Negotiations can be defined as the “interpersonal decision –making process by which two or more parties agree on how to allocate scarce resources”. This means that negotiation is a decision-making tool that helps managers to use scare resources in an economical manner.
Negotiations must involve two or more parties whose common interest is to maximize the benefits accruing from the decisions made out of the negation. This provides the greatest challenge in the process of negotiation since each party focuses on obtaining the largest share of benefits that accrue from the negation. For example, a sales person would want to sell at the highest possible price in order to maximize profits.
On the other hand, the buyer would want to pay the least possible price in order to save his or her money. It is against this backdrop that a negotiator must have effective negotiation skills that would help in realizing a win-win situation. This paper describes the application of the essentials of negotiation in the context of a car sales executive.
I am a senior sales and marketing executive in a motor dealership that sells a wide variety of cars to customers form all over the world. The main challenge in this role is to maximize sales in an industry that is characterized by price sensitive clients. Besides, the clients are from diverse backgrounds and must be approached carefully in order to make a sale.
Given the intense competition in the market, we sell the cars on a non-fixed price basis. In my last deal, I offered the car for sale at a price of $ 4500. The clients were allowed to view the car at the showroom or through pictures posted on our website. Interested customers from overseas were expected to pay for the car through the PayPal system.
The choice of this method was informed by two reasons. First, it is quick since the money is received immediately. Second, it is secure since the buyer is guaranteed his money back if the car is not delivered.
The seller is also guaranteed to receive the payment once the car is delivered. Customers who visited the showroom were allowed to pay in cash. The two methods of payment were chosen in order to enable the firm to achieve timely availability of revenues for restocking the showroom.
Agreement and the Sale Price
The car price was informed by the average industry car price, the cost of the car and the expected profit. The customer offered to buy the car at $ 2500 which was below the cost price. However, I did not “walk out of the negotiation table”. I instead provided the customer with the latest statistics on the sale price of the car across the industry.
I also emphasized on the features of the car that would benefit the customer. Following my presentation, the customer raised his offer to $ 4200 as the maximum amount of cash that he was willing to spend on the car. I accepted the offer due to the following reasons.
First, I realized that the customer had the intention of sourcing a cheaper model of the car from another firm if we disagreed. Second, the price would enable the firm to recover the cost of the car and make a profit of $ 700 which was 15% more than the targeted profit.
Terms of Payment
The payment agreement had the following terms and conditions. First, the customer had to pay the full amount before receiving the car. Second, the customer was expected to pay for the fright and registration costs of the car in addition to the purchase price. The payment methods were limited to PayPal or bankers cheque since they are the safest and convenient methods.
The customer was given a one year warranty on the car. This means that the car will be replaced with a new one if it can be proved that it is not mechanically sound due to the manufacturer’s fault. The judgment will be based on the benchmarks set by the industry. The car will not be replaced if it is damaged due to the customer’s faults or negligence.
Second, the customer was entitled to six months free repairs as an incentive to encourage a repeat business. Finally, the firm was responsible for registering and delivering the car upon receiving the full price.
I consider the sale to be a success since I realized a profit that was above the expectation of the firm. On the other hand, the customer was happy to have purchased the car of his dream. Besides, he was pleased to have saved $ 300 on the original price. Thus it was a win-win situation.
Watkins, M. (2002). Breakthrough business negotiations: a toolbox for managers. New York: Weley Publisher.