Characteristics and Behaviors of Concession Trading

EXTERNAL CHARACTERISTICS: The balance of power is much more equal during Concession Trading.  The complexity of the deal shifts the focus away from just price.  These types of deals require ongoing support through execution and delivery phases, thus creating transactional dependence.  Value, profitability, competitive advantage, and price tend to shape the terms as well as the length of these deals.  There may be few alternatives or substitutes.  Typical negotiations include supplier agreements, business customers and accounts, normal commercial transactions, etc.

BEHAVIORAL ELEMENTS: Concession Trading requires trust as relationship starts to play a role in shaping the transaction.  Satisfaction is received through understanding priorities, identifying common ground, and sharing value on primary issues.  You will need to provide limited information in order to build mutually accepted agreements.  The danger is to allow pricing concerns to devolve the discussion into Hard Bargaining.  Rejection is less extreme and replaced by compromise.  Parties are generally guarded and somewhat defensive as priorities tend to focus on self interests.  Basic operational concern for other party as execution and delivery issues dictate.

STRATEGY: Maximizing value during Concession Trading is through SHARE and PROTECT.  Value is mainly divied up amongst the parties, as little additional value is generated.  Power is accrued through linking the concessions and managing the personal relationship, this is the classic volume for price economies trade off.  The perception of power can swing either way based on your application of the “Laws of Power”.  The following skills are used as described:

OPENING – Your opening now consists of a number of demands.  You will need to pick and choose which issues you open extreme.  As information is shared and/or available the “Piss Off” point converges towards their breakpoint.

MOVEMENT – Movement comes from your ability to link issues and repackage the terms.  Value can be preserved through re-shaping the structure.  Moves tend to be bi-directional (I’ll increase the volume you decrease the price)

RESPONSES – Your responses play a critical role in managing the climate and fostering a healthy working relationship with the other party.  Instead of rejecting offers you offer choices and repackaged proposals.  Make sure to identify critical issues and “deal breakers”.

POSITIONING – Used clear indications of commercial conditions (company, market, precedents, contingencies, etc.).  Managing expectations means very few surprises during the proposal phase.

QUESTIONING – Your questions are directed at identifying priorities and issue flexibility.  Your questions are designed to unlock information.  Often parties will conceal or omit critical information trying to protect themselves.  Questions on strategic importance, future plans, etc.

NVC ALIGNMENT – Your body language should be categorized as measured reluctance during concession trading.  Your ability to make your moves seem painful is directly related to the other party’s satisfaction.

LEVERAGE – As focus shifts to profit, leverage comes from your ability to progress the discussion by offering additional proposals incorporating their demands.

POWER – Use actual and perceived power to SHARE and PROTECT your value.  Power is generated through the ability to clearly perceive their issues and identify possible concessions.  Power is also generated by your ability to manage the relationship and create the perception of “Fairness”.

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