The Creative Negotiating

Creative negotiating is a quest for mutual-gain synergies—to match your assets to the other party’s needs, and vice versa. It takes more than a collaborative mindset; it’s an act of imagination. Creative negotiators unlock hidden opportunities to capture more total value in the deal. 

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Strategic Negotiating, Part II:

Breaking Through in a Cut-Price Marketplace

The Last Newsletter

In our last newsletter, we told the story of Starbucks and United, and how they worked together to help catapult Starbucks into the S&P 500 while forever changing the image of airline coffee. But not all creative negotiators work with iconic corporate brands and high-level strategic partnerships. Most of our clients are more everyday buyers or sellers—and our program works for them, too.

Have you ever really wanted a deal, but knew you were too far apart to settle as soon as you heard the other side’s position? In negotiating parlance, you were deadlocked.

At Mobus Creative Negotiating, we don’t believe that every deal at impasse contains some magical solution. But our research suggests that more often than not, negotiations fail when they might be rescued by a more advanced approach—a more enterprising, imaginative, creative approach.

The 20 Percent Problem

Take our friend Tom, a graduate of our two-day seminar. He works in purchasing for a merchandising chain that battles the Goliaths of the consumer electronics sector. Some years ago, he was thrown for a loss when Walmart and its Asian supplier made an exclusive deal for alarm clocks—then a critical item for Tom—at an ultra-low price point. Soon Walmart was dominating the marketplace; Tom’s company was getting killed. 

Tom is a resourceful guy. He found a Taiwan manufacturer with a great price, but it was still 20 percent too high for Tom’s chain to compete with Walmart. He bargained as hard as he could, but the manufacturer held firm. Both sides wracked their brains to take out cost: Modify the performance specs? Change the materials…the packaging…the shipping and logistics? Finally the manufacturer said: “Look, if I go any lower, there’s no margin for me.” Even with all those changes, a competitive price trim would take them below their cost of production.

Impasse and Inspiration

“I thought that was the end of the road,” Tom told me. “I just couldn’t see any way to make this deal.” What turned it around was a point he recalled from our seminar: the difference between bargaining and deal-making. In bargaining, we ask ourselves: What do I need to get out of this negotiation? It’s the traditional “power” approach to leverage the best possible price at the other side’s expense. In deal-making, we shift our focus from the tactical to the strategic: What does the other side need that they might not have considered?  And: Is there a way for me to meet their needs by opening new possibilities in the deal?

So Tom set price aside—for the moment—and started thinking like a deal-maker. After asking many complicated questions, now he posed a simple one: “By the way, what’s your production cycle?”

And the manufacturer replied, “In the summer, things are really slow. We have to shut down one of our three assembly lines and lay off a quarter of our workforce. Then we hire back in the fall.” As Tom probed further, he discovered that the best of the laid-off workers invariably found jobs elsewhere. Which meant the company had to hire new people each September and train them, at an annual cost of hundreds of thousands of dollars.

Tom said, “What if you produced our entire order during your slow season instead of monthly, and then we warehoused the items until we needed them? If you could keep your good workers year-round, wouldn’t that save you more than a 20 percent discount?”

It would and it did. Tom got the price he needed to compete, and the Taiwan supplier found a way to boost profitability while selling its clocks below production cost. Our client broke the deadlock through creative deal-making—first by exploring mutual opportunities, then by putting himself in the supplier’s shoes. 

In the 20^th century, effective negotiation was characterized by zero-sum toughness. But today’s complex, global economy requires ever more collaboration and creativity. And that’s where we come in.

Our Mission

At Mobus Creative Negotiating, our mission is to show you how to find more profitable outcomes in deals large and small. We can help you improve your negotiation skills by gauging the other party’s pressures and needs—by turning a transaction into a strategic relationship. To learn more about our Creative Negotiating seminars, visit us at http://www.mobusinc.com.