7 Competitive Negotiation Examples to Boost Your Sales Skills
Competitive negotiation is a strategy that involves using tactics such as persuasion, manipulation, threats, or concessions to gain an advantage over the other party and achieve the best possible outcome for yourself. Competitive negotiation is often used in situations where there is a fixed number of resources, time, or money, and where the parties have conflicting interests or goals. Competitive negotiation can be effective in some scenarios, but it also has some drawbacks and risks. In this article, we will explore some competitive negotiation examples and how they can help you improve your sales skills.
KEY TAKEAWAYS
Competitive negotiation is a strategy that involves using tactics to gain an advantage over the other party.
Competitive negotiation can help you boost your sales skills by achieving higher profits and margins, closing more deals, building stronger relationships, enhancing your reputation and brand image, and developing your confidence and assertiveness.
Competitive negotiation also has some limitations and challenges, such as damaging the relationship with the other party, losing the deal or the customer, missing opportunities for collaboration or innovation, and facing ethical dilemmas or legal issues.
Competitive negotiation should be used only when it is appropriate for the situation, the product or service, and the customer.
Competitive negotiation should be balanced with cooperative negotiation, which is a strategy that involves working together with the other party to find a mutually beneficial solution that creates value for both sides.
Competitive Negotiation Examples
1. Using deadlines to pressure the buyer.
One of the most common competitive negotiation tactics is to use deadlines to create a sense of urgency and pressure the buyer to make a decision quickly. For example, you can say that your offer is only valid until a certain date, or that you have other interested buyers who are ready to close the deal. This way, you can reduce the buyer’s time to explore other options, compare prices, or negotiate further. However, this tactic can also backfire if the buyer feels rushed or manipulated, or if they find out that your deadline was not genuine.
2. Making the first offer and anchoring the price.
Another competitive negotiation tactic is to make the first offer and anchor the price at a high level. By doing this, you can set the expectations and influence the perception of the value of your product or service. For example, if you are selling a car and you ask for $20,000, the buyer will likely think that the car is worth around that amount, and any lower offer will seem like a bargain. However, this tactic can also backfire if your offer is too high and unrealistic, or if the buyer has done their research and knows the market value of your product or service.
3. Using scarcity to increase demand.
Another competitive negotiation tactic is to use scarcity to increase the demand and attractiveness of your product or service. For example, you can say that your product or service is limited in quantity, quality, or availability, and that it will soon run out or become unavailable. This way, you can create a fear of missing out (FOMO) and motivate the buyer to act quickly and secure their purchase. However, this tactic can also backfire if the buyer feels deceived or manipulated, or if they find out that your scarcity claim was not true.
4. Using concessions to create reciprocity.
Another competitive negotiation tactic is to use concessions to create reciprocity and goodwill with the buyer. For example, you can offer a discount, a freebie, or a bonus to sweeten the deal and make the buyer feel like they are getting a great value. However, you should only make concessions that are strategic and conditional, and that do not compromise your profit margin or value proposition. For example, you can say that you will offer a discount if the buyer agrees to buy more units, pay in advance, or sign a long-term contract. This way, you can create a sense of obligation and gratitude in the buyer and make them more likely to accept your offer.
5. Using testimonials and social proof to build credibility.
Another competitive negotiation tactic is to use testimonials and social proof to build credibility and trust with the buyer. For example, you can show them positive reviews, ratings, awards, or endorsements from previous customers, experts, or influencers who have used your product or service and achieved great results. This way, you can reduce the buyer’s uncertainty and risk perception and make them more confident in your product or service.
6. Using emotions to influence the buyer.
Another competitive negotiation tactic is to use emotions to influence the buyer’s decision-making process. For example, you can appeal to their pain points, fears, desires, aspirations, or values and show them how your product or service can solve their problems, satisfy their needs, or improve their situation. This way, you can create a connection and rapport with the buyer and make them more receptive to your offer.
7. Using BATNA to leverage your position.
Another competitive negotiation tactic is to use BATNA (Best Alternative To a Negotiated Agreement) to leverage your position and power in the negotiation. BATNA is the best outcome you can achieve if you walk away from the negotiation without reaching an agreement with the other party. For example, if you are selling a house and you have another buyer who is willing to pay more than your current offer, your BATNA is higher than your current offer. By knowing your BATNA and communicating it effectively to the other party, you can increase your bargaining power and influence their willingness to compromise.
How Competitive Negotiation Can Boost Your Sales Skills
Competitive negotiation can boost your sales skills by helping you:
- Achieve higher profits and margins by maximizing your value proposition
- Close more deals by overcoming objections and creating urgency
- Build stronger relationships with customers by creating reciprocity and trust
- Enhance your reputation and brand image by demonstrating credibility and expertise
- Develop your confidence and assertiveness by standing your ground and defending your interests
However, competitive negotiation also has some limitations and challenges, such as:
- Damaging the relationship with the other party by creating resentment, hostility, or mistrust
- Losing the deal or the customer by being too aggressive, pushy, or unrealistic
- Missing opportunities for collaboration or innovation by ignoring the other party’s needs, interests, or perspectives
- Facing ethical dilemmas or legal issues by using deceptive, manipulative, or coercive tactics
Therefore, competitive negotiation should be used with caution and discretion, and only when it is appropriate for the situation, the product or service, and the customer. Competitive negotiation should also be balanced with cooperative negotiation, which is a strategy that involves working together with the other party to find a mutually beneficial solution that creates value for both sides.
TIP
Competitive negotiation can be effective in some scenarios, but it also has some drawbacks and risks. Therefore, use it with caution and discretion, and balance it with cooperative negotiation.
Competitive Negotiation Example: Amazon’s HQ2
One of the most prominent examples of competitive negotiation in recent years was the bidding process for Amazon’s second headquarters, known as HQ2. In 2017, Amazon announced that it was looking for a new location to host its expanding operations, and invited cities and regions across North America to submit proposals. The company said it would invest $5 billion in the project, and create 50,000 high-paying jobs for the chosen area.
Amazon’s request for proposals (RFP) included a list of criteria that the applicants had to meet, such as having a population of more than one million, a stable and business-friendly environment, access to technical talent, and a culture of innovation. However, the RFP also asked for information on tax breaks and other incentives that the applicants could offer to attract Amazon. This created a competitive atmosphere among the bidders, who tried to outbid each other with generous offers of subsidies, tax credits, land grants, and other perks.
According to some critics, Amazon’s RFP was a form of “corporate welfare” that exploited the desperation of cities and regions that were eager to boost their economies and reputations. Some argued that Amazon was already planning to expand its operations regardless of the incentives, and that the company was simply looking for the best deal possible. Others pointed out that the bidding process was not transparent, and that Amazon did not disclose how it evaluated the proposals or what factors influenced its decision.
Competitive Negotiation Example: The Florida Marlins Sale
Another example of competitive negotiation is the sale of the Florida Marlins baseball team in 2017. The team was owned by Jeffrey Loria, who had bought it in 2002 for $158 million. Loria had been trying to sell the team for several years, but faced difficulties finding a buyer who was willing to pay his asking price of $1.3 billion.
In February 2017, Loria entered into an agreement with a group of investors led by Joshua Kushner, the brother of Jared Kushner, who is married to Ivanka Trump. The deal was reportedly worth $1.6 billion, and seemed to be a win for Loria. However, the deal fell apart after reports emerged that Loria was being considered for the position of U.S. ambassador to France by President Donald Trump. This raised concerns about potential conflicts of interest and political backlash among baseball fans and officials.
Loria then turned to another group of investors led by Derek Jeter, a former star player for the New York Yankees, and Bruce Sherman, a wealthy businessman. The deal was valued at $1.2 billion, which was lower than Loria’s initial asking price, but still higher than what most analysts estimated the team was worth. The deal was finalized in August 2017, after receiving approval from Major League Baseball and other parties.
Competitive Negotiation Example: The Impact on Global Demand
Competitive negotiation is a common strategy in business transactions, especially when there is a fixed number of resources or value to be distributed among the parties. However, competitive negotiation can also have negative consequences for both the negotiators and the society at large.
One of the drawbacks of competitive negotiation is that it can damage the relationships between the parties and create distrust and resentment. This can reduce the chances of future cooperation and mutual benefit. For example, some of the cities and regions that lost out on Amazon’s HQ2 bid felt betrayed and disappointed by Amazon’s decision and questioned whether they had wasted their time and resources on a futile effort.
Another drawback of competitive negotiation is that it can lead to suboptimal outcomes that do not maximize the value for all parties involved. For example, some experts argued that Loria sold the Marlins for more than they were worth, and that he benefited from a distorted market that inflated the value of sports franchises. They also claimed that Loria had exploited public funds to build a new stadium for the team in 2012, and that he left behind a legacy of debt and poor performance.
Competitive negotiation can also affect the global demand for certain products or services, depending on how it influences the supply and price factors. For example, if Amazon’s HQ2 project increases its market share and dominance in e-commerce and cloud computing, it could reduce the demand for other competitors in those sectors. On the other hand, if Amazon’s HQ2 project stimulates innovation and growth in its chosen area, it could increase the demand for related products or services in that region and beyond.
FREQUENTLY QUESTIONS
Q: What is competitive negotiation?
A: Competitive negotiation is a strategy that involves using tactics such as persuasion, manipulation, threats, or concessions to gain an advantage over the other party and achieve the best possible outcome for yourself.
Q: When should you use competitive negotiation?
A: You should use competitive negotiation when there is a fixed amount of resources, time, or money, and when the parties have conflicting interests or goals.
Q: What are some competitive negotiation tactics?
A: Some competitive negotiation tactics are using deadlines, making the first offer, using scarcity, using concessions, using testimonials, using emotions, and using BATNA.
Q: What are the benefits of competitive negotiation?
A: The benefits of competitive negotiation are achieving higher profits and margins, closing more deals, building stronger relationships, enhancing your reputation and brand image, and developing your confidence and assertiveness.
Q: What are the drawbacks of competitive negotiation?
A: The drawbacks of competitive negotiation are damaging the relationship with the other party, losing the deal or the customer, missing opportunities for collaboration or innovation, and facing ethical dilemmas or legal issues.
References:
http://www.psych.nyu.edu/gollwitzer/771.pdf
https://deepblue.lib.umich.edu/bitstream/2027.42/26263/1/0000344.pdf
https://www.newscientist.com/article/2336385-korean-nuclear-fusion-reactor-achieves-100-millionc-for-30-seconds/
https://www.the-sun.com/news/4381435/holy-grail-fusion-experiments-breakthrough-race-unlimited-energy/
http://curious.astro.cornell.edu/about-us/54-our-solar-system/the-sun/interior/206-how-hot-is-each-one-of-the-layers-of-the-sun-beginner
https://en.wikipedia.org/wiki/Sun#:~:text=The%20core%20of%20the%20Sun%20extends%20from%20the,the%20Sun%27s%20surface%20temperature%20is%20approximately%205800%20K.
https://en.wikipedia.org/wiki/Solar_core
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