Where Does Negotiating Power Come From?

The primary source of your negotiating power comes from you BATNA, Best Alternative To a Negotiated Agreement. The better you can make your next best alternative, the more power you have. Alternatively, the more superior you can make your offering appear to any other choice the other party has, the less power they have.

If I know that $5.00 per widget is a better price than my customer can buy them for anyplace else and a better decision than going without, then I feel no need to lower my price. What the product costs me to produce is irrelevant, my solution to the customer’s problem is already a better value than any other choice they have.

Usually, we don’t have perfect information about the other party’s BATNA, but we can know what our BATNA is. If I know I can sell out my widgets for $4.75 each, then I am not going to sell any of them for a price lower than that.

If you only have an estimate of what your BATNA is, then use your estimate and stick to it. It is easy to get wrapped up in the desire to close a deal and forget about your BATNA, but don’t. I find it is best to walk away from the negotiation and think about it before reassessing whether my assumptions about my BATNA were valid. Remember, your BATNA is based on information that had nothing to do with the other party. It is what you could do instead of working out an agreement. Is there really anything they have shared with you that changes that?

Try to strengthen your BATNA before you go into negotiations. By strengthen I mean both a better BATNA and a BATNA you are more confident in. Doing your homework to find out what your alternatives are put you in a much more powerful position at the bargaining table.