Brian G.Long, Ph.D., C.P.M.
Brian G.Long, Ph.D., C.P.M., Marketing and Management Institute, Kalamazoo, MI 49002, 616/323-1531.
Elaine N. Whittington, C.P.M.
Elaine N. Whittington, C.P.M., G & E Enterprises, Sunland, CA 91040, 818/352-4995.
In negotiations, a few words one way or the other often influence the outcome. Similarly, a few simple mistakes can often spell disaster. Even experienced negotiators may turn around after an unsuccessful negotiation and conclude that they or their team "blew it."
In the past, purchasers have attempted tricks or tactics which they thought would bring them to a successful conclusion. In actuality, well trained salespeople often regarded these tactics as indicative of negative or non-cooperative styles of purchasing. In some instances, these tactics will simply take the negotiations off track or anger the salesperson. In other instances, they make the purchaser look like an easy mark and raise the seller's expectations about the profitability of the outcome. In still other instances, they will completely "blow" the outcome by creating a wrong impression or making it appear to not be in the best interest of the seller to even attempt to conclude an agreement.
Negotiation is, at best, an inexact science. But what makes the purchaser look the worst is when they get caught making an obvious blunder. Self-analysis is not as easy as it looks, so some negotiators, especially those new to the profession, are less likely to see themselves as others do. In other instances, the negotiator makes an error out of frustration with deadlines, the commodity, the salesperson, or themselves because of all the other frustrations.
Since people have been negotiating with each other since the beginning of time, and buyers and sellers have been negotiating for almost as long, it is not the purpose of the authors to create anything new. Instead, this paper will review some of the major instances where purchasers have been known to "blow it". What follows is a checklist of some of the most common negotiation errors.
One additional note. All of these concepts must be taken in the context of the relationship which exists between the buyer and the seller. If the relationship is very good, most sellers will allow more latitude and may overlook or disregard even the most grievous of errors. Furthermore, if the buyer holds all or most of the power, the seller may have little inclination or opportunity to do anything different as a result of the buyer's error.
Here are twenty of the most common negotiation errors:
ERROR #1 - LACK OF AUTHORITY
Few buyers are given unlimited authority to negotiate anything, any place, any time, and for any terms. However, the response of, "I'll have to check with my people on that, "to nearly every point of the negotiation makes it appear that (1) the buyer's role is just one of collecting concessions from the seller, or (2) the seller is really negotiating with the wrong person and wasting time. Sellers with no authority are generally call "peddlers" by purchasing professionals. Buyers with no or very limited authority are regarded equally poor by their sales counterparts.
ERROR #2 - FAILURE TO LISTEN
Everyone thinks they are a good listener. In actuality, tests have shown that sellers outlisten buyers by about a 3:1 ratio. Very often, the seller will tell the buyer everything they need to know-- if they become meticulous in listening.
ERROR #3 - FALLING FOR FLATTERY
Studies have shown that everyone likes flattery, even when they consciously or subconsciously recognize that it is not sincere. Basic selling calls for the seller to put the buyer in a good mood before discussing business. Even experienced negotiators must be on guard for a seller who is stroking their ego.
ERROR #4 - PULLING THE RUG OUT
Most salespeople come well prepared for most negotiations. This preparation is, of course, based on their perception of the buyer's needs. Therefore, buyers who surprise the seller with a completely new set of needs and demand an extemporaneous response may run a serious risk of the seller walking away. Sometimes even worse, the seller may continue with the negotiation with pricing based on a fairly high "contingency" level.
ERROR #5 - FAILURE TO UNDERSTAND SELLER MOTIVATION
Unlike purchasing people, sales people are often given a personal incentive to sell in the form of a commission, bonus, or quota. Sales compensation and evaluation is almost always based on some measure of profitability-- not in just "closing" a sale. Since they must close it for a profit, any illusion to reducing the seller's position to one of no profit or zero profit will most likely result in the seller deciding that any further discussion is probably a waste of time.
ERROR #6 - LETTING AN IMPASSE DESTROY THE RELATIONSHIP
By definition, an impasse occurs when no progress is being made in a negotiation, and one or both parties have become uneasy. Hard ball negotiators often greet an impasse with silence under the assumption that the seller will be forced to talk. Of course, the seller could employ the same strategy, resulting in both parties staring at each other in icy silence.
Good negotiators recognize that the worst thing to do about an impasse is to ignore it. Impasses wear the nerves of both parties in the negotiation and strain the personal relationships. When no progress is being made and the strain of an impasse has become evident, it is best to recess, call a caucus, or otherwise change the pace of the negotiations.
ERROR #7 - ASSUMING UNIVERSAL GOOD FAITH
Faith implies trust, and trust can only be earned over a period of time. Whereas almost all purchasers will have their guard up for sellers walking through the door for the first time, a much more common problem occurs when the purchaser assumes good faith from a new seller representing the same company or some other person inside the seller's firm who the buyer does not know.
ERROR #8 - PREMATURE DISCLOSURE OF PURCHASE INTENT
There is nothing the seller would rather know than that a concrete decision has already been made to buy the seller's product or service. This disclosure can sometimes be leaked from the requisitioners, but other times the seller is able to get the buyer to admit that the purchase decision has already been made. Under these circumstances, the seller will often offer only token concessions, then sit back and wait for an inevitable purchase order number.
ERROR #9 - TEAM DISAGREEMENT
Bringing together a negotiation team is not as easy as it looks, given the multiplicity of goals, personalities, and expertise. What is paramount is, of course, that the team agrees on agreeing when seated at the negotiation table. Whereas hardball sellers may decide to take advantage of team disagreement by using a divide and conquer strategy, even the best of sellers may conclude a tenuous agreement but walk away questioning whether the buying team's needs have actually been met-- or whether the whole agreement will come unraveled before it is fully implemented.
ERROR #10 - INAPPROPRIATE BODY LANGUAGE
Most seller receive at least some body language training. To some, what is not said but implied by the body language is sometimes more important than the actual words which come across the table. Hence, buyers who say "no" when their body language says "yes" are clearly giving the wrong impression.
ERROR #11 - BEING OVERHEARD
On breaks, especially when at the buyer's site, countless negotiations have been lost when two buyers have been overheard-- when they weren't even thinking about a seller who might be in earshot. The same problem can be encountered in offshore procurement when the buyer thinks some members of the selling team do not understand English. An old U. S. Navy axiom says it best. LOOSE LIPS SINK SHIPS.
ERROR #12 - ADOLESCENT BEHAVIOR
Salespeople often refer to buyers who are difficult to negotiate with as adolescents because of responses and behaviors they are often subjected to by some purchasers. Many less-than-effective buyers do not even notice their own behavior because the sellers generally grit their teeth and proceed. Typical adolescent behaviors which vex sellers include: (1) Interrupting before the seller has completed a sentence, (2) Personal attacks, especially name-calling or questioning the seller's personal motives, morality, experience, or background, and (3) Uncontrolled anger, not unlike what one might expect from a spoiled teenager.
ERROR #13 - UNPROFESSIONAL BEHAVIOR
Old school purchasers used to keep sellers waiting in the lobby at least twenty minutes so that they would come to the table "hungry". In today's environment, sellers who are treated in an unprofessional manner don't get hungry. They get mad. Sellers who are mad will still smile, but they will be less likely to cooperate and are far more likely to hold out for higher prices.
ERROR #14 - HIGH PROFITABILITY DISCLOSURE
Especially in the age of "partnering" and other forms of buyer/seller cooperation, there may be a feeling that the wealth should be shared. On some occasions, such behavior may even be appropriate. However, in other instances, high profitability implies plenty of room for absorbing higher prices.
ERROR #15 - MAKING THE OTHER PARTY UNEASY
Assume that you are half way through a negotiation in your company conference room, and a distinguished person quietly enters the rear of the conference room and begins taking notes. You tell the seller that this person is your company attorney, and you have invited them in just to make a few notes as you wrap up your agreement. Even if the sellers proceed with the discussion, the chances are that they will be uneasy. An even worse case is for them to announce that the discussion cannot continue until they can reconvene with their attorney present.
ERROR #16 - DELIBERATELY MAKING THE OTHER PARTY UNCOMFORTABLE
The old school of purchasing used to recommend putting the sellers on hard chairs while the buyer sat on comfortable chairs, cutting the legs off chairs to demean the sellers, turning the heat up in the room to make them uncomfortable, and a host of other sleazy tricks aimed at making the sellers physically or psychologically ill at ease. Such practices are widely recognized by sellers today, and at best classify the buyer as untrustworthy and difficult to deal with. At worst, such practices form the basis for deciding not to deal with the buyer at all-- at any time and for any price.
ERROR #17 - OVERANXIOUSNESS
Being in too big of a hurry creates a notion of desperation. Even good sellers may be reluctant to offer their best price or terms. Furthermore, agreeing too quickly and easily may leave the seller with that uneasy feeling that they have "left too much money on the table". With a long term relationship, overanxiousness may not be a problem. However, dealing with a seller with whom the buyer is not familiar requires that the buyer not create an aura of desperation.
ERROR #18 - LACK OF PREPARATION
Few things frustrate negotiations more than unprepared buyers. The seller comes ready to discuss business only to discover that the buyer has done little more for preparation than read the seller's proposal while the seller was kept waiting in the lobby. Even if an agreement is reached, the seller fears that the agreement was probably half-baked and will be subject to numerous revision before it is actually performed. Conversely, unscrupulous sellers may decide to take the opportunity to manipulate the buyer into signing an agreement that is primarily in the seller's best interest.
ERROR #19 - TRADITIONAL HARDBALL TACTICS
Most sellers come to the table fully prepared to handle the traditional hardball tactics which purchasers have been passing along from generation to generation for the past 100 years. Some of these techniques include threatening a walkout, presenting what labor negotiators refer to as a "last, best, and final offer," or threatening other existing agreements which the buyer and seller may already have in place. Some sellers will simply call the bluff, leaving the buyer out in the cold. At best, the other sellers may reluctantly go along, but the buyer will find that the resulting buyer/seller relationship is poor. Some sellers will now look for an opportunity to get even.
ERROR #20 - AGREEING TO AN INCOMPLETE AGREEMENT
Buyers are usually in a hurry, and sellers know it. Old school sellers are told to make frequent attempts to close a sale, even when some details still need to be nailed down. Once the buyer agrees, the seller now, for all intents and purposes, quits negotiating. As a result, the seller may now be tempted to fill in the remaining issues in a self-fulfilling manner.