Negotiation Currencies of ExchangePosted on 12/01/2006 in Sales Negotiation Skills
Successful negotiators differentiate themselves from average negotiators in several ways, starting with how they plan and prepare for a negotiation. This newsletter is the third in a three-part series on the planning process followed by the most successful negotiators.
Negotiation Planning Process
Four interrelated steps constitute the planning process followed by successful negotiators:
Step 1: Identifying and ranking their critical needs and issues
Step 2: Asking questions to identify the other side’s critical needs/issues
Step 3: Planning their Settlement Range
Step 4:Creativity on Currencies and Concessions
STAR's October and November newsletters focused on the first three steps of the negotiation planning process. Please visit our website to view previous STAR Tips and Tools on our Blog.
Currencies of Exchange
Exchange, or "give and take," is the essence of negotiation. A key step is to explore for and exchange currencies that will satisfy the needs of both sides. Currencies are tangible or intangible resources that the receiving party values. When assessing the potential value of a currency, keep in mind that currencies tend to have value in proportion to how well they satisfy the needs of the other party.
The best possible outcome is to identify currencies that are perceived to have high value to one party yet are of little or no cost to the other party. In general, the greater the number of currencies, the greater the chance of reaching a win/win agreement. Let’s discuss the relationship between prime currency, alternative currencies, and elegant currencies.
Tips and Guidelines on "Currencies of Exchange”
- Prime Currency, in most business negotiations, is money. Average negotiators focus exclusively or primarily on money, and consequently their negotiations tend to become haggling. Don't be average! Use alternative and elegant currencies instead.
- Alternative Currencies are anything, other than money, that has value to the other side, or to you. The best negotiators are creative, and differentiate themselves by their creativity in introducing currencies other than price. A simple example, "I can't go any lower on price, but I'd be willing to ....extend the warranty, provide 24/7 technical service, serve as a test site for your other clients, etc." You will set yourself apart by offering options and alternatives, so an essential part of the planning process is to brainstorm as many options or alternative currencies as possible.
- The best case is to introduce Elegant Currencies, which are alternative currencies that have high value to the receiving party, and low cost (or no cost) to the giver. During our negotiation workshop, we facilitate a brainstorm discussion to identify the most relevant elegant currencies for your organization or industry.
Giving and Getting Concessions is a Critical Skill
A concession is giving up all or part of a currency. Concessions are part of every negotiation. After all, negotiation is "give and take." The most common mistake made by average negotiators is to concede too much, too soon. Don't be average! Improve your ability to give and get concessions by following these guidelines:
- Always get something in return. This is the most important guideline. Average negotiators tend to make unilateral concessions. Successful negotiators make concessions, but get something in return. One interesting observation: many studies on negotiation have shown that, paradoxically, the other side feels worse if you simply make a concession without getting anything in return. It makes them feel as if they could have asked for more.
- Use elegant currencies whenever possible. Recall that an elegant currency has high value to the giver, and is low cost to the giver. The negotiation is more likely to reach a win/win agreement when you introduce and offer one or more elegant currencies.
- Finally, here is a subtle tip that many experienced negotiators fail to use. Watch your pattern of concessions - the preference is to make a series of smaller and smaller concessions. That way, you create the impression with the other person that you are approaching your limit.