Like other cognitive biases, competitive expectations can be insidious. Fortunately, there are several steps you can take to forestall their negative consequences.
1. Ignore Your Opponent When Setting Your Reservation Price
When determining your reservation price, follow the advice of the experts and base it on your BATNA. Your reservation price should be based solely on your best alternative to a negotiated agreement (BATNA) and unaffected by your expectations of your opponent. During the negotiation, adjust your reservation price only when you receive information relevant to your BATNA. Your opponent’s behaviors, offers, and demands should have no effect on your reservation price, which is external to the negotiation.
2. Check Your Assumptions
Negotiators are often advised to prepare for talks by considering the other party’s strengths and weaknesses. We agree that it’s critical for you to think about your opponent, but we also encourage you to check and verify your assumptions during the negotiation itself. Research shows that people fall victim to a host of perceptual biases when assessing others. Therefore, be prepared to find out that your opponent is very different than you expected her to be.
How can you get accurate information about your opponent? Ask lots of questions, such as “If you don’t buy the product from me, what will you do?” or “Who might be other potential purchasers of our product?”
Such questions will not only help you to gauge your opponent’s basis of power but also establish his perceptions of your power.
In addition, questions such as “What do you value more, delivery time or product features?” will enable you to identify tradeoffs and create value. For instance, you may value delivery time more than your opponent does, and he may value product features more than you do. Knowing this, you can trade off these issues, giving your opponent features you want in exchange for your preferred delivery time. According to research, the more accurately you come to view your opponent, the better your outcomes will be.
3. Be Aware of Your Reputation
You might think that cultivating a reputation as a tough bargainer might be the best way to cope with a competitive opponent. But this isn’t necessarily the best strategy. When your opponent views you as competitive in a single-issue negotiation, as when price is the only issue on the table, he may lower his expectations and reservation price, allowing you to claim more value. However, overly competitive expectations could cause the other party to avoid negotiating with you in the future and lead others to do the same.
Even more critically, a reputation for competitiveness can affect value creation in more complex, multi-issue negotiations. When your opponent sets a low reservation price and makes concessions too quickly, you may not be able to create or claim greater value. Negotiators may also be less willing to provide information about their true interests when faced with a seemingly competitive opponent, further limiting value-creating tradeoffs. Indeed, Catherine Tinsley of Georgetown University’s McDonough School of Business, Kathleen O’Connor of Cornell University’s Johnson Graduate School of Management, and Brandon Sullivan of the University of Minnesota, have found that a reputation for being good at claiming value, even if it’s unwarranted, can prevent a negotiator from creating value.
How can you change someone’s erroneous expectations of your competitiveness? Demonstrate your cooperative spirit by focusing on interests, being open, providing information, and working to build trust. And, after a tough negotiation, Richard Larrick of Duke University’s Fuqua School of Business, Michael Morris of Columbia Business School, and Steven Su of INSEAD in Fontainebleau, France, advise you to offer your counterpart information about why you were so competitive. When the other party realizes that your competitiveness was fueled by strong alternatives rather than by your personality, you may avoid gaining a reputation as an overly tough opponent.
Adapted from “Break Through the Tough Talk” by Kristina Diekmann and Ann E. Tenbrunsel for the July 2006 Negotiation newsletter.