Negotiations... with Customers and Oneself

Michele Hansen 
Welcome back to software social. I'm Michele Hansen.

Colleen Schnettler 
And I'm Colleen Schnettler. So Michele, what's been on your mind this week?

Michele Hansen 
So after our conversation with Alex last week, which, by the way was so fun, I feel like we got to talk to him about like, a 10th of the things I wanted to talk about. I have been thinking a lot about what I got out of my own MBA, because his book, The Tiny MBA, and we talked about this a little bit about the differences between between that and and it's just made me reflect on some of the things I got out of mine. And one of those things is negotiation skills.

Colleen Schnettler 
Okay.

Michele Hansen 
I really learned in that program just how much of a wuss I was at negotiations.

<laughter>

I got to do this trip to India and the UAE and we were visiting factories and and whatnot and part of it, you know, being an India, was going to the markets. And our professor was very keen that we learn how to negotiate and I remember we would, you know, go out and buy things and our graduate assistant student in the program was from India and we would always go to him and be like, hey, like, you know, I got this scarf and you know, I got them down from from this price to this price. And he would always like, shake his head and be like, you could have done so much better than that, like you just got totally ripped off. And I remember feeling like oh my god, like and, and I realized that experience -- getting my ass kicked by India -- made me realize how little I knew about negotiation. And, and so I ended up taking a class on it.

Colleen Schnettler 
Oh, when you were getting your MBA, you took a class specifically on negotiation?

Michele Hansen 
Yeah.

Colleen Schnettler 
Oh, that's awesome.

Michele Hansen
Yeah, it was awesome. And we got to do exercises, simulating negotiations and learning about different styles of negotiation, and different tactics to use.

And the really, the big thing I got out of that was that you don't have to be a hard negotiator, you don't have to be mean, in order to be a good negotiator. And, and I feel like this is something that we don't have a lot of cultural exposure to negotiation, right. You know, unlike my, you know, fellow student who grew up in India and buying groceries or buying anything involved, negotiation and haggling. I didn't really observe a lot of negotiation as a child or as a teenager, right? Like, Can you recall observing that very much?

Colleen Schnettler 
No, the price is what it is and you pay for it or you don't.

Michele Hansen 
Yeah, exactly. So, um, and so I think my understanding of negotiation was very much guided by pop culture figures who are known for being you know, hard charging and you know, screwing the other side basically right like, and so I just kind of I always shied away from negotiation. But negotiation is really, really important in running a business, especially once you start dealing with enterprise customers who pretty much always want to negotiate. They're not going to, you know, just sign up for a plan on the site and then just pay for that, especially on an annual basis and then things like that. And, and so I learned that you can be a good negotiator and get what you need out of an agreement. But you don't have to be mean and you don't have to, like bend over to them, either.

Colleen Schnettler 
Okay, so let's dive into this cuz...

Michele Hansen 
Yes!

Colleen Schnettler 
I think negotiation is a fascinating topic, especially for women. I have negotiated salaries and I remember like the first time I negotiated a salary, it was like, you should always negotiate But to your earlier point, like I have no experience in negotiating. So you just kind of pick a number. You're like, Oh, this is my number. Like, let's talk a little bit more about some of these tactics and like, how does one negotiate without being a jerk?

Michele Hansen 
Yeah, so one of the most important things to remember in negotiation is knowing your BATNA.

Colleen Schnettler 
What's a BATNA?

Michele Hansen 
Your BATNA is a best alternative to a negotiated agreement.

Colleen Schnettler 
Did you make that up?

Michele Hansen 
I did not make that up. This is actually a term that like is in every piece of negotiation literature. Basically, you know, some people think of this as leverage or as your power or but it's basically your alternative, right? Like if you don't negotiate this, like if you walk away from that job, what is your alternative? And, but you always have to think about your BATNA and then your counterparty's BATNA, and maybe way to think about this is it has The word bat in it, right? Your BATNA is what allows you to fly away.

Colleen Schnettler 
Okay, so let's use your example. I like concrete examples when I'm trying to understand this. Are you comfortable? Like you can make up numbers? But let's say you're negotiating with an enterprise client. So when you say BATNA, you mean that is your number you won't go lower than.

Michele Hansen 
That's a reservation price.

Colleen Schnettler 
That's different reservation price. Okay?

Michele Hansen 
So um, so your BATNA is basically your alternatives. So, for example, let's say that you...Okay, here, here's an example. Let's say you run a customer support platform. So these things out there like intercom and whatnot. So your customers, your customers' BATNA, right, so their alternative is are there they can use one of your competitors. But maybe they don't have all of your features like maybe, let's say, you do chat and email and knowledge management. They can use one of your competitors, but they don't have one of those features. So that's their best alternative. Or they can use three different services that will cost them a lot more money than using your one service. So that's probably the simplest example is that their alternative to using your service requires them to use three other services that end up being more time and hassle for them. By knowing what their BATNA is, or what their alternative is, you have a stronger negotiating position. You don't have to give up as much. And also you can remind them Yes, for example, let's say $5,000 a year sounds like a lot of money. But if you were to not use this service, and use x, y and z instead you would be paying $15,000 a year. So you have actually just created a net positive for them of $10,000 and you haven't moved on your price at all.

Another thing that is really important in a negotiation and part of not being mean another way to put it, it's actually a book that Alex recommended last week that really piqued my interest called Just Listen. And he had mentioned how this is a book used by hostage hostage negotiators. And that really got me interested because they are some of the best negotiators out there. And one of the concepts of it is you just listen for what is important to the other side. So for example, in your salary example, what may be important to you is the number but there may be other benefits that are really important to you, that are ancillary to the salary itself, that actually aren't very difficult for the employer to give you.

So for example, let's say that you're negotiating on a salary of $100,000, and they're only willing to give you $...