A Sales Negotiation Story (Interests vs. Positions)

By Donal Daly

Image via http://www.thejfblogit.co.uk/

In any negotation, you never want to confuse interests with positions. 

A position is a particular stance taken by one party in a negotiation. It typically outlines that person's preferred result.

Interests, on the other hand, are the reasons behind the position. Interests define the problem. They are based on intangible motivations such as need, desires, or concerns, which underlie the preferred solution. It is important that you distinguish between interests and positions. Your interests in a negotiation are whatever you care about that is at stake in the process.

A "Complete Negotiator" is clear on his or her ultimate interests, and those of the other side. They also know their trade-offs among lesser interests, and are remarkably flexible and creative on the means. Consider the following negotiation story as an example. 

Simon is a sales executive in a software company that provides sales management solutions to the life assurance industry. A typical sale for Simon comprises a software license fee of $80,000, with an additional annual maintenance and support charge of $20,000, for a total purchase price of $100,000. Having competed effectively in a bid to a large insurance company, Simon was the preferred supplier. When it came to the negotiation, the buyer informed Simon that he needed him to sharpen his pencil a little, as he was only prepared to pay $75,000 in total. Simon was surprised, and a little dejected. He couldn’t sell the software without maintenance, and there wasn’t any way he could provide a full 25% discount. He tried everything to raise the buyer’s offer. He offered free additional training programs to the buyer. He suggested that, if he could hold his price, he could add a second year’s maintenance at a reduced rate. He even offered a dedicated support agent, just for that customer. It was all to no avail. The customer held firm, stating that he could only pay $75,000. Simon was confused. This customer had been reasonable to deal with right through the selling cycle. He provided information as requested and gave honest feedback on issues and progress. Simon felt he was at an impasse. The customer wouldn’t move from his $75,000 number –- not one dollar. Finally, Simon just asked the customer, “What’s magic about $75,000?”

The customer’s response opened the door to a solution. “It’s all I have left in this year’s budget.”

Though Simon had checked budget availability earlier in the selling cycle, a small project had been approved that took $50,000 from his buyer’s coffers, leaving him with only $75,000. That left him $25,000 short, if he agreed to Simon’s number. The buyer’s issue wasn’t value or price. It was that year’s budget. His position stated that all he was prepared to pay was $75,000, while his interest, once uncovered, revealed that $75,000 was all he was prepared to pay in that financial year.

Simon solved the problem by selling him a two-year maintenance contract, and agreeing a payment schedule that met his customer’s requirements. “Can you commit to a two-year support deal, if I structure the payment schedule such that you only have to pay $75,000 this year?”

"Complete Negotiators" probe beyond combative positions to uncover the shared interests that lie beneath. Arguing over positions is inefficient, and frequently damages the relationship between the seller and the buyer. Too much emphasis on positions drives negotiation toward a risky, ritual dance that does not meet either party’s fundamental concerns. Learning about and reconciling the full set of interests requires patience, researching the other side, asking many questions, and really listening. When you shift the discussions from positions to interests, the path to resolution becomes clearer. When you focus on the buyer’s interests, you can get to the heart of the matter more quickly, promote mutual understanding, and accelerate the search for a creative solution.

Donal Daly is CEO of The TAS Group. 

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