using shock openings in negotiations

Changing the Other Sides Expectations
The use of a shock opening can compel the other side to adjust their expectations. Using a shock opening is easier if you are in the strong position. If you are in the weak position, a shock opening can endanger the whole negotiation, as if the other side don't believe that your opening is credible they may decide to abandon the process altogether. Don't forget that the credibility of the opening position only needs to be established in the minds of the other side. For example, you could say something like:
“As I’m sure you’re aware things are slowing down at the moment, lots of people think that there’s over capacity building up in our sector. If we’re going to survive we need a significant price reduction from all our suppliers - and I’m asking for 20% off your prices.”
If you can get the other side to accept your extreme opening position then you will create the opportunity to use a split the difference approach later on. Remember that the other side may find it very difficult to refuse this suggestion without appearing to be both unfair and unreasonable

An Example Shock Opening
In the following example Laura, a technical author, is in the opening phase of negotiating a publishing deal for her new book on telecommunications networks.
She's expecting to agree a royalty of around 20% and has opened with a request for 25%. She's expecting the publisher to counter with an offer of around 15%. This example illustrates how the publisher could counter with a shock opening.
“Well Laura, our company usually pays royalties of between 5 and 10 percent for technical publications. Your book would be in high demand, but it’s likely to be out of date in about 12 months. Therefore, it is essential that the production of your book gets underway as soon as possible - and we are uniquely placed to make sure that your book is on the shelves within the month. As the market leader in this sector we can guarantee to maximize sales, but obviously this incurs high production and distribution costs.”
If this shock opening succeeds, Laura's expectations will be radically lowered - and whatever happens in the bargaining phase she would now consider anything above 10% to be a good result. The publisher has attempted to make this shock opening credible - by stressing the high initial costs of ensuring rapid publication.

The “Old Mother Hubbard”
The Old Mother Hubbard approach can be used to disguise a shock opening. As you may remember from the nursery rhyme, when Old Mother Hubbard went to the cupboard it was bare. This approach is based on the premise that irrespective of any other argument - there is no more money available. For example:
“The board have studied your proposal with interest and believe that your system offers the best solution. However due to budget constraints the most that we can afford is $22,000. I know that this is some way short of your proposed $30,000 - but there’s simply no more money available.”
An important point when employing this tactic is to make it clear that you are genuinely interested and that there is only one major obstacle in the way of an agreement – that is the amount of money. This approach can also be used where something other than money is raised as the only obstacle to doing a deal.

Agreeing the Agenda
You should try to follow your own clearly thought out agenda and use it to keep you focused on your goals and to keep the discussions on track. It may be advisable to agree the agenda up front, as described earlier. Beware of wasting time on issues that are of little importance to either side - this sometimes happens when both sides work too hard at avoiding contentious issues.

Use an agenda to:
1.      Formally define what the discussions are about.
2.      Keep you focused on your goals.
3.      Allocate fixed periods of time to specific issues.
4.      Help to bypass any deadlock situations - by moving onto the next item.

The presence of a firm deadline on your agenda can be used to put the other side at a disadvantage. Their options may become more limited as they feel the pressure of time. You may decide to set a deadline arbitrarily, for example by letting the other side know that you’ll be unavailable after a certain date because you have other commitments or are starting another project. You may highlight or exploit an existing fixed date as a deadline in order to expedite the negotiation process, for example a forthcoming trade show or the launch of a new venture. Negotiations depend upon clear communication and it is vital that both sides understand one another. Misunderstandings are potential time-bombs - set to go off just when both sides feel as though an agreement is within their grasp.

Always be explicit about:
1.      What point you are discussing.
2.      Each offer you make to the other side.
3.      What objections your side has to a given offer.
4.      What changes remove or negate a current point of contention.
5.      What terms you think you are agreeing to.

Try to draft notes about points of disagreement and about each point that is agreed on. Committing thoughts to paper can make both sides think more clearly about what has been agreed and reduces the chance of a misunderstanding arising.

Taking Notes
The bargaining phase can be long and protracted. During this phase many options may be discussed and it is important that you note down all of the concessions that are offered by the other side - no matter how tenuous or how conditional they appear to be. When it comes to detailing the terms of the final deal, the notes you have taken may put you in a position to request concessions that can substantially benefit your side’s position. The other side may have volunteered concessions, at the time noted by you, that you can later request - for example making them conditional on you delivering the main deal in line with their expectations.

For example, you might say:
“Just a couple of requests - first you indicated yesterday that you’d be willing to supply the first years maintenance free if we committed to a three year contract. This morning you said that you’d be willing to service a fifth site free for 6 months if we signed up four sites for two years.”
“Well I am now in a position to sign up the four sites for a two year period but only if you’ll give us the first years maintenance free without any commitment on our part thereafter and the fifth site free for 1 year instead of 6 months.”

The details you have recorded enabled you to respond in the following way:
Their Offer: First years maintenance free on a 3 year contract, 5th site free for 6 months if 4 signed up for 2 years.
Your Request: First years maintenance free on a 1 year contract, 5th site free for 12 months.

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