(From the notebooks of Tyler Gitou, the Deal Whisperer)
“We had our meeting with the client,” Verdi said to Tyler Gitou. “As you suggested, I provided him the two options.”
“Let me make sure I understand the situation,” said Tyler. “You offered to deliver the equipment for $1 million with a certain level of quality. The client then asked for a $100,000 reduction in price or else he would go to your competitor.”
Verdi nodded. “That’s right. We spoke and you suggested I offer him two options: either paying $1 million for the equipment with the higher quality components, or paying $900,000 for lower quality components.”
“Good,” said Tyler. “Now let’s think about how he might respond.”
“He will either accept one of the two options,” said Verdi, “or he may come back and say he wants both higher quality components and a lower price. If that happens, what do I do? We can’t provide the better quality for the lower price. It’s a bad deal for us. I can’t agree to it.”
“What will he do if you can’t reach agreement?” Tyler asked. “What’s his BATNA?”
“His what?”
“His best alternative to a negotiated agreement, or BATNA. What will he do if he can’t reach a deal with you and he walks away? Will he do a deal with someone else? Not do a deal at all? We need to think of all of his potential alternatives and decide which alternative is best for him. That’s his BATNA.”
“He could delay doing a deal,” Verdi said. “Or he could go to my competitor for the lesser price.”
“Is he likely to do either of those things?” Tyler asked. “Is your competitor’s offering as good as yours? Or will his old equipment provide the quality he needs?”
Verdi thought for a moment. “No and no,” he said. “The competitor’s product is not even close to ours in terms of quality and reliability. And he has to do a deal to upgrade the equipment because he has regulatory compliance issues to address.”
“What I am hearing, then, is that your client really has no alternative which will better meet his interests than your product, and that the deal you have put on the table is your best and final offer. Is that correct?”
Verdi nodded. “That’s sounds right,” Verdi said. “So what do I say if he requests the same quality at the lower price?”
“Verdi, the answer is right there in front of you!” Tyler laughed. “You’re just afraid to say it.”
Verdi swallowed hard. “I say, ‘no’.”
“Exactly,” Tyler said. “You have to say ‘no’ because you just told me you won’t say ‘yes’! But you’re afraid to say ‘no’ because you perceive that is the end of the deal. It’s not. A Deal Whisperer knows that ‘no’ is often the beginning of the deal. What you don’t see is that your client is waiting for you to say ‘no.’ Like any good negotiator, he is going to keep asking you for changes until you say ‘no.’ Why shouldn’t he keep asking as long as there is a chance you might say ‘yes’?”
“You’re right, of course. I was afraid of what he would do if I said ‘no.’ Analyzing his BATNA with you makes me less concerned. But how do I actually say ‘no’?”
Tyler smiled. “Explain the situation. This is your best deal. You can reduce the price if you reduce the quality, otherwise your hands are tied. Let him know this is it. You don’t have to say ‘no’ so much as you need to let him know these are the final options.”
Verdi stood up. “OK, I’ll give him a call. Let’s hope the next time we meet it’s to say the deal is done!”
“I’m confident it will be,” Tyler said.
