Selling & Negotiation Skills_6

BATNA

In negotiation theory, the best alternative to a negotiated agreement or BATNA is the course of action that will be taken by a party if the current negotiations fail and an agreement cannot be reached.
If the current negotiations are giving you less value than your BATNA, there is no point in proceeding. Prior to the start of negotiations, the parties should have ascertained their own individual BATNAs.
BATNA was developed by negotiation researchers Roger Fisher and Bill Ury of the Harvard Program on Negotiation (PON), in their series of books on Principled Negotiation that started with Getting to YES. Nobel Laureate John Forbes Nash has included such ideas in his early undergraduate research.
For example, if I have a written offer from a dealer to buy my car for $100 dollars, then my BATNA when dealing with other potential purchasers would be $100 since I can get $100 for my car even without reaching an agreement with such alternative purchaser.
A party should generally never accept a worse resolution than its BATNA. Care should be taken, however, to ensure that deals are accurately valued, taking into account all considerations (such as relationship value, time value of money, likelihood that the other party will live up to their side of the bargain, etc.) These other considerations are very difficult to value, since they are often based on uncertain considerations, rather than easily measurable and quantifiable factors.
Examples of other offers that might or might not be better than the BATNA in the example above might be:
An offer of $90 by a close relative (is the goodwill generated worth $10 or more?)
An offer of $125 in 45 days (what are the chances of this future commitment falling through, and would my prior BATNA ($100) still be available if it did?)
An offer from another dealer to offset $150 against the price of a new car (do I want to buy a new car right now, the offered car in particular? Also, is the probably minuscule reduction in monthly payments worth $100 to me today?)
BATNA is seen in negotiation fields as the single most important source of negotiation power. Negotiators don't use their BATNA merely as a safety net, but rather as a point of leverage in negotiations.
Consider the following business example: Company one can choose to buy from companies two, three and four - but companies two, three and four can only sell to company one. Company one can use their powerful BATNA position to leverage a better deal by playing companies two, three and four against each other. This is a common practice among purchasing and procurement managers in the business world.
Whilst your alternative options, and therefore your BATNA might be known to you, very often your BATNA may not be. So time and energy are demanded to figure out which options are really available to you and actionable. Even if your alternative options are known, they need to be real and actionable. A Project on Negotiation Executive Seminar experiment and other experiments have proven that most managers overestimate their BATNA whilst simultaneously investing too little time into researching their real options. This results in poor or faulty decision making from overconfidence and good choices being rejected
What BATNAs Are
BATNA is a term coined by Roger Fisher and William Ury in their 1981 bestseller, Getting to Yes: Negotiating Without Giving In.[1] It stands for "best alternative to a negotiated agreement." BATNAs are critical to negotiation because you cannot make a wise decision about whether to accept a negotiated agreement unless you know what your alternatives are. Your BATNA "is the only standard which can protect you both from accepting terms that are too unfavorable and from rejecting terms it would be in your interest to accept."[2] In the simplest terms, if the proposed agreement is better than your BATNA, then you should accept it. If the agreement is not better than your BATNA, then you should reopen negotiations. If you cannot improve the agreement, then you should at least consider withdrawing from the negotiations and pursuing your alternative (though the costs of doing that must be considered as well).
Having a good BATNA increases your negotiating power. Therefore, it is important to improve your BATNA whenever possible. Good negotiators know when their opponent is desperate for an agreement. When that occurs, they will demand much more, knowing their opponent will have to give in. If the opponent apparently has many options outside of negotiation, however, they are likely to get many more concessions, in an effort to keep them at the negotiating table. Thus making your BATNA as strong as possible before negotiating, and then making that BATNA known to your opponent will strengthen your negotiating position.
"The reason you negotiate is to produce something better than the results you can obtain without negotiating. What are those results? What is that alternative? What is your BATNA -- your Best Alternative To a Negotiated Agreement? That is the standard against which any proposed agreement should be measured." -- Roger Fisher and William Ury
Guy Burgess and Heidi Burgess have adapted the concept of BATNA slightly to emphasize what they call "EATNAs" estimated alternatives to a negotiated agreement" instead of "best alternatives." Even when disputants do not have good options outside of negotiations, they often think they do. (For example, both sides may think that they can prevail in a military struggle, even when one side is clearly weaker, or when the relative strengths are so balanced that the outcome is very uncertain.) Yet, perceptions are all that matter when it comes to deciding whether or not to accept an agreement. If a disputant thinks that he or she has a better option, she will, very often, pursue that option, even if it is not as good as she thinks it is.
BATNA and EATNAs also affect what William Zartman and may others have called "ripeness," the time at which a dispute is ready or "ripe" for settlement.[3] When parties have similar ideas or "congruent images" about what BATNAs exist, then the negotiation is ripe for reaching agreement. Having congruent BATNA images means that both parties have similar views of how a dispute will turn out if they do not agree, but rather pursue their other rights-based or power-based options. In this situation, it is often smarter for them to negotiate an agreement without continuing the disputing process, thus saving the transaction costs. This is what happens when disputing parties who are involved in a lawsuit settle out of court, (which happens in the U.S. about 90 percent of the time). The reason the parties settle is that their lawyers have come to an understanding of the strength of each sides' case and how likely each is to prevail in court. They then can "cut to the chase," and get to the same result much more easily and more quickly through negotiation.
On the other hand, disputants may hold "dissimilar images" about what BATNAs exist, which can lead to a stalemate or even to intractability. For example, both sides may think they can win a dispute if they decide to pursue it in court or through force. If both sides' BATNAs tell them they can pursue the conflict and win, the likely result is a power contest. If one side's BATNA is indeed much better than the other's, the side with the better BATNA is likely to prevail. If the BATNAs are about equal, however, the parties may reach a stalemate. If the conflict is costly enough, eventually the parties may come to realize that their BATNAs were not as good as they thought they were. Then the dispute will again be "ripe" for negotiation.
The allure of the EATNA often leads to last-minute breakdowns in negotiations. Disputants can negotiate for months or even years, finally developing an agreement that they think is acceptable to all. But then at the end, all the parties must take a hard look at the final outcome and decide, "is this better than all of my alternatives?" Only if all the parties say "yes," can the agreement be finalized. If just one party changes his or her mind, the agreement may well break down. Thus, knowing one's own and one's opponent's BATNAs and EATNAs is critical to successful negotiation
Additional insights into BATNA are offered by Beyond Intractability project participants.
Determining Your BATNA
BATNAs are not always readily apparent. Fisher and Ury outline a simple process for determining your BATNA:
1. develop a list of actions you might conceivably take if no agreement is reached;
2. improve some of the more promising ideas and convert them into practical options; and
3. select, tentatively, the one option that seems best.[4]
BATNAs may be determined for any negotiation situation, whether it be a relatively simple task such as finding a job or a complex problem such as a heated environmental conflict or a protracted ethnic conflict.
Fisher and Ury offer a job search as a basic example of how to determine a BATNA. If you do not receive an attractive job offer by the end of the month from Company X, what will you do? Inventing options is the first step to determining your BATNA. Should you take a different job? Look in another city? Go back to school? If the offer you are waiting for is in New York, but you had also considered Denver, then try to turn that other interest into a job offer there, too. With a job offer on the table in Denver, you will be better equipped to assess the New York offer when it is made. Lastly, you must choose your best alternative option in case you do not reach an agreement with the New York company. Which of your realistic options would you really want to pursue if you do not get the job offer in New York?
More complex situations require the consideration of a broader range of factors and possibilities. For example, a community discovers that its water is being polluted by the discharges of a nearby factory. Community leaders first attempt to negotiate a cleanup plan with the company, but the business refuses to voluntarily agree on a plan of action that the community is satisfied with. In such a case, what are the community's options for trying to resolve this situation?
They could possibly sue the business based on stipulations of the Clean Water Act.
They could contact the Environmental Protection Agency and see what sort of authority that agency has over such a situation.
They could lobby the state legislature to develop and implement more stringent regulations on polluting factories.
The community could wage a public education campaign and inform citizens of the problem. Such education could lead voters to support more environmentally minded candidates in the future who would support new laws to correct problems like this one.
In weighing these various alternatives to see which is "best," the community members must consider a variety of factors.
Which is most affordable and feasible?
Which will have the most impact in the shortest amount of time?
If they succeed in closing down the plant, how many people will lose their jobs?
These types of questions must be answered for each alternative before a BATNA can be determined in a complex environmental dispute such as this one.
BATNAs and the Other Side
At the same time you are determining your BATNA, you should also consider the alternatives available to the other side. Sometimes they may be overly optimistic about what their options are. The more you can learn about their options, the better prepared you will be for negotiation. You will be able to develop a more realistic view of what the outcomes may be and what offers are reasonable.
There are also a few things to keep in mind about revealing your BATNA to your adversary. Although Fisher and Ury do not advise secrecy in their discussions of BATNAs, according to McCarthy, "one should not reveal one's BATNA unless it is better than the other side thinks it is."[5] But since you may not know what the other side thinks, you could reveal more than you should. If your BATNA turns out to be worse than the opponent thinks it is, then revealing it will weaken your stance.
BATNAs and the Role of Third Parties
Third parties can help disputants accurately assess their BATNAs through reality testing and costing. In reality testing, the third party helps clarify and ground each disputing party's alternatives to agreement. S/he may do this by asking hard questions about the asserted BATNA: "How could you do that? What would the outcome be? What would the other side do? How do you know?" Or the third party may simply insert new information into the discussion...illustrating that one side's assessment of its BATNA is likely incorrect. Costing is a more general approach to the same process...it is a systematic effort to determine the costs and benefits of all options. In so doing, parties will come to understand all their alternatives. If this is done together and the parties agree on the assessment, this provides a strong basis upon which to come up with a negotiated solution that is better than both sides' alternatives. But if the sides cannot come to such an agreement, then negotiations will break down, and both parties will pursue their BATNA instead of negotiation.
Importance of batna
BATNA is the acronym for Best Alternative To a Negotiated Agreement. If you look at it from the simplest standpoint, your BATNA is the choice you can make if you conclude that negotiating with a particular party is not likely to yield a favorable result. You can walk away from a negotiation if your BATNA is better than the likely outcome of that negotiation.
BATNA, however, covers far more than that. One view says that BATNA is the measure of the balance of power in a negotiation. If other parties need you in order to reach their objectives, your BATNA is strong; your negotiating circumstances are strong. If you want to buy a new car and the same model is for sale at several car dealers, you have a strong BATNA because you can benefit from their competition for your business.
It is crucial to think of BATNA as having two stages in a negotiation. You start off with your 'walking-in' BATNA; the things you can influence or control before the negotiation begins. However, once negotiation starts, the BATNA is a dynamic element, changing as you derive information about the interests of other parties and their constituencies and as you compare the resources each party (including you) has available to bring about and fulfill an agreement.
You can think of BATNA in negotiation like playing a game of cards. Your walking-in BATNA may be the first cards you are dealt. In many card games, your hand may change during the play as new cards are dealt to you (and others). So your BATNA changes as new cards come into your hand. If those new cards are only known to you, you develop a greater understanding of your own apparent strength. If the new cards are dealt to all the players in a way that allows each player to see at least some of the cards in each player's hand, you learn more about the comparative strength of your BATNA. In negotiation, rather than looking at cards, we are assessing information about our own resources, those of other negotiating parties, and the influences on each negotiator from their constituencies.
By looking at BATNA as an ongoing, changing measure of negotiating strength, as a mechanism for deciding whether and/or when to quit, we develop a disciplined, informed approach to our negotiations.

Selling & Negotiation Skills_2

What is Negotiation?
Negotiation is the mean by which people deal with their differences. Whether those differences involve purchase of a new automobile, a labor contract dispute, the terms of sale, a complex alliance between two companies, or a peace accord between warring nations, resolutions are typically sought through negotiations. To negotiate is to seek mutual agreement through dialogue.

A business negotiation may be a formal affair that takes place across the proverbial bargaining table, in which you haggle over price and performance.

It could be much more casual, such as meetings of a manager with his subordinate employees whose collaboration is needed to get a job done.
If you are a supervisor, manager, or executive, you spend probably a good part of your day negotiating with people inside or outside your organization – often without even realizing it.
Given the role of negotiations in our personal and professional lives, it is important to improve our negotiating skills. Even a modest improvement in those skills can yield a sizable payoff, such as larger pay raise, a better deal on a home purchase, or more effective working arrangements in the office.

Types of negotiations
Distributive Negotiation: A negotiation in which the parties compete over the distribution of a fixed sum of value. The key question in a distributed negotiation is “who will claim the most Value”?. In distributive negotiations, a gain by one side is made at the expense of the other.

Distributive Negotiation can also be referred as a Zero-sum, or constant-sum, or the win-lose situation.

A seller’s goal is to negotiate as high as possible, a buyer’s goal is to negotiate as low as possible.


Distributive negotiation is more like a tug of war, each negotiator aims to “pull” the final deal point as close to his or her side’s desired price as possible.

Information plays an important role in Distributive Negotiation. The less the other side knows about your weaknesses and real preferences, and the more it knows about your bargaining strength, the better will be your position.

Key points to remember to achieve success in Distributive negotiation
The first offer can become a strong psychological anchor point, that one sets the bargaining range. The negotiation outcomes often correlate with the first offer. So start at the right place.

Do not disclose any significant information about your circumstances-Including why you want to make a deal, your real Interests or business constraints, your preferences among issues or options, or the point at which you would walk away from the table. It is advantageous, however to let the other side know that you have the good option if this falls through.

Information about the other side can benefit you. Learn as much as possible about the other side’s circumstances and preferences-Including why they want to make a deal, their real Interests and business constraints, and their preferences among issues or options.

Exploit what you learn about the other side in setting your first offer or demand.

Don’t overshoot. If you claim aggressively or greedily, the other side may walk away. You will have lost the opportunity to make a deal.

Integrative Negotiation
Integrative Negotiation: A negotiation in which the parties cooperate to achieve maximum benefits by integrating their interests into an agreement. These deals are about creating values and claiming it.

In Integrative negotiation your task is two fold:

1) to create as much as value for you as well as for the other side.

2) to claim value for your self.

Integrative negotiation could also be termed as win-win situation.

Integrative negotiation could also be termed as collaborative bargaining, for this type of negotiation, the parties should look for creative options, and not focus on which concessions to make.

You have to believe that its in your interest to look for ways to benefit your negotiating counterpart, your goal is not to hurt them, but to help them at little cost to your self and have them help you at little cost to them.

The more creative you are at coming up with things that are good for both of you the happier both of you will be.

Fisher, Ury, and Patton’s popular book, Getting to yes shifted people’s focus from I-Win-you-lose situations to Integrative Negotiations in which each party can claim satisfaction.

They provide approaches both for creating value (focus on Interests, not position, separate people from problems) and for “principled” value claiming (Identify objective standards)

Key points to Remember the Integrative Negotiation
Provide significant information about their circumstances.
Explain why they want to make a deal.
Talk about their real interests or business constraints.
Reveal and explain in general terms their preferences among issues or options.
Consider and Reveal any additional capabilities or resources they have that might meet the other side’s interests and could be added to the deal.
Use what they learn to find creative options that will meet the interests of both the parties to get the greatest extent possible.

The negotiator’s Dilemma
The Negotiator’s Dilemma describes the situation faced by people who enter any type of bargaining situation. They must determine which game to play
1) Aggressively claim the value currently on the table (and possibly come out as a loser) which is the type of distributive negotiation, or

2) Work with the other side to create even better opportunities that can be shared, which is the type of Integrative Negotiation.

Multiple Phases and multiple parties
Many negotiation involves more than two parties, and they sometime take place in phases, each devoted to one of several important issues. Each representing a “Type” of negotiation.
Multiphase Negotiations
Multiphase negotiation and the prospect of future dealings offer important advantages for parties who are trust worthy and who would like to foster cooperative behavior.

Early phases allow the parties to built trust by performing their agreements as promised.

A failure to perform warns other side to be careful and to create enforcement mechanisms for agreements.
Multiparty negotiations
Business and professional Negotiations commonly involve more than two parties, and more than two people.

Coalitions can form among the parties. Coalition makes it possible for weaker parties to gather the strength to push through their preferred proposals, or at least to block those they find acceptable.

There are at least two types of coalitions:

a) A Natural coalition of allies who share a broad range of common Interests. A natural coalition is hard to break

Eg: an environment agency and a citizen's nature conservation group might form a coalition to block development initiatives even without explicit agreement to do so.
A single-issue coalition, in which parties that differ on other issues unite to support or block single issue. E.g.: A labor union and a nature conservation group might form a coalition to block an antiunion developer from building a shopping mall in a wooded area. Each has a very different reasons for joining the blocking coalition, which makes it feasible for the other side to put a wedge between them.

The challenge of multiparty negotiation is managing coalitions, breaking them apart or keeping them together depending on your own interest

Key concepts in Negotiation
Any successful negotiation must have a fundamental framework based on knowing the following:
The alternative to negotiation
The minimum threshold for negotiated deal.
How flexible a party is willing to be, and what trade-offs it is willing to make.

Four concept for essential for negotiation
BATNA (best alternative to a negotiated agreement)
Reservation price
ZOPA (Zone for possible agreement)
Switching to Integrative Negotiation.


BATNA: A concept developed by Roger Fisher and William Ury, it is one’s preferred course of action in the absence of a deal.
Knowing your BATNA means knowing what you will do or what will happen if you fail to reach agreement in the negotiation at hand.
People who enter negotiations without this knowledge put themselves in a bad position, being unclear about their BATNA’s.

Strong and Weak BATNA’s
If your BATNA is strong you can negotiate for more favorable terms, Knowing that you have something better to fall back.

A weak BATNA puts you in a weak bargaining position, whenever a negotiator has a weak BATNA it is difficult to walk away from the proposal.

Take a minute to think about your own best alternative to whatever deal you are presently negotiating. Do you have one? Is it strong or weak? Can you quantify it?

Improving your position
Improve your BATNA
1. Anything that can be done to improve your BATNA will strengthen your position.
2. If you have the strong BATNA and if you are certain that its much stronger than anything the other side can muster, then discretely let the other side know that you’re negotiating from a strong point.

Identify other side’s BATNA
Knowing other sides BATNA is extremely helpful when you can obtain it. You can do this by:
1. Contacting sources within the industry
2. Checking potentially relevant business publications.
3. Reviewing annual reports (or public Filings)
4. Asking questions informally of the negotiator or others within the company.
5. Imagining what our interests, preferences, and your needs, would be if you were in their position.

Weaken other party’s BATNA
Anything that weakens the other side’s alternative to a deal will improve your relative position.
When you have no alternative
No negotiator is in a weak position than one with no alternative to a deal. In this case, the other side can dictate the terms, The BATNA less party is a deal taker not a deal maker.
BATNA is not always simple
Most business negotiations involve many variables, some of which cannot be quantified, this makes for a fuzzy BATNA.

In transactions that involves price and various other features you can make BATNA less fuzzy by assigning a monitory value to the various features and adjusting the BATNA value by that amount.

Price is not always the fulcrum of negotiated deals. Qualitative issues also matters.

Reservation Price
The reservation price (also referred to as a walk-away) is the least favorable point at which one will accept a deal. Your reservation price should be arrived from your BATNA, but it is not usually the same thing.

ZOPA
ZOPA (zone of possible agreement) is the area or range in which a deal that satisfies both parties can take place, it is the set of agreements that potentially satisfy both parties.

Each party’s reservation price determines one end of ZOPA.

The ZOPA itself exist in the overlap between these high and low limits, that is between party’s reservation price.

Value Creation Through Trades
Negotiating parties can improve their positions by trading the values at their disposal.

Value creation through trades occurs in the context of integrated negotiations. It usually takes the form of each party getting something it wants in return for something it values much less.

For a supplier, that greater value might take the form of an extended delivery period. For the customer, having deliveries spread out during the month might be of no great consequence, but for supplier with strained production facilities it may be very important.
For a customer, greater the value at low cost might take the form of three months repair services if needed. For a vendor who has great confidence that its product will need no repairs during that period, free service is nothing of consequence. In providing it to the customer values the repair service highly.
For an employee, the opportunity to work from a home office two days each week may produce great satisfaction while costing the employer nothing.