Success in negotiation requires careful preparation and planning. The following are the 10 Critical Steps for Negotiation Preparation:
- Assessing your Leverage
- Identifying the Issues
- Setting Targets
- Deciding if and when to disclose targets
- Developing a Strategy
- Putting Negotiation Issues in order
- Contingency Planning
- Deciding on location
- Developing your negotiation worksheet
- Practicing the negotiation
This article focuses on the third step in preparing for a negotiation: setting targets for each issue you identified.
A target is a goal that you want to achieve for a particular issue. If a supplier proposes a price of $12,000 and you want to pay $10,000, then $10,000 becomes your target price. But many negotiation experts suggest setting not one, but three targets for each issue.
Those three targets are:
- The most desirable outcome
- A realistic scenario
- Least acceptable alternative
Most Desirable Outcome
In the most desirable outcome, you are recording a target that represents obtaining the maximum amount of concessions from the supplier. If price is the issue for which you are setting a target, the most desirable outcome target would be the lowest price that you could possibly pay.
While most desirable outcomes are often overly optimistic, they serve a couple of purposes:
- force you to think about how much flexibility there really is in the supplier’s terms.
- motivate you to work hard – if the most desirable outcome is achieved, you can feel great about achieving all your objectives.
- prevent you from settling for less than what you may be able to achieve.
- serve as a good starting offer in negotiations where the parties start at opposite extremes and end up agreeing upon some position between the two original positions.
Consider this Example:
You may offer $80,000 (your most desirable outcome) for a piece of used equipment that the supplier has priced at $100,000. You reasonably expect that both parties would be willing to settle at approximately $90,000 – the lowest price the supplier would be willing to accept.
In the realistic scenario, you are recording a target that you strongly feel is the likely outcome, provided that you negotiate using your best skills. While the realistic scenario is not as extreme as the most desirable outcome, it should represent a challenging goal. If you fail to achieve a result that approximates your realistic scenario, you have come up short and should aim to improve your negotiation performance next time.
Least Acceptable Alternative
In the least acceptable alternative, you are determining at what point it would not be worth it for you to do business with the supplier. Accepting less than the least acceptable alternative would be regarded as a mistake. You have other options – even the option to do nothing – that would be better than accepting the least acceptable alternative.
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