like reading their minds. Once you have this information, then you will be well positioned to make use this knowledge to make a follow-up offer that will be much more acceptable to the other side.

Yes, yes – as with everything in life, there is some risk associated with using this technique. The other side may become so upset that they just up and walk away from the negotiations. However, using this technique carefully and in the correct negotiating situations can open up avenues to reaching a solution that were not previously available. Remember that before you use this technique, you want to make sure that you have left yourself a way to re-enter the negotiation – don’t get shut out!

Have you ever been given an offer that you just had to refuse? Did you refuse it? What happened next? What was the final outcome of negotiations? Leave me a comment and let me know what you are thinking.

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Wachovia, Wells Fargo, and Citigroup – Now You’re Negotiating With The Big Boys

Tuesday, October 14th, 2008
Both Citigroup And Wells Fargo Wanted To Buy Wachovia

Both Citigroup And Wells Fargo Wanted To Buy Wachovia

The financial world sure seems to be intent on driving itself off of a cliff; however, that is no reason that negotiations should not stop. As long as companies are talking, there is learning for us to be doing. This time around the negotiations center on just who gets to buy what remains of the battered Wachovia bank – Wells Fargo or Citigroup? Sounds like it’s time for some negotiating…

I guess just a little bit of background would be appropriate so that we’re all on the same page here. Wachovia is a bank that made the mistake of investing too heavily in securities that were backed by sub-prime mortgages. Once folks started defaulting on those mortgages, Wachovia’s investments went up in smoke and they could no longer get credit to cover their debts. They had to put themselves up for sale or risk going out of business. Interestingly enough, the FDIC steped in and brokered a deal with Citigroup to buy out Wachovia. This allowed Wachovia to keep their doors open. Simple, eh?

Nothing ever stays simple in the world of finance for long. Wells Fargo realized that this was a great way to expand their operations on the cheap and so then they stepped in and offered more money than Citigroup to buy Wachovia. Oh oh – conflict.

Once both offers were on the table, the negotiating started. Needless to say it didn’t go well (I guess both parties don’t read this blog!). In fact, things were going so poorly, that all three sides ended up calling for a two-day timeout. The purpose of this timeout was to give everyone a chance to step back from the negotiation table and take a breather. Another big reason that the timeout was called was because the government was not happy at how the negotiations were going – they were taking too long.

Now just between us, what do you think that the negotiators did during those two days? Sit at home? Huddled with just their team to plot strategy? No way! I’m sure that all three teams reached out behind each other’s backs and had private discussions with the other two teams. This “forced pause” in the negotiations was just a bit unusual, but the experienced negotiator knows to make the best of what he/she has been handed. This two day period was just what the teams needed in order to send up some trial balloons and see what the other side thought of them. They could also do some probing in order to determine if there was any sort of offer that they could make that would effectively make the other side walk away.

In the end, this last step is exactly what happened. Just before the two-day timeout was called, there had been a deal on the table that would have split up Wachovia with Citigroup taking Wachovia’s northeast customers and assets and Wells Fargo taking the rest. However, because of the way that the deal had been structured and because they had two days to think about it, Citigroup eventually decided that they would be taking on too much risk for too little of a benefit if they agreed to this deal. In the end, Citigroup walked away and Wells Fargo will now buy out all of Wachovia.

From a negotiating point-of-view, the two-day timeout made all of the difference. Before the break, Citigroup was willing to go toe-to-toe with Wells Fargo. However, the two day break gave them time to change their mind and in the end, that made all the difference in the world.

Have you ever called for a break in the middle of a negotiation? How long was the break? When both  parties came back to the table, were things different? What did you do to secure your position during the break? Leave me a comment and let me know what you are thinking.

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