Peter is a vice president of marketing and communication for a startup food delivery company called FoodFAST. Part of Peter's job in this role is to find a customer relationship management (CRM) technology solution that fits within FoodFAST's budget and vision. This is critical for FoodFAST for a variety of reasons. First, the company needs to know as much about their customer's preferences as possible so that it can suggest food items customers are likely to be interested in. Second, the company needs to be able to access customer data quickly so that it can troubleshoot any likely problems. Third, it needs a secure solution so that there is never any threat to their customers' data. Finally, because the company might need to sell parts of customer data in the future, it needs a technology that would allow this possibility. Peter is negotiating with Ben at CRM_One, one of the possible suppliers of a CRM product. Ben has offered him the following terms on the CRM_One Platinum Solution: Two-year contract Site license for the entire company at $25,000/year Free 24/7 tech support Web-based CRM access (no need to install software on desktops) Mailing program extension included at no extra charge (so that FoodFAST can create custom mailings for different segments of the database) Highest level of security along with insurance guarantee if data are hacked Peter is preparing a response to Ben. Imagine two different situations where Peter has two different BATNAS. Scenario 1: CRM One is Peter's first solid offer. He has calls into two other companies, Sales Fish and Market Capture, but neither of those sales representatives has returned his calls. Based on his knowledge of the market, he believes that Market Capture is going to be a more expensive solution, as this product is typically used by large companies in business-to-consumer marketing. Peter used Market Capture at his previous job, although he was not in charge of negotiating the contract. He knows very little about Sales Fish, except that the company has been around for about 18 months. Scenario 2: Before Peter got the offer from CRM_One, he negotiated extensively with Sales Fish, a competitor of CRM One, which has been in business approximately 18 months. He has received the following offer from Sales Fish: Open-length contract Site license for the entire company at $18,000/year Free 24/7 tech support Web-based CRM access (no need to install software on desktops) Highest level of security (no insurance guarantee) Willingness to customize up to 10 Sales Fish dashboard screens for FoodFAST (what the user sees when logging in) Peter feels pretty good about this offer but is a bit worried that Sales Fish is so new. CRM_One is a much more established company (>10 years). Peter has already talked to his boss, though, and the boss is comfortable with Sales Fish if Peter thinks that is the best value and will serve FoodFAST well.
#5 DESPARATELY
Poter is a vice president of marketing and communication for a startup food delivery company called FoodFAST. Part of Petor's job in this role is to find a customer rolationship management (CRM) tochnology solution that fits within FoodFAST's budget and vision. This is critical for FoodFAST for a variety of reasons. First, the company needs to know as much about their customer's preferences as possible so that it can suggest food items customers are likely to be interested in. Second, the company needs to be able to access customer data quickly so that it can troubleshoot any likely problems. Third, it needs a secure solution so that there is never any threat to their customers' data. Finally, because the company might need to sell parts of customer data in the future, it needs a technology that would allow this possibility. Peter is negotiating with Ben at CRM_One, one of the possible suppliers of a CRM product. Ben has offered him the following terms on the CRM_One Platinum Solution: - Two-year contract - Sile ticense for the entire company at $25,000 year - Free 24/7 tech support - Web-based CRM access (no need to install software on desktops) - Mailing program extension included at no extra charge (so that FoodFAST can create custom mailings for different segments of the database) - Highest lovel of security along with insurance guarantee if data are hacked Peter is preparing a response to Ben. Imagine two different situations where Peter has two ditforent BATNAs. Scenario 1: CRM_One is Peter's first solid offer. He has calls into two other companies, Sales Fish and Market Capture, but neither of those sales representatives has returned his calls. Based on his knowledge of the market, he believes that Market Capture is going to be a more expensive solution, as this product is typicaly used by large companies in business-to-consumer marketing. Peter used Markot Capture at his previous job, although he was not in charge of negotiating the contract. He knows very little about Sales Fish, except that the company has been around for about 18 months. Scenario 2: Bofore Peter got the oller from CRM_One, he nogotiated extensively with Sales Fish, a competitor of CAM_One, which has been in business approximately 18 months. He has received the following offer from Sales Fish: - Open-length contract - Site license for the entire company at \$18,000Vyear - Free 24/7 tech support - Web-based CRM access (no need to install software on desktops) - Highest level of security (no insurance guaranteo) - Willingness to customize up to 10 Sales Fish dashboard screens for FoodFAST (what the user sees when logging in) Peter feels pretty good about this offer but is a bit worried that Sales Fish is so new. CRM_One is a much more established company ( >10 years). Peter has already talked to his boss, though, and the boss is comfortable with Sales Fish if Peter thinks that is the best value and will serve FoodFAST well. - Site license for the entire company at $18,000/year - Free 24/7 tech support - Web-based CRM access (no need to install sotware on deskitops) - Highest level of security (no insurance guarantee) - Wilingness to customize up to 10 Sales Fish dashboard screens for FoodFAST (what the user sees when logging in) Peter feels pretty good about this offer but is a bit worried that Sales Fish is so new. CRM_One is a much more established company ( >10 years). Peter has already talked to his boss, though, and the boss is comfortable with Sales Fish it Peter thinks that is the best value and will serve FoodFAST well. Questions: 1. What is Peter's BATNA in Scenario 1 ? 2. What is Poter's BATNA in Scenario 2? 3. How is Peter likely to respond to CAM_One in Scenario 1 versus Scenario 2? Why? How does the relative strength of the BATNA impact Peter's likely response? 4. What would you recommend Peter do in Scenario 1? 5. What would you recommend Peter do in Scenario 2? Discussion Questions 1. Why is the concept of BATNA so fundamental to understanding and analyzing negotiations? 2. Should good BATNAs always be used? In what types of contexts should BATNAs be used or not used? 3. What would be the benefit to revealing a poor BATNA to the other side in a negotiation? Would this ever be a desirable action? 4. How does having a strong BATNA impact the ability to use other negotiation levers and tactics? Which ones and why? Concept Application 1. Negotiate using your BATNA as your main tactic. Report to the class how you improved your BATNA and how you used it. Also report whether or not it was effective and why. 2. Find a real-life negotiation where the sides each threatened to walk away. Assess whether this tactic helped either side (or both) and why. If it didnt help, speculate on why the two sides continue to use such tactics. Why do you think certain (entrenched) parties nogotiate via BATNAs in this way? Role-Play Exercise: H-Electrix Automotive This is a negotiation between the chief financial otticer (CFO) of H-Electrix Automotive and the CFO of Honyota USA. The negotiation is whether H-Electrix would like to purchase the Fremont manufacturing facility from Honyota. H-Electrix is a startup company looking to produce hydrogen fuel cell vehicles. H-Electrix has developed (and acquired) designs and technology and is ready to begin manufacturing. This would be the first production facility for H-Electrix. Honyota is a Japanese auto manufacturer that has been making cars in the United States since the early 1980s. Honyota has often been an early adopter of technology, especially in the area of aliernative fuels. The company sold the first commercially viable models of electric and hybrid gas-electric cars in the U.S. market. Honyota has considerable experience building hydrogen fuel cell electric cars and is one of the pioneers of this technology. As early as 2008, Honyota started selling its Lucidity model in California, which was the first hydrogen fuel cell car sold in the United States. To reach agreement in this negotiation, the two CFOs must agree on three issues: purchase price, the time frame for when H. Electrix would take over the plant, and whether to retain the current workforce. 5. Suppose Peter is negotiating with Ben in Scenario 1 and he was not able to improve his BATNA. How should he go about negotiating with Ben? (4 points) He should remain respectful and ethical. Peter can use tactics like If all else fails, Peter should walk away, because
