1. Al Futtaim Retail Business College
E-Learning Refresher
Negotiation Skills

2. The Negotiation Balance
Other Party
You
Opening stance
Opening stance
Tradable
Variables
Cost / Value
Tradable
Variables
Cost / Value
AED
AED
Your walk away
Other Party’s walk away
Zone of agreement
Win / Win
Welcome to the Al Futtaim Negotiation Skills e-learning module. In this module we are going to recap the key theory of negotiation and the process that we go through when planning for and conducting a negotiation.
Lets start first with the model that we call the Negotiation balance.
This model represents a negotiation scenario between you and another party.
Every negotiation will have a number of common features within it. Here we can see that each party will have an opening stance (represented by the green and orange lines to the extreme left and right). They will also have a walk away point which is the maximum amount that they are prepared to trade before deciding that the deal is not worth making. The walk away point is represented by the shorter colored lines towards the middle. When these two lines cross each other it forma an areas called the zone of agreement. It is within this zone of agreement that a deal can be done because it is within the parameters of both parties.
The black lines in the represent variables that each party has to trade with each other. It is the process of trading these variables with each other that get us into the zone of agreement. These black lines vary in height because they will each have a different cost and perceived value to the other party.

3. The Negotiation ICEBERG
© Kantar Retail 2010
Successful Negotiating
Conducting A Negotiation P L A N I G
Cost Benefit Analysis
Shopping Lists
Variables
In order to demonstrate the negotiation process we will think of it as an Iceberg. This is because the bulk of the negotiation actually happens in the planning phase. Often we think of a negotiation as being the act of debating with the other party about the terms of the deal. Actually, this is only a small part of it, and hence the ‘conducting a negotiation’ stage is only the tip of the iceberg. We must firstly go through a series of planning stages.
It starts with a Power Analysis where we analyze who might have the upper hand in the relationship and how we might combat this if we are weaker or utilize our position of power if we are stronger.
We then have a look at all the possible things that we can offer the other party and all the possible things that they can offer us. These are called variables.
We then need to select from these variables what are the things that we want from the other party and what are the things that they might want from us. These narrowed down lists are called shopping lists.
After that we need to assign some value to our variables so that we can see whether the potential trading of these variables make financial sense. This is called a cost benefit analysis.
And then finally we are ready to conduct our negoation.
Power Analysis
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4. The Negotiation ICEBERG
© Kantar Retail 2010
Successful Negotiating
Conducting A Negotiation P L A N I G
Cost Benefit Analysis
Shopping Lists
Variables
Lets start by looking at the first step. The Power Analysis.
Power Analysis
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5. FACTORS THAT CONTRIBUTE TO POWER
BRANDS
How important are your brands to the customer? Do they represent quality for them as a business? Do we have market data to support this?
SIZE
What proportion are you to his business? What proportion is he to your business? What is the relative position of the competition?
TIME
Who is under the most pressure to complete the deal? Does the customer need the product for a specific purpose on a specific date?
STYLE
Is a direct and aggressive style intimidating? Is a supportive and cooperative style forcing concessions based on a fake relationship?
There are a number of factors that contribute to the power someone has in a business negotiation.
Animated Slide (Narrator to run through the list)
LEGITAMACY
Is there anything that you haven't followed up on in the past ? Did you fulfill all your obligations in last years agreement?
KNOWLEDGE
How much do your know about their business? How much regional insight can you bring? Do you know the market dynamics?

6. Completing a Power Analysis
© Kantar Retail 2010
Successful Negotiating
Where Our Own Power Lies
Those things we can emphasize in our selling / negotiation
Where The Customer Power Lies
Those things our customer will use against us – and we should plan to overcome
Where The Balance Of Power Lies
Our realistic assessment of the relevant positions
What We Need To Do
Things we must do to maintain or change our position
A useful tool at this stage is to complete a power analysis. It splits into 4 sections.
In the top left hand corner we need to list all the things that we feel give us strong power in a negotiation. In the top right hand corner we list all of the things that make the other party powerful.
We then need to assess, based on these lists, where we think that the balance of Power Lies. In other words what is our assessment of who has the upper hand before we begin the negotiation. This goes into the bottom left box.
Then finally, we write a list of this that we must do to maintain the factors that contribute to our power and things that we can do to improve our position of power. This goes in the bottom right box.
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7. The Negotiation ICEBERG
© Kantar Retail 2010
Successful Negotiating
Conducting A Negotiation P L A N I G
Cost Benefit Analysis
Shopping Lists
Variables
Next we need to look at the possible variables that can be traded in the negotiation.
Power Analysis
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8. Successful Negotiating
Variables
© Kantar Retail 2010
Successful Negotiating
A variable is something which COULD BE traded during a negotiation which ensures your shopping list objectives are achieved
Sometimes this can be achieved first by exchanging items on your shopping lists
Sometimes you need to seek other variables from elsewhere to ‘make the deal’
A variable is something which could be traded during a negotiation which ensures your shopping list objectives are achieved
Sometimes this can be achieved first by exchanging items on your shopping lists
Sometimes you need to seek other variables from elsewhere to ‘make the deal’
Some Variables Can Be Traded. Some Cannot
Tradable variables are elements of your proposal you could trade in return for something back from the customer, eg Delivery dates
Non Tradable variables are elements of your proposal that you cannot alter at that moment in time, eg Product composition
So we have to decide at this stage, which variables are tradable and which are not.
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9. List of Possible Variables
© Kantar Retail 2010
Successful Negotiating
Pricing & Discounts
ALLOWANCES (Lump Sums)
Others
1. Volume / quantity discounts
2. Long term discounts
3. Short term discounts
4. Contractual pricing
5. Introductory discount
6. Range discount
7. Special quantity discount
8. Bulk Purchase Discount
9. Early payment discount
10. Pre-payment discount
11. Extended credit
1. Loyalty Payment
2. Referral Payment
3. Retrospective discount
1. Sale or return
2. Exchange of stock
5. Free stock
6. Production of print material
7. Art work / origination
9. Product / Staff Training
10. Free Items
11. Charity payments
12. Staff Training
Here is a list of possible variables that we might have in a business negotiation.
(Narrator to run through the list)
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10. Quantify Costs and Values for Each Variable
© Kantar Retail 2010
Successful Negotiating
Quantify Costs and Values for Each Variable
High
Medium
Low
High, Medium and Low
Cost to you
Value to customer
Cost to customer
Value to you
Whatever we are trading will have two things. An actual cost to us and a perceived value from the other party. So what we must do now that we have our variables is decide whether they are high, medium or low value cost to us and whether they will be perceived as high medium or low value by the other party. So, therefore, it is obviously best to trade variables that are low cost to us but have perceived high value by the other party.
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11. The Negotiation ICEBERG
© Kantar Retail 2010
Successful Negotiating
Conducting A Negotiation P L A N I G
Cost Benefit Analysis
Shopping Lists
Variables
Next we have to form shopping lists
Power Analysis
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12. A Range of Options Forms Your Shopping List
© Kantar Retail 2010
Successful Negotiating
In a negotiation both you and your customer will have things which are
Essential – the minimum acceptable position, least favored (but acceptable) situation. Failure to agree at this level means a deal cannot be done (today)
Probable – the objective, the target, the preferred position
Desirable – the best case scenario, better than the objective, beyond your expectations
This range of options forms your Shopping List
You should plan YOUR shopping list and try to second guess your customers shopping list
REMEMBER, customers don’t always plan; sometimes they just react (to what you say)
In order to best prepare for our negotiation we have to decide from our list of potential variables, which ones we want most from the other party and which ones we are prepared to trade to acquire them.
For each of our variables there will also be a scale of how much of that variable we can get or trade.
So the next thing we need to do in our shopping list is create a scale for our variables of
Essential - the minimum acceptable position, least favored (but acceptable) situation. Failure to agree at this level means a deal cannot be done (today)
Probable – the objective, the target, the preferred position
Desirable – the best case scenario, better than the objective, beyond your expectations
So lets have a look now at how an example shopping list might look....
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13. Example of an Al Futtaim Shopping List
© Kantar Retail 2010
Successful Negotiating
Example of an Al Futtaim Shopping List
Item
Essential
Probable
Desirable
Payment Terms
40 days
30 days
28 days
Pricing Tier
Max Allowed
Discount
Mid Band Discount
Top Pricing Band
Referrals
Introduced to
next senior line
2 external
lead contacts
2 external
lead contacts
This is an example of our shopping list.
Lets take the bottom row as an example. In this example we are selling products to a company that has multiple sites. In our negotiation we are going to try to agree on where our products will be placed. So this is a variable that the other party has that we want to get. And here our desirable position is to be in all the customers locations. The probable outcome is that we will be present in 5 locations. But as a minimum we have to make sure that we are in the customer’s top 3 loactions.
Endorsement
Permission
to mention client
Letter of
Recommendation
Website
Endorsement
Distribution
In Customer’s
top 3 locations
In Customer’s
top 5 locations
In All Customer’s
locations
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14. Successful Negotiating
© Kantar Retail 2010
Successful Negotiating
Example of a Customer’s Shopping List
Item
Essential
Probable
Desirable
Invoice Discount
15%
20%
25%
Free Items
Discounted
2nd item
One Free Item
Two Free Items
Staff Training
Annually
Twice Per Year
Quarterly
Delivery
2 weeks from order
1 week from order
2 days from order
Charity Donation
Commit for
next year
Contribute
1,000 AED
2,500 AED
We also have to predict what the other party will want from us. In this example they want the maximum discount possible. So in the first row you will see that they would like to get 25% but will be prepared to accept 15% discount. It is important that we predict what their boundaries might be and do a shopping list for them also.
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15. BATNA ZONE Overall Shopping List Desirable Probable Essential
The key Variables that you will trade
The key Variables that you want from the other party
Variables ‘in’ the negotiation
Desirable
Probable
Essential
(Walk Away)
BATNA ZONE
We now need to create our overall shopping list by filling in a format like this. So what will the other party trade with us and what are we prepared to trade with them?
You will see that for each of these variables we select there is a walk away point. This means that if the other party wants too much for their variable or is prepared to pay too little for our variable then we fall into the BATNA zone.
The BATNA zone stands for Better Alternative To A Negotiated Agreement. In other words, it does not make commercial sense to reach an agreement and a negotiation cannot be done.

16. The Negotiation ICEBERG
© Kantar Retail 2010
Successful Negotiating
Conducting A Negotiation P L A N I G
Cost Benefit Analysis
Shopping Lists
Variables
Now that we know what each party is looking for from each other, we need to assign some real financial value to each of the variables that we are about to trade so that we know the deal is worth making. This is called a cost benefit analysis.
Power Analysis
Proposal To Be Sold
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17. Customer Location Distribution Net Value of the agreed ‘deal’
Example of a Negotiation Outcome
insert document title
Glendinning Management Consultants insert year
Variables
Customer Discount
Customer Location Distribution
Staff Product
Trainings
Delivery
Endorsement
Net Value of the agreed ‘deal’
Optimum
15%
Product in Every Location
Not Included
4 weeks
Website
Desirable
18%
Product in top 3 locations
Annually
2 weeks
Letter Of Endorsement
Essential (Walk away)
21%
Product in top location
Quarterly
1 week _
Commercial COST or BENEFIT (+/-) of each variables ‘final’ negotiated position at your assumed sales level
-AED 250,000
+AED 300,000
-AED 20,000
-AED 5,000
+AED15,000
+AED40,000
In this grid we can see our shopping list items and the grey boxes indicate where the deal has ended up.
The row at the bottom shows how much that particular variable has cost us or benefited us.
The important number is the one at the bottom right. This must be positive so that we know that the deal makes us money overall.
doc ref

18. The Negotiation ICEBERG
© Kantar Retail 2010
Successful Negotiating
Conducting A Negotiation P L A N I G
Cost Benefit Analysis
Shopping Lists
Variables
So we are now in a good position to go forward and actually conduct our negotiation. But we have to remember that the bottom of the iceberg is critical as without this we will not be able to negotiate the best deal.
So lets have a look at the process we take to conduct the negoatiation.
Power Analysis
Big Idea
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19. Conduct the Negotiation
© Kantar Retail 2010
Successful Negotiating
Explore
Propose
Trade
During a negotion we actually follow a selling structure.
The first stage is to explore the needs of the other party:
Explore
Here we are trying to explore our negotiation limits. There are a number of things that we must consider:
Consider
Where they might start
Your starting position
Persuasive reasons why they should accept your position
Words you will use to offer your concession(s)
Words they might use in response
And so on and so on
Decide your fall-back positions
The objective here is to determine the other parties position and what is on there shopping list.
Propose
As a general rule you make the first proposal
Remember the other party need to be ‘seen’ to negotiate so we have to let them come back to us before we try to close the deal.
At this stage we need to consider some things:
Open realistically
Remember that“Outrageous proposals will generate outrageous responses”
Make it conditional
Allow customer to consider
Obtain specific objections
Trade
Hopefully the customer will have accepted our proposal and we will not need to negotiate. However, as with any negotiation, we will sometimes be forced to start trading some variables.
Here we have to remember some essential words....”If you.... Then I...” It is essential that when we trade any variable we use these words so that for anything that we give away we are getting something back in return. It is also important to remember the word order. We must never say “If I give you.... Then you can give me....” because this suggests that we can give it anyway. We must make the other party think that we can only trade our variable on the condition that they give us their variable.
Close
Finally we must close the deal and in the negotiation scenario this is often done best by summarising all the variables that have been traded and asking for agreement from the other party.
So remember to follow this process and remember the key words....”If you....then I...”
Close
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20. Understand Negotiation Tactics
© Kantar Retail 2010
Successful Negotiating
Salami
Setting out to agree on a point at a time rather than revealing the whole shopping list before negotiating
Silence
Complete silence – waiting for you to speak first. The people to break the silence rarely win
Columbo / Add ons
Getting right to the end of the negotiation and saying ‘oh just one more thing’
Competition
Referring to a competitor offer as ‘much better than yours’
Precedents
Your predecessor did it!
Flinching
Making out it hurts
Shrewd and experienced negotiators will use a variety of tactics to put you under pressure. Our response should always be to keep calm. Here are some of the most widely used tactics in Negotiations:
The Salami
This is when the person you are negotiating with will attempt to get you to agree to a variable one at a time in effect slicing up your deal just like a piece of Salami meat. We should not allow this to happen because if we think back to our cost benefit analysis of our shopping list, we will remember that there are some variables that make us money and some that cost us some money. The fact that we are prepared to trade variables that cost us money is because the overall deal still remains positive. When a customer tries to slice up the deal and get to agree point by point then we run the risk of the overall deal being negative.
Silence
This one is fairly self explanatory! But sometimes when we present our deal it is met with total silence because this puts us under further pressure to concede another variable because we are given the impression that the other party does not like our deal. This, however, is often just a tactic so wait fro them to respond. They may like your deal but are just waiting for you to concede something else.
Columbo/ Add Ons
This is a common negotiation tactic where we will have agreed on our deal and finished our negotiation only for the other party to say “just one more thing…. Can you perhaps add in this…..”. We should treat this like any other variable and only trade what they are asking for if we get something back in return. Remember, never give anything without getting something back even if the request comes after the deal has been closed.
Competition
It is not uncommon for the other party to reference our competitors as giving them a better deal to put us under further pressure to match it. Remember your parameters and only negotiate within them. If it doesn’t make sense for you to trade more variables to match the deal then don’t. Remember the BATNA zone and walk away if we get forced to concede too much.
Precedents
If we are new to the role then we may get told that the person who used to work in our position used to give them something that we are no longer offering. Resist the temptation to match this and re-inforce the benefits of your deal. There is most likely elements of your deal that your predecessor did not offer either so mention these variables that the customer has got this time instead.
Flinching
Good negotiators will always make things seem more difficult than they actually are. So if you ask for something they will make out that it is very difficult for them to trade it. This is just to increase the perceived value of that variable. So do not trade something big just because the other party is flinching, often if they can give it then it is not as difficult as they make out.
All of these tactics can be used against us but we should also try to use them as much as possible. Negotiation is a game and these tactics as long as used in the right way are expected in a commercial negotiation.
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21. If You’re in Trouble, Buy Time
© Kantar Retail 2010
Successful Negotiating
Call for a ‘time out’
Make notes
Refer to notes
Make a phone call
Use your calculator
Don’t make snap decisions under pressure
One of the key things in a negotiation is to have time to think. If you are under pressure then make sure that you buy your time by using one of the methods above…..
(narrator to run through the list)
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22. Build Rather Than Fight
© Kantar Retail 2010
Successful Negotiating
Look for common ground rather than looking for a fight
Listen hard for opportunities to develop your position or theme based on what they are saying
Keep summarising – it helps to keep on reminding everyone what has already been agreed and what still has to be done – sometimes you are closer to a deal than you imagine
Remember our objective. We want to move into the Win:Win zone. We do not need to achieve the ‘Optimum’ level of each of our variables. As long as they are within the ‘Essential’ then we are still within an acceptable position to close the deal.
The negoation will only move if we try to build rather than fight so bear this in mind if the negotiation seems to be getting into stalemate.
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23. Successful Negotiating
Top 10 Negotiation Tips
© Kantar Retail 2010
Successful Negotiating
6. Win:Win 7. Always have variables left – avoid the Columbo 8. Keep sight of big picture – avoid the Salami 9. Remain flexible and be creative 10. Know your walk-away point
1. If you then I 2. Understand their shopping l ist – be clear on yours 3. Sell more – negotiate less 4. Deal with facts, not emotion 5. Minimize value of customer’s concessions / maximize yours
Finally, this is a summary of the Top 10 Negotiation Tips
(Narrator to run through the points mentioned)
Thank you for taking the Negoation E-Learning Module
Please now continue to the assessment for completion of the module.
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24. Assessment

25. The Negotiation Balance
1. Click on the part that represents your opening stance
2. Click on the part that represents the other party’s opening stance
3. Click on the part that represents your walk away point
4. Click on the part that represents the other party’s walk away point
5. Click on the part that represents the zone of agreement
Other Party
You 2.
Tradable
Variables
Cost / Value 1.
Tradable
Variables
Cost / Value
AED
AED
Answers In Yellow 3. 4. 5.

26. The Negotiation ICEBERG
© Kantar Retail 2010
Successful Negotiating
Drag the following stages of a negotiation into the relevant stages on the iceberg:
Variables List
Conducting A Negotiation
Shopping Lists
Cost Benefit Analysis
Power Analysis
Conducting A Negotiation P L A N I G
Cost Benefit Analysis
Answers In Yellow
Shopping Lists
Variables List
Power Analysis
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27. Conducting the Negotiation
© Kantar Retail 2010
Successful Negotiating
Drag these stages of conducting the negotiation (on the right hand side) into the correct area on the funnel
EXPLORE
TRADE
PROPOSE
PROPOSE
Answers In Yellow
TRADE
CLOSE
EXPLORE
CLOSE
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28. Successful Negotiating
Negotiation Tactics
© Kantar Retail 2010
Successful Negotiating
Match the tactic on the right hand side to the correct description on the left hand side:
Setting out to agree on a point at a time rather than revealing the whole shopping list before negotiating
Salami
Waiting for you to speak first to force the concession of another variable
Competition
Getting right to the end of the negotiation and saying ‘oh just one more thing’
Columbo / Add ons
Answers In Yellow
Silence
Referring to another offer as ‘much better than yours’
Flinching
Using past relationships as a yardstick to force easy concessions of variables
Precedents
Making out that the variable is hard to give than it actually is
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