IV. Buyer Viewpoint – Preferences

The screen shot below shows the initial negotiating ranges chosen by Buyer for each selected negotiation variable. For example, the negotiating range defined by Buyer for Annual Savings was from zero to $300,000/year. Buyer chose to fix the importance of Annual Savings   at 300 units of satisfaction so that one unit was about $1000/year. In so doing, the importance of the other variables are determined in relation to this one. For example, a decrease in Volume Commitment from 100% to 50% would be worth 42 satisfaction points on this scale.

Relative importances may not stay constant during the course of a negotiation but vary as the players learn more information and are able to do a better analysis. As part of the negotiation process, with   the help of their facilitators, Buyer may use a methodology called Even Swaps to fine-tune their preferences. Note that, since each party sets their own scale and not all variables have the same negotiating range, the relative importances cannot be directly compared between parties.

Notice that no importance is assigned to the variables in black lettering. This is because the satisfaction from these variables is totally captured by the performance variables that are included in preference analysis.

By default, Smartsettle usually displays the more preferred end of the negotiating range on the right hand side. This can be seen readily by the simple linear satisfaction graph for Annual Savings.

The satisfaction graph defined by Buyer for Volume Commitment was non-linear near 100% since Buyer placed a lot of value on at least a little flexibility on its commitment to buy from this supplier.

In the case of Price Index Interval, both ends of the negotiating range are undesirable compared to the most preferred outcome for Buyer, which is shown here at 6 months. Expecting inflation, Buyer would like prices to be adjusted relatively often, but not so frequently that the process becomes inconvenient.

Contract Term for Buyer also has a peaked satisfaction   graph, with a most preferred outcome of 60 months. A contract term beyond 60 months is undesirable due to lack of knowledge about what the market is going to look like that far in the future.

The satisfaction graph for Order Lead Time is also non-linear. A shorter lead time is generally preferable to Buyer, although it doesn’t make much difference less than about three or four days.

Most critical to a negotiation, is how much satisfaction each player expects to achieve. When parties seem not to be making quick progress toward a solution, a Smartsettle Facilitator might suggest that they do a confidential walkaway analysis. Parties may also seek advice from professional counsel at this time. In this simulation, players were told at the beginning that the values defined by the Prior Contract would be acceptable, but no package less satisfactory than that. Following is how the Prior Contract looked in Buyer’s view.

Proceed to the next section to view concessions made by each party.