A BATNA, or Best Alternative to Negotiated Agreement, represents the best option for either party in a negotiation if the talks fail. Known colloquially as ‘Plan B,’ this is your alternate plan when your negotiations begin to wobble out of control. It can also be your trump card to make the deal happen to your advantage. Having your BATNA prepared enables you to walk away from the deal altogether if it is not suitable for you.
In any negotiation, the party with the strongest BATNA has the least intrinsic incentive to come to an agreement, which means it can easily walk away from any agreement that it does not consider adequate. Think about the time you walked away from a street vendor while haggling for a price. As long as you genuinely walked away with no real intention of returning, you would receive the least possible price… but if you walked away hesitantly, the vendor would probably have given you a marginal discount, just to appease your ego.
Consider this example:
Assuming you may need the below products or services, grade the Seller’s BATNA in each of these situations (1 being the highest & 4 being the lowest)
- Retailers selling mobile phones
- Doctor prescribing medicines
- Mortician offering a variety of coffins
- Beautician offering a variety of hair treatments
Most would choose option 2 as the answer. However, let me put forth this extreme poser – do you not go for a second and even third opinion if your heart specialist asks you to immediately undergo a bypass operation for your clogged arteries? If so, then can we still say that the Doctor’s BATNA is infallibly strong?
You may have options on Retailers and Beauticians, but imagine option 4, wherein you have to organise a coffin for a recently deceased relative. Would you bargain or walk away from the seller if you felt he was asking too much? Are Coffin sellers available all over to choose from? Doesn’t sentiment take over reason sufficiently enough to override your misgivings over an expensive coffin? After all, time is of the essence, and a decaying corpse cannot be kept endlessly whilst you go from undertaker to undertaker attempting to wrestle a good price!
Peter Drucker was known for stating the obvious, ‘the purpose of a business is to create customers.’ Harvey Mackay famously wrote, ‘Take care of your customers or someone else will.’
The idea of stating the above is to caption that a strong BATNA should never be misused, for the consequences of customer exploitation can be disastrous.
While working for a leading luxury hotel brand, and on a sales blitz to Mumbai many years ago, I met with several Key Decision Makers of corporates who expressed angst against our Bangalore Hotel for overcharging and pricing rates way above the Plimsoll mark. While these corporates were ready to pay a premium for luxury, they felt the rate negotiations were one-sided. Not only were the rates too high, the corporates felt that they received no significant benefits or preferential services while contracting. We were the closest hotel to the airport at that time, and there was no competition nearby. The traffic congestion on this airport road was very severe during peak times, and other hotels took over an hour to drop off or receive their guests. With such a strong BATNA, the hotel milked its customers for several years.
A few years later, the airport shifted to North Bangalore. The Result? Room, as well as F&B occupancies, dropped drastically overnight, and the hotel GM and sales teams had to go out and meet up with their ruffled corporate KDMs, to re-establish a sound bipartisan relationship… a process which took over a year to stabilise.
In the pre-Covid era, some hotels sacrificed their goose for its golden eggs, at the altar of instant gratification; by squeezing the client dry as long as their own BATNA was strong. After all, didn’t the clients squeeze them dry when their BATNA was high? Not anymore though, as all has changed over the past couple of years. With corporate travel just beginning to open up, hoteliers are busy vying for a share of the minuscule, but growing pie. With supply being far greater than demand, the obvious BATNA is firmly in the Client’s camp, for the nonce.
So, what must a Salesperson do to improve his/her BATNA?
- The first possibility is to strengthen one’s BATNA. The second way is to weaken the BATNA of the other side, or at least affect the other team’s perception of their BATNA.
- Ask what other options you might employ that could improve your bargaining position. Brainstorm the situation with all the key players in your organization. Your planning must also factor in the other negotiator’s priorities, interests, and options.
- Improve Your BATNA: Endeavour to expand your options. One possibility is to consider bringing more vendors or buyers into the mix. If you weaken the other side’s best alternative by adding valuable new terms to your offer, the game takes on a whole new slant.
The answers for the above lie in today’s reality, wherein hotels may strengthen their position (BATNA), by considering the following:
- Most employees consider corporate travel a perk, millennials consider business travel an enriching experience, and frequent business travellers also feel more empowered and engaged. Can hotels use this nascent customer mindset to strengthen their BATNA?
- Companies are desperately wooing their employees to prevent attrition in today’s scenario, where many are not keen on returning to offices. Companies will offer more flexible travel policies to their employees and even support blending business with leisure travel – Bleisure or workcations.
- Work-from-home (WFH) will encourage localised corporate business.
- Consider ESG Travel (Environmental for carbon footprint, Social, and Governance).
- Pay attention to the Quality and Safety of Technology (Wi-fi) for online communication platforms.
- Look at Immersive technologies, Augmented Reality & Virtual Reality – AR/VR technologies where people will be able to take a virtual tour of their hotels, for reassurance before travel.
- Safety Initiatives – Travel managers will assess Travel Risk Management and see if the travel is essential, assess if the employee is fit to travel for their age, evaluate risks & business ROI for each trip, and do robust scenario planning. Apart from this, they will need to give employees the autonomy of managing their business trips
- Travel patterns are resetting globally (leading to more international corporate travellers to India).
The battlefield landscape has changed and only the fit and adaptable will survive – Darwinism at its best! So, what’s your BATNA?
This article has appeared in ET HOSPITALITY WORLD.COM March 2022