Give yourself negotiation power with an ambitious Goal & ZOPA - Part 2/3

Today you will learn: How to set a goal price in a negotiation - How researching and pushing the other side's limit gets you the best deal - How analyzing the ZOPA (Zone of Possible Agreement) helps you avoid losing millions over your career

This month we focus on how you secure the biggest piece of the pie and share the three key numbers you need to prepare for any monetary negotiation.

In Part 1 last week you saw how you need to set your Limit Price with the help of your BATNA (see here if you missed it).

This week, let's talk about the 2nd Number: the Goal Price

Your second number to prepare in distributive negotiation is your goal. This number should be higher than the limit (if you are the seller/claimant) or lower than your limit (if you are the buyer/defendant).

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How do you set a goal?

Some basics: It should be optimistic, yet realistic, specific and well-researched but as high/low as you can possibly dream to get. Remember, in life and in negotiations, higher goals achieve objectively higher outcomes.

There are 2 ways to set your goal:

A. Use your best objective criteria to calculate what might be the best possible deal.

B. Or even better: Push to THEIR limit price. Even the best objective criteria vanish in comparison to a good "guesstimate" of what THEIR limit (ie alternative) is. Because it can help you grab the biggest part of the "ZOPA"

ZOPA - What is that?

ZOPA is the Zone of Possible Agreement. It is the overlap between the limit prices of both sides. Any rational deal MUST happen in this zone. Whoever manages to push the deal closer to the limit of the other side has taken the bigger piece of the pie.

Here is a graphic of the ZOPA between the buyer of a house who has set their limit to 580k (let's say they have an alternative house to buy at that price) and the seller who has set their limit to 500k (let's say they already have an offer for that).

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The ZOPA is therefore between 500k - 580k.

All deals will happen in this zone. Whoever manages to push the deal closer to the limit of the other side has taken the bigger piece of the pie.

What does this mean for our goal-setting?

The best goal price is the one that is as close to their limit as possible.

Will we usually know the (exact) limit (i.e. alternative) of the other side? Unlikely.

But we can do our best to do as much research as possible to find out about it (see example of a salary negotiation below).

Since people don't spend time doing that research they set suboptimal goals and therefore end up with suboptimal deals.

Watch this video for more details and an example of how to calculate the ZOPA:

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BONUS EXAMPLE SALARY NEGOTIATION

Here is a practical example: A university professor came to me to help him prepare for a salary negotiation with the dean for a new position. The job post had stated 70,000 for the job (the minimum salary, as required to be publicised by law). To prepare for the negotiation I asked him to research the average salary for this position. He came back with 80-100k. So then we started thinking: "What do we think is the absolute maximum the dean could give? Where is his limit?". We decided it would probably be 100k. So this is where he set his negotiation goal, at 100k. He started out asking for 120k and ended up with an offer for 96k.

Without this thought process, he may have set his goal at 90k.. Which is "already 20k more than the post". He might have started with asking 90k. Which then would usually get him around 80-85k. 10-15k less a year (or more than half a million over his remaining career years.. Even without any other promotions or adjustments.?

In short: Don't use this framework and it can cost you millions over the course of your career.

Keep Negotiating! And have a goal when you do!

Dr. Claudia

Your Negotiation Whisperer

Next week: Part 3 - Your opening price. How to anchor in a negotiation to significantly sway the numbers your way.

PS: Any questions, examples or thoughts? Other topics you want to learn about? Comment on the post below and let's talk!

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