So I presume many of your current quarter’s committed opportunities would be in “Negotiation stage”, in the Sales Funnel.
While you are preparing and brainstorming with your fellow colleagues from Pre-Sales, Delivery, Finance & Operations teams, here are three terms that I wanted to get your attention on. Gaining a clear understanding of these terms and preparing on these aspects will increase your chances of winning against the competition.
1. BATNA
2. DOUBLE (S-W)
3. ZOPA
1. What is BATNA? How does it help?
BATNA is defined as the “best alternative to a negotiated agreement”. Let’s understand this from a customer’s perspective. BATNA for your customer is what your customer would do IF you failed to reach an agreement with respect to the terms of the contract – namely Price, Delivery lead times, commercial terms and conditions, Warranties, Penalties etc. It’s very important for you to understand this ahead of any negotiation.
In fact, I would alter the BATNA definition as “next best alternative to a negotiated agreement” available to the customer. The important question to answer is – If not you, your organization, who would the customer most likely place the Purchase order with? Your relationship and strong traction with the customer will help in your assessment of your “best competitor”. The strategy and the tactics that you formulate should be to WIN against that competitor.
That is where the second term comes into play for your preparation. Read ahead.
2. What is DOUBLE (S-W)? How does it help?
You need to clearly map out the Strengths and Weaknesses of your organization vs your “best competitor” at the current opportunity. You need to create the 2 x 2 matrix, as highlighted in the image below and come up with action plans. Highlight the strengths that you bring to the table and also highlight the weaknesses of your competition to the customer. What are the potential gains for your customer if they go with your value proposition against the possible pitfalls of going with your competitor’s solution?. As I have always maintained in all our discussions, we need to quantify this aspect.
3. What is ZOPA? How does it help?
ZOPA stands for “Zone of possible agreement”. The zone of possible agreement (ZOPA), or bargaining range, describes the intellectual zone in sales and negotiations between two parties where an agreement can be met which both parties can agree to. Within this zone, an agreement is possible. Outside the zone, no amount of negotiation will yield an agreement. As an example, as a best-case scenario, on the quoted price you want to negotiate and close the contract by offering 8% discount and you can go up to 10% discount. On the customer side, as his best case scenario, he wants to close the deal at 15% discount and you estimate that he can come up to 12%. ZOPA falls somewhere in between 12-10%.
You need to have a feel of this range.
ZOPA is applicable to many factors that are important for the contract in question – price, delivery lead-time, warranty terms, penalties etc.
Experience tells us that we will not be able to get a perfect deal, winning on all the terms and conditions.
This is where you differentiate between your “Queen and pawns” in chess terms. What can you sacrifice during negotiations, in return for some of the critical factors that you cannot compromise on?
List them down.
This gives you clarity and therefore the confidence to face the negotiations discussions with the customer.
Negotiation is a mental game as much as in the details that you will gather in the form of numbers, percentages, timelines and various data points.
While there are many aspects that are involved in successful negotiations, getting a good handle on BATNA, Double (S-W) and ZOPA would increase your preparations and therefore your confidence to WIN against competition and secure that critical opportunity in your favor.
If there are other aspects and tactics that worked for you during negotiations, please leave your thoughts and comments here. That would be highly valued by me and my network. Thanks
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