Training : What Is BATNA In Negotiation And Why Is It So Important?

As a modern-day salesperson have you ever found yourself in the position where your prospect or client has flat out refused to accept your deal, price, or agreement? I’m positive you have.

They either want a discount or terms that you simply can’t adhere to, or it makes no sense for you to agree to them.

Negotiating properly means that you know what you can trade, like better delivery terms or products and services added or removed, what you can discount to and it’s also very important to know what your walk away point is.

When it comes to negotiating the deal it’s very important that you have several different options and alternatives up your sleeve. But when all is said and done there will be one option that will be your best and that’s called your BATNA.

What does BATNA in negotiation stand for?

Before we get into how to use and create your BATNA, let’s answer the key question, what is BATNA?

BATNA stands for Best Alternative to a Negotiated Agreement. It’s what you will do if the negotiation process doesn’t result in an agreement that works for you.

When making a sales pitch, for example, your BATNA is the next best deal. It’s what you will do if the potential customer says no to your proposal. Creating a BATNA is important because it gives you more power and leverage during the negotiation process. It allows you to walk away from a bad deal and avoid getting taken advantage of.

As part of the sales process, you should always have a BATNA in mind. This way, you’ll be less likely to make concessions that you’ll later regret.

Your BATNA should be realistic, and it will be based on your objectives going into the negotiation. It could be that you find another supplier who can offer you better delivery terms or products and services added or removed, what you can discount to, and it’s also very important to know what your walkaway point is.

When you know what your BATNA is, you can be more confident and focused in the negotiation process. You will know when to walk away from the negotiation and when you should be open to concession.

Most people find it helpful to create a BATNA before they start negotiating. This way, you can go into the negotiation feeling more confident about what you want and what your options are if an agreement isn’t reached.

What’s the importance of having a BATNA?

A BATNA can be extremely helpful in a negotiation. It can give you a clear goal to work towards and help you avoid making concessions that you later regret.

When you have a BATNA, you also know your bottom line – the point at which you will walk away from the negotiation. This can be very useful information to have, particularly if the other person is proving to be difficult to work with.

Negotiation skills are important in both our personal and professional lives. By understanding and utilising key concepts such as BATNAs, we can improve our chances of achieving favourable outcomes in a wide range of situations.

So, if you’re asking yourself why is BATNA important, a BATNA can give you a significant advantage in a negotiation. It is therefore important to spend some time thinking about what your BATNA might be before you enter any negotiations.

How to create your BATNAs

While each BATNA will be specific to each negotiation, and to each person involved, there are some general steps that you can follow that will show you how to determine BATNA:

1. Identify possible alternatives

Always have a plan B. If the negotiation doesn’t work out the way you want, what are your other options? What are you going to do if the negotiation fails?

Having this backup plan will help to give you a sense of security and confidence going into the negotiation, knowing that you have other options if this one falls through.

It will also prevent you from over focusing on one particular negotiation and missing out on other opportunities.

2. Consider the costs and benefits of each alternative

Not all options are created equal. Some may be more expensive or time-consuming than others. Others may be riskier. Weighing the pros and cons of each option will help you to decide which is the best for you.

This is where research becomes your best friend. If you know the going rate for what you’re selling, or the average cost of what you’re buying, you’ll be in a much better position to decide.

3. Choose the best option

Once you’ve considered the costs and benefits of each option, it’s time to decide. You’ll need to isolate the option that offers the most benefit for the lowest cost. This is the option that you should choose.

Of course, sometimes there are other factors to consider. If one option is considerably riskier than another, but also has a higher potential reward, you may decide that it’s worth taking the risk. Ultimately, the decision is up to you.

When making a cost-benefit analysis, it’s important to be as objective as possible. Try to smooth over any personal biases that you may have and look at the situation from all angles. It can also be helpful to get input from other people who are affected by the decision. Remember, there is no perfect outcome in every negotiation. The best you can hope for is a result that is fair and equitable for both parties. The key is to be clear about what you want and be prepared to walk away if you don’t get it.

4. Create a list of concessions

This is where you will start to get into the nitty-gritty of the negotiation. What are some things that you are willing to concede to get what you want? For example, if you are negotiating for a higher price, you may be willing to concede on the quantity of goods or services. Or, if you are negotiating for a lower price, you may be willing to concede on the quality of the goods or services.

5. See if you can improve your BATNA

Now that you have your BATNA in place, it’s time to iterate and see if you can improve on it. This may require some creativity and out-of-the-box thinking, but it will be worth it in the end. Do your research on your best alternative and see if you can find ways to make it even better. For example, if your BATNA in negotiation is to close a sale of a certain value, can you find ways to increase the value of the sale? Or would walking away from one sale make it possible to close two other sales?

6. Use your BATNA as leverage

Now that you have a strong BATNA in place, you can use it as leverage in the negotiation. This means that you can be more demanding in the negotiation knowing that you have a strong alternative if the negotiation fails.

However, you should be careful not to use your BATNA as a bluff. This is when you threaten to walk away from the negotiation knowing that you will not follow through with it. This will only damage your reputation and make it harder to negotiate in the future.

BATNA examples for B2B and B2C sales

To make things as crystal clear as possible, let’s look at a few BATNA negotiation examples for both B2B and B2C sales:

B2B BATNA Examples

Anna is a business development manager for a mid-sized company that sells office supplies. Her company is in the process of negotiating a contract with a new client. The client is demanding a lower price than what Anna’s company is willing to sell the supplies for.

Anna knows that her company has several other potential clients to whom they could sell the supplies to if this negotiation falls through. This gives her company some bargaining power and makes their BATNA stronger.

In this BATNA example, Anna’s company’s BATNA would be to sell the supplies to another client at a higher price. However, if Anna can negotiate a lower price with this new client, then her company’s BATNA would be to sell the supplies to this new client at a lower price. This would be a better option for Anna’s company, and so she will try to negotiate for it.

If you’re in sales, then understanding your company’s BATNA is essential to your success. After all, if you don’t know what your company’s best alternative is, then how can you negotiate for a better option?

B2C BATNA Examples

John is a software sales representative for a small company. His company’s main product is a new software that helps businesses keep track of their inventory. John has been trying to sell this software to a large retail chain, but so far, the chain has not been interested in the price point that John’s company has been offering.

John knows that his company’s best alternative to a successful negotiation with the retail chain is to find another customer who is willing to pay the asking price. John also knows that the retail chain is his company’s best alternative to not having a sale at all.

The BATNA, in this situation, pivots on the retail chain’s willingness to negotiate on price. If the retail chain is not willing to negotiate, John’s best alternative is to walk away and find another customer.

If they are willing to negotiate on price, John’s best alternative is to sell to the retail chain at a price that suits both companies. In either case, John’s BATNA provides him with some flexibility and options.

It is important to remember that the BATNA is not always about finding the highest possible price or the best possible customer. Sometimes, the best alternative might be to simply walk away from the negotiation and find another customer.

This is because the negotiation process can be time-consuming and costly, and it might not be worth it if the other company is not willing to budge on price. In other words, the BATNA can help you save time and money by helping you avoid fruitless negotiations.

Analysing BATNA alternatives for the other side

Understanding your BATNA is critical, but so is understanding the BATNA of the other side. This is because, if you know their BATNA, you will have a better idea of how much leverage you have in the negotiation.

There are a few ways to go about analysing the other side’s BATNA. One way is to simply ask them what their BATNA is. This can be a bit of a risk, as they might not tell you the truth, or they may use your question to try and infer your own BATNA.

Another way to analyse the other side’s BATNA is to try and think about what their options are outside of the negotiation. This will give you a good idea of how strong their position is, and how much they need to make a deal with you.

If you’re struggling to think about what the other side’s BATNA might be, there are a few key questions you can ask yourself that will help you to generate some ideas. These include:

• What are their alternatives to this deal? – Doing a little opposition research can help you to understand what other options the other side has, and how likely they are to pursue them.
• What are their costs if they walk away? – It’s important to think about not just the financial costs, but also the opportunity cost and any other factors that might influence their decision.
• How much do they need this deal? – This ties in with the previous point, but it’s worth considering how much the other side needs or wants this deal in order to gauge their BATNA.
• What are the consequences of them not making a deal with you? – Are there any other factors at play that might make the other side more or less likely to reach an agreement with you? Will they be able to find another buyer? Are there any time pressures?

Analysing the other side’s BATNA can be a complex task, but it’s important to try and understand their motivations and what they’re looking to achieve in order to give yourself the best chance of reaching a successful agreement.

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