Warren Buffet said that it is only when the tide goes out that you can see who is naked. In other words, it is easy to be successful when the markets are doing well; it is only when tough financial times arrive that we can easily distinguish 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'
People are more interested by avoiding loss than by attaining the very same gain. Kahneman & Tversky's Prospect Theory work describes how people will become risk seeking when trying to avoid a loss whilst they are likely to be risk averse when seeking rewards. In the way that we negotiate, we can make the other side aware of the items that they stand to lose if they don't agree to our requests and otherwise acquire if they do.
Create Alternatives
In times of uncertainty it is vital to create alternatives so as to strengthen our negotiation position. Creating options are important in the context of negotiation and the strength of options to securing a deal is the primary driver of our negotiation power.
We normally wait until we realise that we are not going to make a deal before we start thinking about alternatives. We risk entering into unfavourable deal and if we have not investigated all the alternatives. Similarly, thinking about the alternatives available to the other side in the negotiation will give you a clear understanding of their relative position of strength in the negotiation. If they have strong alternatives available then they will be more aggressive and if they don't, they will tend to be more accommodating.
Use Reciprocation
Reciprocation is a key principle of powerful influencing skills, because we are prone to return to others the form of behaviour that they exhibit towards us. In times of economic uncertainty it is vital that we act in the interests of the other side if we would like them to act in our best interests. You can use this principle to your benefit by acting first and invoking the rule of reciprocation. One note of caution and make sure that you register the obligation with the other side.
Move from price to value
Remove the focus off price and home in on the Total Cost of Ownership. For all services, products and solutions that we buy or sell, there is always an exchange between value & price. If we only focus on the price, the best that we will do is to barter and it is only when we explore the entire lifecycle of the service, product or solution that we buy or sell, that we start to discover options for negotiation. Before you mention price in negotiation, analyse your counterparty's long term strategic fit, capabilities, switching costs should they wish to change a business partner, financial stability and potential risks or negative consequences that may occur when the other side doesn't manage to reach agreement with you.
Don't forget that the magic in negotiation is found in the quality of your preparation. In times of economic uncertainty it is more important than ever to commit adequate time to planning your negotiations.
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