Negotiation is part of almost every B2B sale (business to business, one company selling to another), and of many other situations: a salary, a rent, a group project. This lesson gives learners five tools and lets them try them out in a role play between two fictional companies. Both sides get confidential instructions, so each knows only its own numbers, as in real life.
At a glance
Item | Details |
|---|---|
Time | 90 minutes |
Level | Vocational school, bachelor, adult education |
Group size | Any; the role play runs in pairs or in teams of two against two |
Learners do | A short anchoring experiment, a ZOPA calculation, preparation with a planning sheet, a 20-minute negotiation, a debrief |
Running the lesson
90 min- 5 min
Anchoring experiment: hand out the two estimate cards (half the class gets A, half B). Collect the estimates without comment.
- 15 min
Input: BATNA, reservation price, target and ZOPA with a number line on the board. Reveal the results of the anchoring experiment and explain anchoring.
- 10 min
ZOPA worksheet in pairs (three short tasks). Compare answers.
- 10 min
Input: trade concessions instead of giving them; packaging several issues. Practise three "if you, then we" sentences.
- 10 min
Introduce the case. Hand out the confidential instructions. Each side fills in the planning sheet alone or with its team partner.
- 20 min
Negotiation in pairs. Each pair writes its agreement (or "no deal") on the result slip.
- 15 min
Results on the board, then debrief with the questions below.
- 5 min
Exit ticket: "One thing I will do differently in my next negotiation." Set the homework.
Materials
Anchoring cards A and B (below), cut so each learner gets one.
The ZOPA worksheet (below), one per pair.
Confidential instructions for the buyer and the seller, from the reveal below, printed separately. Each learner sees only their own side.
The planning sheet, one per side.
Result slips: price per kg, delivery, contract length, payment terms, signatures. Or let pairs write their results on the board.
A table on the board to collect all results (see the debrief section).
Key ideas
BATNA
BATNA stands for best alternative to a negotiated agreement: what you will do if this negotiation fails. The term comes from Roger Fisher and William Ury's book Getting to Yes (1981). A buyer's BATNA might be another supplier's offer; a seller's BATNA might be selling to a different customer. The better your BATNA, the less you depend on this deal. Knowing it before you start stops you from accepting a deal that is worse than your alternative.
Reservation price and target
Your reservation price is your walk-away point: the worst price you would still accept. For a seller it is the lowest price, for a buyer the highest. It follows from your BATNA. Your target is what you realistically hope for. Good negotiators prepare both and keep the reservation price to themselves.
ZOPA
The zone of possible agreement (ZOPA) is the range between the seller's reservation price and the buyer's reservation price. If the seller would accept anything above 40,000 euros and the buyer would pay up to 46,000 euros, every price between 40,000 and 46,000 works for both: the ZOPA is 6,000 euros wide. If the seller's minimum is higher than the buyer's maximum, there is no ZOPA, and no deal is possible on these terms.
Draw it on the board as a number line:
seller's minimum 40,000 ... ZOPA ... 46,000 buyer's maximum
Anchoring
An anchor is a first number that influences later estimates, even when people know it is arbitrary. Psychologists Amos Tversky and Daniel Kahneman described this effect in 1974. In negotiation, the first offer often works as an anchor: later offers move around it. A seller who opens with a high but defensible price, and explains why, often ends higher than one who opens low. An anchor must be realistic, though. An absurd first offer can end the conversation.
If the other side opens with an extreme anchor, do not negotiate from it. Say calmly that it is far from what you expected, and put your own, well-reasoned figure on the table.
Trade, don't give
A concession is something you give up: a lower price, faster delivery, longer payment terms. Inexperienced negotiators give concessions to be liked, and the other side simply takes them and asks for more. Experienced negotiators trade them: "If you sign for two years, then we can offer 50 cents less per kilo." Every concession gets something back.
Packaging
Most deals have more than one issue: price, delivery, contract length, payment terms, service. The two sides usually value them differently. Something cheap for you may be worth a lot to the other side, and the reverse. Negotiating the issues together as a package, instead of one by one, lets both sides gain. Negotiating only about price turns every euro into a win for one side and a loss for the other.
Honesty
You do not have to reveal your reservation price or your BATNA. But do not invent facts, such as a competing offer that does not exist. Lies about facts damage trust when they come out, and in business you usually negotiate with the same people again.
Step by step
Anchoring experiment (5 minutes). Hand out cards A and B at random without explaining the difference. Learners write their estimate on the card and hand it in. Do not discuss it yet.
Input (15 minutes). Explain BATNA, reservation price, target and ZOPA, with the number line. Then calculate the average estimate for cards A and B on the board and reveal that the cards had different first numbers. Explain anchoring. If the averages are not different in your group, discuss why: small groups give noisy results, and some learners may have known the real price range.
ZOPA worksheet (10 minutes). Pairs do the three tasks. Compare answers in class.
Input (10 minutes). Explain trading and packaging. Each pair writes three "if you, then we" sentences for any situation (a part-time job, a used bike), and two are read out.
Preparation (10 minutes). Introduce the case in two sentences, then hand out the confidential instructions. Each side fills in the planning sheet. Remind everyone: do not show your sheet to the other side.
Negotiation (20 minutes). Pairs negotiate. Warn at 15 minutes. At 20 minutes, each pair writes its result, or "no deal".
Results and debrief (15 minutes). Collect all results in the table on the board, then use the debrief questions. Reveal both sides' numbers only at this point.
Exit ticket and homework (5 minutes).
Anchoring cards
Cut the cards apart. Give half the class card A and half card B.
Card A | Card B |
|---|---|
A company sells a used office chair in good condition. Is the price higher or lower than 400 euros? Write down your estimate of the price in euros. | A company sells a used office chair in good condition. Is the price higher or lower than 40 euros? Write down your estimate of the price in euros. |
ZOPA worksheet
Litware, a fictional software company, wants to sell a licence to Trey Research. Litware would accept no less than 40,000 euros. Trey Research would pay at most 46,000 euros. What is the ZOPA, and how wide is it? Litware opens at 52,000 euros, Trey Research at 36,000 euros. If they met exactly in the middle, would that be inside the ZOPA?
Litware now needs at least 50,000 euros because of higher costs. Trey Research still pays at most 46,000. Is there a ZOPA? Name two things the two sides could do.
Trey Research gets an offer from another supplier: the same service for 43,000 euros. What is Trey Research's BATNA, and what happens to its reservation price and to the ZOPA from task 1?
Planning sheet
Each side fills this in before the negotiation.
Question | Your answer |
|---|---|
What is our BATNA? | |
Our reservation price (base terms) | |
Our target price | |
Our first offer, and how we will explain it | |
Which issues matter most to us? | |
Which issues are cheap for us to give? | |
What might matter to the other side? | |
Two "if you, then we" offers we can make | |
What we will say if they make an extreme first offer |
The case: coffee beans for Fourth Coffee
Fourth Coffee, a fictional chain of twelve cafés, needs a new supplier of coffee beans, about 1,000 kg a month (12,000 kg a year). Northwind Traders, a fictional wholesaler of coffee and café supplies, wants the contract. The two sides meet to agree four issues: price per kg, delivery (monthly or weekly), contract length (one or two years) and payment terms (30 or 60 days). All figures are invented for teaching.
Confidential instructions (for the teacher: print each side separately)
Seller: David Klein, key account manager, Northwind Traders
Your aim. Win the Fourth Coffee contract at the best possible price for Northwind.
Your numbers (do not show them to the buyer):
Your list price is 16.00 euros per kg.
Base terms: monthly delivery, payment within 30 days, a one-year contract.
Your BATNA: you can sell the same beans to your other wholesale customers for 12.50 euros per kg on average. So your reservation price for the base terms is 12.50 euros per kg.
Weekly delivery costs you 0.40 euros per kg extra (more trips). With weekly delivery, your minimum rises by 0.40.
A two-year contract is worth 0.50 euros per kg to you, because you can plan your roasting. With two years, you can accept 0.50 less.
Payment in 60 days instead of 30 costs you 0.20 euros per kg (interest and risk). With 60 days, your minimum rises by 0.20.
Your manager would very much like a two-year contract.
Rules. Do not reveal your reservation price. Do not invent facts, for example other offers you do not have. You may say that a longer contract or other terms would help you.
Buyer: Elif Arslan, head of purchasing, Fourth Coffee
Your aim. Get good beans for all twelve cafés at the best possible terms for Fourth Coffee.
Your numbers (do not show them to the seller):
Your BATNA: your current supplier, Wide World Importers, offers 14.20 euros per kg with monthly delivery, payment within 30 days and a one-year contract.
Your baristas say Northwind's beans are clearly better, worth up to 0.30 euros per kg more. So your reservation price for the base terms is 14.50 euros per kg.
Weekly delivery is very important to you: the cafés have little storage space and the beans stay fresher. It is worth 0.60 euros per kg to you. Your current supplier cannot deliver weekly.
A two-year contract with a fixed price is worth 0.20 euros per kg to you, because it protects you from rising coffee prices.
Payment in 60 days would help your cash in the quiet winter months. It is worth 0.15 euros per kg to you.
Your own target is around 13.00 euros per kg.
Rules. Do not reveal your reservation price. Do not invent facts. You may say that weekly delivery matters to you.
Debrief
Collect every pair's result on the board:
Pair | Price per kg | Delivery | Contract | Payment | Deal? |
|---|---|---|---|---|---|
1 | |||||
2 |
Then ask:
Who made the first offer in your pair? How far did the final price end up from it?
Did anyone give a concession without getting something back? What happened next?
Which pairs talked about delivery and contract length, and which talked only about price? Compare their results.
Did any pair fail to agree? Was there really no ZOPA, or did they not find it?
Now that you know both sides' numbers: which package would have been best for both sides together?
Did anyone feel tempted to bluff? Where is the line between not revealing something and lying?
Differentiation
Easier.
Negotiate price and delivery only (leave out contract length and payment).
Give each side a list of "if you, then we" sentence starters.
Teams of two against two, so learners can discuss before answering.
Harder.
Learners calculate their own minimum or maximum for every package before the negotiation.
Add a time limit with a cost: after 15 minutes, each extra minute costs both sides 0.05 euros per kg.
One observer per pair records every concession and whether something was traded for it.
After the debrief, pairs write a two-paragraph email confirming the agreement.
Homework
Prepare a real or realistic negotiation from your own life, such as pay for a part-time job, the price of a used bike or the split of tasks in a group project. Fill in the planning sheet: BATNA, reservation point, target, first offer with a reason, issues that matter to you and to the other side, and two "if you, then we" offers. Write five sentences on what you would say first.
Solutions: ZOPA worksheet
The ZOPA runs from 40,000 to 46,000 euros, so it is 6,000 euros wide. The middle of 52,000 and 36,000 is (52,000 + 36,000) ÷ 2 = 44,000 euros, which is inside the ZOPA. Both opening offers were outside it, which is normal: first offers leave room to move.
Litware's minimum (50,000) is above Trey Research's maximum (46,000), so there is no ZOPA. Options: change the package (for example a smaller licence, a longer contract or less service, so Litware's costs fall or Trey's value rises), look for something else of value to trade, or both sides accept their BATNA and walk away. Walking away is a correct result when there is no ZOPA.
Trey Research's BATNA is now the other offer at 43,000 euros. If the service is really the same, its reservation price falls to about 43,000 euros, and the ZOPA shrinks to 40,000 to 43,000 euros (3,000 euros wide). A better BATNA gives Trey Research more power in the negotiation.
Solutions: the coffee case (for the teacher)
ZOPA on the base terms (monthly, one year, 30 days): seller minimum 12.50, buyer maximum 14.50. The ZOPA is 2.00 euros per kg, which is 2.00 × 12,000 kg = 24,000 euros a year to divide between the two sides.
Each package's minimum and maximum. Seller minimum = 12.50, plus 0.40 if weekly, minus 0.50 if two years, plus 0.20 if 60 days. Buyer maximum = 14.50, plus 0.60 if weekly, plus 0.20 if two years, plus 0.15 if 60 days.
Delivery | Contract | Payment | Seller minimum | Buyer maximum | ZOPA per kg | ZOPA per year |
|---|---|---|---|---|---|---|
Weekly | 2 years | 30 days | 12.40 | 15.30 | 2.90 | 34,800 |
Weekly | 2 years | 60 days | 12.60 | 15.45 | 2.85 | 34,200 |
Monthly | 2 years | 30 days | 12.00 | 14.70 | 2.70 | 32,400 |
Monthly | 2 years | 60 days | 12.20 | 14.85 | 2.65 | 31,800 |
Weekly | 1 year | 30 days | 12.90 | 15.10 | 2.20 | 26,400 |
Weekly | 1 year | 60 days | 13.10 | 15.25 | 2.15 | 25,800 |
Monthly | 1 year | 30 days | 12.50 | 14.50 | 2.00 | 24,000 |
Monthly | 1 year | 60 days | 12.70 | 14.65 | 1.95 | 23,400 |
The best package for both together is weekly delivery, two years and 30 days: the ZOPA grows from 2.00 to 2.90 euros per kg, an extra 0.90 × 12,000 = 10,800 euros a year that both sides can share.
Weekly delivery costs the seller 0.40 but is worth 0.60 to the buyer: trading it creates 0.20 of value.
Two years is worth 0.50 to the seller and 0.20 to the buyer: both gain, 0.70 in total.
60-day payment costs the seller 0.20 but is worth only 0.15 to the buyer: it destroys 0.05 of value. A pair that agreed on it gave up 600 euros a year without noticing.
A fair example agreement: weekly delivery, two years, 30 days, at about 13.85 euros per kg, roughly the middle of 12.40 and 15.30. The seller earns 1.45 per kg above its minimum and the buyer pays 1.45 below its maximum.
How to judge a pair's result. Check that the price lies between the seller's minimum and the buyer's maximum for the package they chose. If not, one side accepted a deal worse than its BATNA. A pair that negotiated only price (monthly, one year, 30 days) had only 2.00 per kg to share, while pairs that found the best package had 2.90.
Patterns to look for in the debrief (they may or may not appear in your group):
Pairs who talked only about price may have ended near the middle of 12.50 and 14.50 and felt the negotiation was a fight.
Compare sellers who opened at the list price of 16.00 and explained it with those who opened low. If the first group ended higher, that is anchoring at work.
Buyers who mentioned early that weekly delivery mattered may have paid more for it than needed. Revealing what matters to you is useful, but trade it: "If you can deliver weekly, then we can sign for two years."
Sources and further reading
Roger Fisher and William Ury, Getting to Yes: Negotiating Agreement Without Giving In, 1981, the origin of the term BATNA.
Amos Tversky and Daniel Kahneman, "Judgment under Uncertainty: Heuristics and Biases", Science, 1974, on anchoring.
To practise handling difficult moments in a sales conversation, use the objection handling exercise.