Episode 23 – Negotiation Techniques: Deal Design
The art of deal designing could be very helpful to make things go your way during a negotiation.
In this part of the Ultimate list of Negotiation Techniques, I teach you exactly that. We go over several clever negotiation techniques that you can use to design a deal in your favor.
Each technique is explained in depth with scenario examples.
Hi, my dear negotiators. In this episode, we continue the ultimate list of negotiation techniques. Today's focus will be on how to design a good deal. As mentioned in the last episode, I'm really eager to hear what questions you have, so ask me directly. Go to procurement zen.com/ask and record a question. Want to know how to uncover a bluff? Go to procurement zen.com/ask need last minute tips on negotiation preparation? Go to procurement .com/ask. Or do you want to educate yourself and want to know what the best negotiation book is? You guessed it? It's easy as pie. Go to procurement zen.com/ask and click the green start recording button. I will collect your questions and publish them once per month with my responses all for free. As always, you will find the show notes for this episode email@example.com slash zero two three that's zero 23 for episode 23 and now let's dive deep into today's episode about deal design negotiation techniques. Let's go.
Are you looking to up your negotiation and procurement skills? You're in the right place. Welcome to procurement Zen with your host Phil Kowalski.
Negotiation techniques, deal design.
The first item in this category of deal design is demand inflation. Have you ever purchased a car and wondered why the final price was so much higher? Then the offer price from the advertisement, you have been fallen victim to demand inflation. Usually the other party or maybe you gets the foot in the door with a very attractive offer and then bit by bit expands the piece of the cake. Navigation System? Sure. Take the platinum 1100 at $930 extra, Need winter tires? We have an amazing set for this model for another 420 this is also known as the nibble, which I have also listed in my list of negotiation tactics.
Upgrades is next. Related to demand inflation come upgrades. This is not an extension but rather the ask for a more expensive product, but for the same price as the original. Madam, is it possible to get upgraded to a higher class for this flight? In business environments, this could be a better service for the price of the standard. The idea behind asking for an upgrade is that you do not get the upgrade you asked for but something still sticks.
Next is unrealistic counter offers. Approaching your negotiation this way is quite aggressive. You make a high, but fake offer. Fake here means unrealistic. Something that is impossible for the other side to take once the other side states that this is not what they want because it's over the top, you step back and try to undermine the other party's reputation. Mr. Jones, if you can deliver 10 resources instead of only one, I would be willing to pay this increased rate. Sorry, but you know we're not that big says the supplier, so I do not have 10 resources to deliver. Quite honestly. Mr. Jones, are you serious? I accept your high rate and you said no. Okay, then let's revisit what we have here and later in the same negotiation: You were not able to fulfill my earlier request, Mr. Jones. Then let's rather talk about a price more into the direction that I have mentioned.
Procurement Zen with your host, Phil Kowalski will be right back.
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Back to the show ProcurementZen with your host Phil Kowalski.
Next comes a classic: bundling. Usually bundling is a negotiation tactic applied by suppliers, but buying parties could use it as well. Bundle worthless "options" with your requests and use it to improve your position. We would also be willing to invite you to our supplier day, Mr. Jones. If you see a chance to accept all liability clauses.
Next is: partial acceptance. If you hear responses starting with "yes, but" you get partial acceptance, it's quite easy: you accept the part of the offer you like, but bundle it with another maybe unrelated option from your list. Supplier says, I want 35 47 per item and the testimonial you promised, okay, yes, agreed, but only with the 120 day payment term.
Next is: counter offer. Why do we mention counter offers as separate negotiation tactic? Aren't they the core of any negotiation? Yes and no and I use them in conjunction with my "giveaway list".
What does that mean? Let's see. An example, I cannot pay the 35 47 per item. You ask for $32 13 cents is my absolute max, but I will introduce you to my colleagues for an opportunity to make more business and this negotiation tactic - the introduction - is an element on my giveaway list. By the way, you should always have such a giveaway list available . See my episodes on the negotiation playbook to get more into negotiation preparation.
Next is: counter offer rejection. It Gets even more granular. There are some situations in which you reject any kind of counter offer. You do not respond to the offer on the table, which in itself could motivate the other side to improve their offer. This again is an aggressive negotiation tactic. It's important that you stick to it and keep silent while rejecting.
Next: Differentiate. Sometimes the other party tries to generalize you as a commodity, but you are not using differentiating tactics. You need to emphasize that you are special. It seems like you are comparing us to your other customers, but we are not. We have locations in 52 countries. Our competitors on average located in eight countries. You see dealing with us will offer you a much bigger leverage. By the way, this tactic is also used by vendors very often. Everyone is special and unique. If you encounter this tactic by a supplier, dive deep to uncover any "fake uniqueness".
Next is the call for quality. Humans tend to be fair, full stop. More often than not, this is true. Hence, the call for equality says, I feel I'm not treated fair. This is my example you've told us that you consider us an a client of yours. I assume that a clients, we've some special treatment from your company, but all I can see are standard terms and standard conditions. I would at least ask for a similar treatment than other A clients.
Next, is dramatizing. Using the dramatizing negotiation tactic can be very effective. Dramatize a certain point that in itself is not important for you. Later on in the negotiation, you have something to drop and you should drop it in exchange for reasonable concession. If others apply this upon you, make sure to focus on the topics that are important to you. Why should I care? Is the question to ask here. And because I want them to like me is not the correct answer.
Next, it's removing pains. This is yet another sales strategy turned into a negotiation tactic for buyers. Try to find out what the pain point of the other party is. Is it revenue recognition? Is it sales quota? Is it something completely different? Try to solve that problem with your conditions and you will have a rock solid deal as this is a negotiation approach that is rarely seen by buyers you can ensure that you get max attention. It's a pattern interrupt and that's always a good thing.
Next is the dead end. As with so many other negotiation tactics, this approach slows down speed. For example, when you need more time. Sorry Jim, but what you're asking for is impossible. We never have paid more than $19 47 per item. Such a deal is not doable. This negotiation tactic is also good for sparking the other side's ideas and come up with new proposals. Some that are more in your favor.
Next is waste of time. If you feel that you're getting nowhere, use this negotiation tactic. Sorry, but this does not lead anywhere anymore. We have reached a dead end and if I don't hear anything new in the next five minutes, I have to go. You can use this in two ways as an indicator if you can expect any movement from the other side or not.
If within these five minutes, nothing large happens, you are at a dead end and better pack your things and go,. No deal is better than a bad deal. And it can serve to place extra requests, especially if all parties invested a lot of time already. Nobody wants to see this time wasted, so putting a little bit of pressure in can help to close the final gap.
Next is accurate statements. Using accurate statements is more a mindset rather than a real negotiation tactic. Being precise helps. Compare these two sentences. First, we need to improve payment terms. Second, we need to improve payment terms to 90 days net based on invoice receipt. Accuracy goes a long way here. Research shows that it's more acceptable to the other side and it's precise.
Next is giving responsibility. By giving responsibility, you spark the dream mode of your counterpart. Jim, tell me your title so that I can put it in the contract papers. You can spot this very often. Private negotiations, the realtor who says this would be the perfect home for you. I can see your kids already play on the lawn. It is especially effective when the resistance is low in general or if other deal making tactics and this list have lowered it already.
Next are pro and con lists. Ah, the good old listing approach. This is a very effective negotiation tactic but it needs some preparation. It works as easy as these three steps. First you collect some topics you want to from the other side before a negotiation. Brainstorm pros and cons for your request. Make sure that you have much more pros for your request. In the negotiation, write them down. Do it on whiteboard flip chart or similar. This is much more effective if the other side can take part in its creation or at least experience it so you don't want to create the list upfront in any kind of presentation software for example.
Of course. You could also turn this around listing more cons for an unfavorable request from the other side. For example, it works the same way to make their way much less attractive. Next is to switch options. I think that others use the switch options negotiation tactic more often on you as that you use it yourself and it works like this. Supplier says, we don't have this standard maintenance for enterprise level customers like you anymore, but let me introduce our premium support to you. It's making options unavailable to the other side. To fight back on this, you need to focus on your request. Label it like Chris Voss suggested like this. It seems the options have switched. There is no denial, no accusation, no I in that statement. Again, the statement is "it seems the options have switched". If you want to use it, you could applied like this. We know you wanted to limit the liability to $100,000 per year, right, but this is no option for us. Hence we have rewritten the clause to a $500,000 liability.
Next, it's late exchange. The late exchange negotiation tactic works like this. So for the $10,000 we have agreed upon, we can give you 8,000 in cash. We pay the remaining 2,000 in five equal parts after service is started. As the name indicates, you use it late in the process, usually at a time when resistance is already low and it should come as a surprise to the other side, a classical pattern interrupt. And making this extra deal request you could follow two strategies. First, ask for something you want in the example you really want to split the payments or second, ask for a tradable item, stick to it as long as you can and then trade it for something else you want.
Next and last in this list of deal design negotiation techniques are process changes. Warning using this negotiation tactic will frustrate the other side because in the middle of the negotiation you changed the negotiation process. For example, if you run an ebbing for an online tool as discussed before, all bidders have placed their prices and all of a sudden you introduce a second round. Yet this is a good indicator how much the other side wants to do business with you, but you should only use this for commoditized materials. If you have a monopolist and they step away because of frustration, you are in trouble. And this concludes part number five of our ultimate list on negotiation tactics in this category deal design. This was our negotiation techniques episode about deal design. Find the show notes over procurementzen.com slash zero two three for episode 23 we have two more episodes to come with very interesting categories, so make sure to subscribe, to educate yourself, make better deals, and ultimately advance in your career. Until next week, yours truly Phil bye.
Thanks so much for listening to this episode of ProcurementZen with Phil Kowalski. For more great content and to stay up to date, visit procurementzen.com. If you enjoyed today's episode, please review and subscribe and we'll catch you next time on ProcurementZen.
- I explain how demand inflation could be a useful tactic in designing a deal in your favor
- How asking for upgrades even if you don’t get the upgrade could be a good idea?
- Making an unrealistic counter offer as an extremely powerful tool in deal design
- How to use bundling to improve your position in a negotiation?
- What is a giveaway list? how to incorporate them while making counter offers?
- How no response to any counter offer could motivate the other side to improve their offer
- Make yourself standout using differentiating tactics
- Use human nature of being fair to your advantage
- Dramatizing a certain point: an extremely powerful tool
- What to do when you need more time for a negotiation?
- Indicate the interest of the other side using waste of time tactics
- Use process change tactic to indicate how much the other side wants to do business with you
- You can use tactics used by suppliers as a buyer
- Aggressive tactics pose high risk but could give high rewards, use them cautiously
- Research shows to use precise statements are more acceptable to the other side
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