Higher Ground Negotiations: Don’t Compromise Your Position with a Compromise
Copyright 2006 Progress-U Ltd.
I still remember sitting in the car with our French
representative on the way to our customer’s factory north
of Paris some five years ago. At that time I was Director
International Sales for a German technology company. The
conversation went this way.
“Alain, what do you think? How much of a discount will
Monsieur Ribault expect? You know, we offered the
instrument including all accessories, installation and
commissioning for 350,000 USD.”
“The last time, we sold the same machine for 280,000 USD
was four years ago. Also, I know, you added some features
to the machine that improved its performance. However,
knowing M. Ribault, it will be tough to achieve a higher
price than last time.”
“The price for the previous machine was already at the
bottom. Our cost increased, not decreased, with higher
wages, higher material cost and improved design. So we need
a higher price this time.”
“Well, we can try to get him on 300,000 USD. Would that
still be acceptable?” I inquired.
“Actually not, but o.k. At the same time we need this order
now, so if he can decide immediately, we are willing to
compromise to 300k.”
I knew that M. Ribault was a tough negotiator but I also
knew that his company, a multi-national automotive
corporation, was very satisfied with the machine they
bought four years earlier.
When we met M. Ribault, he opened the conversation by
saying that his top management’s requirement was to reduce
the cost for any supplier by 3.5% per year on the average.
This policy was introduced the year before.
M. Ribault was not a man of many words and he frankly
stated: “We need your price to go down by 7% at least, i.e.
the maximum we can pay for this machine is 260,000 USD. If
you can’t follow our policy and efforts to reduce our cost,
I’m afraid that we will need to look for alternative
suppliers.”
Wow, there I sat, expecting to get a better price and now I
had an important customer seriously saying that if we
didn’t lower our price to 260,000 USD, we would be out of
the game.
At first, I tried to explain why in this case it was
impossible for us to lower the price and that we actually
needed 7% more, not less. I realized quickly that this
attempt would lead nowhere.
So what to do? Negotiate and pressure him so long until we
reached a somewhat still tolerable compromise? Perhaps to
reach at least the same price as last time? Give up? Give
in? It seemed like one of us had to lose and that one would
most likely be us, no matter if we compromised or not.
When I thought more about it, I realized that M. Ribault’s
company would also lose. I knew that our instrument was by
far the best the solution they could get for this
application, so if we gave up, they would lose by choosing
another supplier. If we gave in, they would lose because
with such a bad margin on our side, service would be
reduced to an absolutely necessary minimum in order to
recover at least some of the lost margin.
Was it a lose-lose situation that couldn’t be overcome?
Suddenly, I realized that any common ground would not be
attractive enough. We had to do something outside the box
to turn this negotiation into a win-win situation for both
parties.
Traditional negotiation practice teaches you to optimize
your position when trying to establish a common ground.
Common ground negotiations are straight forward and usually
the fastest way to achieve an agreement. In most cases,
they require compromises from one or both parties. Common
ground negotiations are the appropriate procedure if the
compromises are still attractive for both parties.
Unfortunately this is often not the case.
So what do we normally do?
We either compromise our desired position through a
sub-optimal compromise or we pressure the other party into
an undesirable compromise, or both. In the worst-case
scenario, we exit and let the negotiation fail.
Some might think, well, no problem if the other party
compromises their position as long as we get what we want.
A win-lose situation is a win for us and therefore is o.k.
I wholeheartedly disagree with this concept.
I strongly believe that if one party loses, both parties
lose. Any win-lose situation eventually ends up as a
lose-lose situation and is therefore not desirable.
So what else to do?
The answer is “Higher Ground Negotiation” which means to
leave the common ground and to look for a higher ground
that is attractive to both negotiation parties. To do this
successfully, we need to have a few pre-conditions in place:
1. True trust between both parties
I elaborated on the issue of trust and it’s three key
elements in our July edition of this E-Zine. Kindly refer
to this section.
2. The willingness of both parties to create win-win
situations
Of course, many hardcore negotiators still believe that a
win-lose outcome is desirable. You may attempt to change
your negotiation partners’ beliefs on this by coaching them
through the potential consequences of win-lose situations.
However, if this turns out not to be fruitful, you will
need to decide on whether or not you want to continue doing
business with people who want you to lose every time you
deal with them.
3. A thorough understanding of what is important to the
other party
If you have built some trust with your negotiation
partners, they will help you understand what is truly
important to them…and that may go way beyond the price of
your product or service. You need to gain a thorough
understanding of the other party to find a higher ground
that is attractive to both them and you.
Once you have these three pre-conditions in place, you can
start exploring an attractive higher ground. You will have
to think outside the box and be creative. A solution might
not be evident right away, so you might need to do some
meaningful brainstorming.
In the case of our French customer, we discovered that
there was an upcoming need for certain other products this
company would typically source from our competitors. For a
long time, my colleagues had tried to sell these kinds of
products, but without success. I knew that we had rather
big margins on them and could compensate for the loss of
margin caused by selling the other instrument at 260,000
USD.
So everybody won. M. Ribault got his cost reduction, we got
the order not only for this instrument but also for the
other products and therefore could still get a good overall
margin…and my colleagues were happy to finally get a
chance to have their equipment employed at this important
company.
Conclusion: “Winning” in negotiations means creating
win-win situations. If one party loses, ultimately both
parties lose. If the traditional approach of finding a
common ground doesn’t lead to any attractive outcome for
either party, you may need to look for a higher ground.
Higher Ground Negotiations require trust, the desire for
win-win situations on both sides, and a thorough
understanding of what is important to the other party. With
creative out-of-the-box thinking, an attractive higher
ground can be found which results in true win-win
situations making it unnecessary for you to compromise your
position with a compromise.
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Charlie Lang’s mission is to change the image of sales
through the completely buyer-oriented Stop Selling!
approach. He is a passionate and professional executive
Coach, Trainer, Public Speaker and Author of over 100
articles related to leadership, coaching, change management
and innovative sales. For more info visit
http://www.progressu.com . To receive his monthly articles
on sales or leadership, visit
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