To achieve a win-win outcome, even zero-sum bargaining may be productive.
There is a common piece of advice given to negotiators: avoid competitive discussions. The parties involved should instead work to expand the available resources and create win-win situations. But, in practice, talks may oftentimes be expected to be competitive. There seems to be no wiggle space for compromises at times. And when we won’t be seeing our counterparts again, it may be a relief on both ends, as neither of us will have to worry about our reputations being damaged.
For instance, when buying a used automobile from an individual, the price is the most important factor (once you find the model you want). There isn’t much room to grow in this pie, and if you live in a big enough city, you probably won’t see this particular vendor again anyhow. It all boils down to a competitive discussion over pricing.
What if, though, the win-win framework could still be used to enhance competitive negotiations? Under that framework, negotiators are often responsible for juggling three distinct but related processes, or what may be conceptualized as three separate but concurrent negotiations:
- Substance negotiation (price, product, service, contract duration, etc.)
- Communication negotiation (the way we convey interest)
- Relationship negotiation (general satisfaction of both parties)
Enhancing Conferencing and Negotiation
Often, when we hear the term “competitive negotiations,” we picture serious discussions about issues like pricing. Yet things can be different. Indeed, we may try to incorporate the communication and connection components to aim for a win-win in competitive negotiating as well.
New evidence reveals that there exists an optimal way for a buyer to structure an offer that maximizes both parties’ happiness. An experiment was conducted in which condo owners were given a target price of S$520,000 and informed that a buyer was available, at the very least, to pay S$380,000. This gave them a floor price, or best alternative to a negotiated bargain (best alternative to a negotiated agreement).
In the meanwhile, potential purchasers have been told to offer S$450,000. Some potential buyers approached the sellers and inquired about how much higher or lower their offer was than the lowest they would go. To rephrase, they based their offer on the sellers’ asking price minus the deposit. An alternative group inquired as to the sellers’ reaction to their offer in light of their desired price. The remaining bidders submitted their offer without providing any context (no framing).
Despite having the lowest average selling price, sellers that used the reserve price framing reported the highest levels of satisfaction. To make the offer more appealing, we asked the sellers to weigh it against their (lower) reservation price.
The anchoring bias, which refers to people’s inclination to focus on a certain reference point (typically price) that is offered early in a negotiation, is the foundation on which the notion of framing your offers depends. After an anchor has been effectively implemented, research suggests that it is difficult for counterparties to make adjustments away from it.
In the experiment just described, the buyers made the initial bid, thus setting the price. Yet, what about instances where it makes no sense to set the price first? This may occur if you are unprepared or if your opponent has extensive expertise.
Let’s say you’re a businessman visiting Namibia for the first time. She needs a taxi right now because she will be late to her meeting. The airport’s information desk is closed, and her phone is dead. She should wait for the taxi driver to make the initial offer while haggling over the fee. A study using this scenario found that inexperienced bargainers gave an average of US$25 for a taxi journey, while those who waited for the driver to make an offer paid just US$5.
Your offer’s language may nevertheless be persuasive even if you’re bidding second. Several studies have shown that changing the wording of an offer to “I will give you X for your Y” rather than “Give me your Y for my X” will make the resource you’re offering more appealing to the other party. If you use this “technique,” your rival may be more willing to make compromises. Hence, if you can’t go first and your odds of introducing an anchor are poor, you should stress what you can give rather than what you can take.
Enhancing the Art of Relationship Bargaining
Your counterparty’s satisfaction and continued commitment to the agreement are two of the most important metrics you may use in maintaining the relationship. If you want to keep your partners happy, think long and hard about accepting their offer, even if you really want to. According to studies, negotiators report higher levels of satisfaction when their offers are accepted after a period of waiting, even if the later have a superior economic conclusion. Accepting an offer (too) hastily might sow the seeds of doubt in your counterparty’s mind, leading them to ponder if they could have gotten a better price if they had waited.
A widespread fallacy in negotiations is the belief that a “nice guy/gal” discount is automatic if you only be kind to your rival. Nonetheless, in competitive negotiations, stern and uncompromising negotiators tend to do better economically without hurting the relationship.
Even if you hold the upper hand in the negotiation, it is still important to treat your rival with respect by letting them have some input into the final outcome. According to studies on procedural justice, Americans value due process highly. More specifically, negotiators who believe their negotiation process was fair report higher levels of satisfaction with the outcomes of their negotiations, even if those conclusions were unfavorable to them.
Enhancing Conferencing Over Substance
Keep in mind that counterparties with high power (e.g. a powerful BATNA) are tougher to persuade when employing framing methods. You should research the market and your counterparty and, if required, do data analytics to make sure your total bargaining efforts are worthwhile. If your research shows that your best offer is lower than their BATNA, then you should definitely focus your efforts elsewhere in the negotiating process in the hopes that they would abandon their BATNA.
Negotiators, interestingly, frequently want to compare a transaction to what a neighbour, family member, or someone else in their social circle has achieved in a comparable circumstance. If you and a coworker both buy the same kind of automobile for $10,000, but you negotiate a discount and end up paying $9,000, you’ll both feel good about the deal. In order to find social comparisons that might make your opponents pleased, it is necessary to investigate their social circle.
A “my way or the highway” situation is not necessary for successful negotiation. Better bargains and more delighted negotiators are the inevitable result of keeping in mind the three pillars of win-win negotiations: content, communication, and relationship.