One can sense an air of insecurity in the world financial markets wherever you go - for the first time - regardless of geographical location.

Warren Buffet stated that it is only when the tide goes out that one can see who is wearing no swimsuit. In other words, it is easy to be thriving when the markets are booming; it is only when tough financial times arrive that we can easily discern quality & commitment.

How can you use your negotiation skills, negotiation training or purchasing training to sidestep losses in the present economic climate?

Use 'Loss Framing'

We are more motivated by avoiding loss than by achieving 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 more likely to be risk averse when pursuing advantages. In the way that we negotiate, we can make our counterparties aware of the unique items that they stand to lose if they don't move in our direction and otherwise acquire if they do.

Create Alternatives

In times of difficulty it is vital to create alternatives so as to support our negotiation position. The ability to create options is key in the context of negotiation and the power of alternatives to concluding a deal is the key driver of our negotiation power.

We normally wait until we realise that we are not going to be able to do a transaction before we begin to think about other options. We risk entering into a less than ideal transaction and if we have not explored all the alternatives. Similarly, thinking about the options 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 good options available then they will be more competitive and if they don't, they will tend to be more agreeable.

Use Reciprocation

Reciprocation is one of the key principles of powerful persuasion skills, because we are prone to return to others the sort of behaviour that they exhibit towards us. In times of economic uncertainty it is key that we perform in the interests of our counterparties if we would like them to perform in ours. Use this principle to your benefit by acting first and using the rule of reciprocation. One note of caution and ensure that you record the indebtedness with your counterparty.

Move from price to value

It is important to take the focus off price and concentrate on the Total Cost of Ownership. For all services, products and solutions that we buy or sell, there is always a trade off between value & price. If we only focus on the price, the best that we will do is to barter and it is only once we start to study the total lifecycle of the service, product or solution that we trade, that we begin to uncover options for negotiation. Before you even mention price in negotiation, analyse your counterparty's long term strategic fit, expertise, switching costs should they wish to change a business partner, financial steadiness and possible risks or negative consequences that may happen when your counterparty doesn't reach an agreement with you.

Don't forget that the magic in negotiation is found in the quality of your planning. In times of economic uncertainty it is more important than ever to commit enough time to preparing for your negotiations.

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