3 Reasons Why You Should Offer Alternatives When Negotiating
When was the last time your offer included multiple alternatives? Why isn’t this common practice? It’s an easy way to get more information on the other party, build some trust, and improve the likelihood of them accepting your offer.
Information is vital to progressing a negotiation. The more information you have about your counterparty’s requirements and how they value them, the better a position you’re in to change the variables or issues until you find something that everyone can agree on.
The problem with providing only one offer is that you get little to no insight as to why it was rejected. Your offer doesn’t just include price, it might include payment terms, quantity, renewal terms, exclusivity or a host of variables. Each variable will be valued differently though, to you and to them. You should strive to find out what’s valuable to them so you can tailor the deal to be agreeable to both.
This is where alternatives come in. Structure two or more alternatives together to have roughly equal weighting for you. For one the price might be higher, and quantity lower, another might have exclusivity or promotional material etc. Make them different enough so there’s a clear distinction, but again, make sure they’re of more or less equal value to you.
Now, offer them the alternatives, and listen very closely. Whether explicitly or not they’ll let you know which one is most favourable to them and hopefully why, or you should be able to deduce it based on their preference.
Great. Now you have information on what they value more. And now if you give them another offer, you’ll know what issues they’re keen to take.
Building Trust and Demonstrating Flexibility
Another component that is vital to progressing negotiations is trust. You want to build trust so that you can negotiate as openly as possible to encourage and make use of any special circumstances or requirements each party has. By providing multiple alternatives in your offer, you’re communicating that you’re willing to be flexible to make this happen. It shows commitment, flexibility, and understanding. You’re committed to finding a good solution for everyone, you’re flexible with the proposal, and you understand they have their own requirements and needs.
Be careful if you choose to make one or more alternatives to be a very poor deal though. This is a tactic sometimes used. You propose one alternative that is reasonable and the rest to be completely unacceptable in an attempt to make them choose the more preferable alternative. Although this can work, if they catch on to this you’ve just deteriorated that trust. Use with caution.
Closing the Deal
Naturally the more alternatives there are, the greater the chance that one of them rings true to their needs. As long as you structure the alternatives to be equal in value to you, there’s no reason not to provide them with multiple options, and you might find them accepting one that is no better or worse than the originally intended offer.
For example, if after some number crunching your team figured that every extra week provided on payment terms comes to about 0.2% of the cost per unit, give them two alternatives, one with later payment terms equal to an equivalent increase in cost, and one with your standard payments with your suggested price per unit. You might find the buyer prefers the later payment terms due to cash flow concerns and that gives them a workaround to accept the higher price.
Alternatives add value to any face-to-face or online negotiation: they progress them, provide information, build trust, and hopefully lead to a deal well done.
This article has been written in collaboration with Alex Stefan from The Gap Partnership the world-leading negotiation consultancy firm.