NEGOTIATION 102

Being Nice
Negotiations need not be antagonistic. Being serious about what you came for does not mean negotiators cannot be nice to each other. If culture allows it, always offer a smile, and a warm and firm handshake. Thanking each other is a must.

Being Patient

Another hard lesson I learned from negotiating a deal was on patience. As I was dealing with a more elderly person, I had to be very patient in listening to his voice which was barely audible and comprehensible. Waiting for him to make up his mind and close the transaction also required a great deal of patience which I dearly lacked. I knew that if showed I was in such a hurry to sign him up, I would look very interested and possibly kill the deal or pay a higher price. I also learned to never say “YES” to the first offer because doing so might make him conclude that he have already pushed me to my limit.

What You Want vs What They Want

Before sitting on the negotiating table, a negotiator must be clear with what he wants to get out of the “possible” deal. He must be specific with the outcome of the transaction even before the first punch is thrown. If possible, he must write this down or memorize the sequence of how he is going to throw his punches and counter punches. Failure to visualize the outcome may end up badly for a negotiator who will be left wandering how the other party was able to outsmart or outmaneuver him. Reading between the lines will also help a negotiator in knowing what the other party wants aside from what was laid down on the table. Verbal and non-verbal cues must also be watched for because these might give away his position.

When to cut loose vs when to stick to it

When the other party offered a price, I was almost tempted to immediately grab it, forgetting that I had a specific price in mind. Good thing I remembered my fallback position- the figure at which I will have to say NO and walk away. I realized that in any negotiation, I should be constantly aware of the limit or bottom line figure that I am willing to accept. I must be clear with my own NO DEAL situation. I also need to know how many bones I am willing to break if only to make the other party feel comfortable and make concessions with me. Whatever I am willing to give up getting a concession must be clear to me but I must make sure that it is worth it.

Win-Win vs Win-Loose

It will always feel good to walk out of a deal knowing that both parties are happy. If attaining a win-win deal is possible, a negotiator must go for it. If not, then go for what is most beneficial to you or your organization. Never sacrifice your own just to make the other side happy or to please the other negotiator at the expense of your side. A negotiator must look for gaps that need to be filled in by both sides. Consulting the other side is always a good technique. Workable compromises must be identified and must be really worked out. Flexibilities must be explored. Know which ones can be compromised and which ones cannot from your organization’s perspective, and from you own.

A negotiator must never underestimate the other party, AND HIMSELF. Just because the other party looks old or young, you will underestimate him or her. This might all be ploys to canalize your decisions on their favor. Never look down on yourself too but never feel superior as well. Maintain confidence but not to the point of being arrogant and condescending. It turns other negotiators off. Worse, you might actually fall into their trap and go home broken.

Deals must always be documented especially the outcome. Mutual trust is important but it is not an excuse for foregoing documentation. When push comes to shove, you will always have your papers to back you up. And don’t forget to have it signed.

On “Rethinking Marketing”

How do you usher in transformation in your organization? How do you adopt to changes within your group? How do you adapt your business to the environment, to the market? These were the questions I asked myself as I browsed through Roland Rust’s piece on “Spotlight to Reinvention: Rethinking Marketing”.

Reading Rust brought me back to my very own organization- the Philippine Army. In 2011, the Philippine Army embarked on an ambitious transformation program aptly dubbed the “Army Transformation Roadmap (ATR)”. The ATR is an 18-year transformation and governance program aimed at transforming the PA into a more professional, capable, responsive and dynamic organization that can effectively perform its mission and better serve the people. It was developed based on the Performance Governance System (PGS) which is a local adaptation of Harvard’s Balanced Scorecard framework. The Vision of this transformation- “By 2028, to become a world-class Army that is a source of national pride” sounds ambitious but its framers think it is attainable. Two of the strategic objectives espoused by this program are: “to develop and communicate a brand image consistent with the Army’s Core Values; and “to engage and partner with key stakeholders”. These objectives are being pursued through a set of strategic programs which are implemented and monitored through a performance governance scorecard.

Looking closely, how does the Philippine Army, a government entity market itself as a brand? What goods and services does it sell or provide? Who are its primary customers or stakeholders? How does it build, cultivate and nurture its relationship with its clients?

The PA’s serves its customers- the Filipino people with its products or major final output: the safety and security of the land. Before, only a handful knew of the relevance of the military especially its role in nation-building. Now, the PA serves as a catalyst of societal change and usher of community development. Through the ATR, the PA is now mastering stakeholder engagement which is undertaken through Civil- Military Operations (CMO) by soldiers who specifically cater to its customers. How does it work? CMO entails a coherent and systematic application of words and deeds- of messages and actions. Just like a Chief Customer Officer, CMO Operators look primarily into the welfare of its clients and continuously seek ways on how to serve them better. Both the government and the enemies of the state battle for the support of the people hence, gaining their hearts and minds is the key to long-term success. This is aptly captured by Rust’s Customer- Manager Driven relationship where building long-lasting relationship and customer welfare are given premium by the organization. This is a major turn-about for an organization that has long been accustomed to doing things by itself and without regards to its stakeholders. Now, the PA strives to strike a balance between mission accomplishment and the welfare of the people that it serves.

Almost seven years after ATR was introduced and adopted, the PA is now in full gear to pursue its own brand of transformation. The advent of information technology has made this journey more challenging and interesting at the same time. Like any organizational transformation initiatives, humps and bumps are expected along the way but the PA is more steadfast than ever to attain its goal. As Rust said, transformation is inevitable…and will soon be the only competitive way to serve customers.

On “Defensive Marketing”

My wife and I got married in 2010. By that time, she already owned a string of beauty salons around Metro Manila, and was aggressively expanding her own brand in and around the National Capital Region. Although I never had any experience or background in running a business, she sometimes consults me on some things especially when it comes to managing human resources. It has been almost eight years now since we got married, and more than a decade since she started the business. The salon has already about a hundred branches now most of which are owned by franchisees. The business has grown, and so with the challenges and the challengers. She says it comes with the territory. Lately, I asked her what happened to other salons- her competitors which I don’t see anymore. She said some have went out of business while others have slowed down. So, what is her company’s secret to longevity? How did it last this long while others withered?

She said the salon is certainly a cutthroat industry where competitors can easily sink you down using various marketing ploys and industry tradecrafts. As a business owner, you must master the art of defending your territory, and protecting your brand. By the way, my wife trained as a lawyer and not as a businesswoman and that probably helped her survive amidst a tough and extremely competitive environment. She said it was a struggle to position her own brand in the industry but it is harder to maintain foothold as competitors are always out to unseat you. The company has got to figure out how to secure and defend its position because both existing players and new entrants want a (big) piece of the cake- the people. Choosing and getting customers are both challenging tasks but keeping and growing them are equally, if not, even harder. And these reminds me of John Roberts who said that “if a defender can’t hang on to what it has, it loses the foundation on which to build its own growth”.

Indeed, in any business undertaking, the significance of analyzing the environment cannot be simply understated. For you to protect your battle position or basecamp, you must understand the threats, leverage on your strengths, improve on your weaknesses and seize on every opportunity to defeat the enemy. The salon thrives on its strength which is in providing the best quality of service to its clients. It willingly goes the extra mile to ensure customer satisfaction knowing that it is a perishable commodity. Loyalty is difficult to build and maintain hence keeping its clients happy is on top of its priorities along with neutralizing or besting its opponents. It reaches out to its clients through traditional means and modern media. It invests on advertisements, endorsements, tie- ups and x-deals (with celebrities) to promote and solidify its brand.

However, despite its relative success, the salon has a long way to go towards its goal of becoming the local industry leader. I told my wife to adopt a “careful hurry” mode- to be aggressive yet defensive, optimistic but vigilant and most of all, to focus not only on beating the competition but also on refusing to get beaten. Now, she thinks I am a smart guy.

On “The Post-Global Brand” By Jean-Noel Kapferer

The popular economic resource online site Investopedia describes “Globalization” as the global integration of international trade, investment, information technology (IT), and cultures. It further claims that government policies drive globalization which results to the opening up of economies domestically and internationally. This translates into economic development and higher standards of living for people in poorer countries. It says that globalization allows corporations to gain competitive advantage due to lower operating costs, access to cheaper raw materials and wider market base.[1] However, many also look at globalization with intense scrutiny as it has become the symbol of environmental destruction, imperialism and human exploitation among many others.

Professor Theodore Levitt (who is credited for the term “globalization”) perhaps made one of the greatest prophesies in the history of marketing when he claimed that a global market for uniform products and services is at hand. Levitt said that “a powerful force drives the world toward a converging commonality, and that force is technology”.[2] Many marketing gurus subscribe to his tenets but others view it with more objectivity.

Jean- Noel Kapferer asserted that there is such thing as “Post-Global Brand”. He said that “global brands must be also be local” which means that while they are being marketed based on the popularity of their name, it must be able to cater and adapt to the local market. World leaders in the industry such as Ford and Toyota for example has assembly plants in various countries, and they vary car models sold from country to country to suit the needs and demands of the market. McDonald’s in the Philippines tastes a little bit different as compared abroad due to the unique palate of the Filipinos. Jollibee changed its local name when it ventured in China. The most popular technology brands such as cell phones and computers are assembled in countries outside their main headquarters and sold with unique features for every country. The point is, global brands cannot just bank on the popularity of their brands alone to achieve global success. They should immerse, adapt and adjust their products to the target market or else other brands will do- and eat them up.

Now going back to my wife’s salon business: During our light moments, we dreamed of expanding her business, first locally then internationally. We both agreed that it is an ambitious thought and an interesting proposition but not totally out-of-this-world. These local brands that we know of today were once struggling start-ups in a small garage somewhere. But after reading Kapferer, the challenge became more daunting than ever. Does the salon have the X-factor to position itself as an industry leader locally? How about internally and globally?

Meanwhile, the thought of international salons (mostly Korean brands) rapidly flooding the Philippine market sends shivers down our spine.

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[1] https://www.investopedia.com/terms/g/globalization.asp. 14 Feb 2018

[2] https://hbr.org/1983/05/the-globalization-of-markets. 14 Feb 2018

On “Three Questions You Need to Ask About Your Brand”

Still on the salon business…

As I have mentioned in my previous reflection, my wife’s salon business has been in the market for over a decade now. The company has survived the ups and downs of sales, the increasing prices of inputs, the intense rivalry with existing competitors and of course, the threat of new entrants and substitutes. It is constantly challenged on how to establish its brand in a market that is already saturated by salon bigwigs who leverage on their huge capital and invest heavily on massive advertisement campaigns. My wife’s company certainly doesn’t have that much- yet, but there is still a big chance of propelling itself in the market through systematic and comprehensive marketing. But how?

After our long discussion about targeting the BoP and market segmentation, I took the courage of asking her the same “Three Questions You Need to Ask About Your Brand” that Keller, Sterthal and Tybout posed to the readers: Have we established a frame? Are we leveraging our points of parity? Are the points of difference compelling?

Keller, et. al. suggested that, in a widely competitive market, points of differentiation will no longer suffice to sustain a brand, and that managers should be clear about the frame of reference on which the brand is reckoned from. Furthermore, it must be able to effectively address the features that it has in common with other brands. In the case of the salon: What should its prospective clients expect if they are going to avail of its services? How do these services differ from that already being offered by other salons? Will they come out more beautiful from my wife’s salon than if they went to another? What aspect of the salon industry should it focus on? Where does it stand out among the rest? What exactly should be the salon be most known for, both by its customers and competitors?

As I have observed, the salon business, as with other fields, is a cutthroat industry where players will go to extremes just to stay on top of the game- or survive at the least. My wife’s salon ought to revisit its strategy to determine its points of difference-its uniqueness, and review its frame of reference and points of parity. I suggested to her that the company must be able to strengthen its position in the market by leveraging on the quality and distinctiveness of its services. It needs to reinforce the brand’s performance and imagery, and improve satisfaction and promote customer retention. And it needs a clear, comprehensive and viable plan to do these if it wants to stay on- and possibly win the race. The market is very dynamic. She needs a system, a process. And she needs to “trust the process”.

I have never seen her so agreeable at this point.

Segmentation

After reading the article on the “Fortune at the Base of Pyramid”, I found myself discussing it with my wife over dinner. She owns a chain of beauty salons in and around Metro Manila and I was telling her about the possibility of expanding her business to the BoP. She told me that the business is already targeting that segment of the market through their small salons located in smaller cities and towns (and not inside big shopping malls). We talked about creating another brand name that would specifically cater to Tier 4 because, like anybody else, all people especially women need pampering and beauty services from time to time. But then we asked each other: Who are the Tier 4 consumers? How do we determine who among them would actually need salon services? Who among them can afford the services that the salon is offering? How much are they willing to pay for a haircut or hair re-bonding for example? Little did I realize that we were already talking about market segmentation and targeting- at least in the manner we understood it.

Yankelovich and Meer said that “good segmentations identify the groups most worth pursuing- the underserved, the dissatisfied and those likely to make first-time purchase, for example”. I excitedly brought this idea to her over the phone and I told her that to expand her business targeting the BoP market, her company must be able to do a good segmentation. However, we realized that her business has been thriving without the slightest idea of psychographic segmentation as described by the authors. The company lacks profiling of its market according to relevant consumer attributes (personality traits, values, attitudes, interests, lifestyles etc.) and does not have even the simplest information in terms of customer gender, location, job/ source of income and others. I told her that segmentation will allow the company to deliver better services because they would be able to know what the consumers really want. For example: Who among the target segment has never had a salon experience? Who among them have experienced unpleasant services in beauty salons? What kind of services do they need relative to their jobs, or status? How important is ‘makeover” to them? How often do they need it? By answering these questions, they would be able to expand their market to that ‘underserved- dissatisfied segment” of the market.

We ended our conversation with a resolve to better understand her business stakeholders- first through market segmentation. She agreed that segmentation efforts must be aligned with the company’s overall strategy or else it will all amount to nothing. I was relieved. It’s not often that I get to persuade her to my side.

“The Fortune at the Bottom of the Pyramid”

Isn’t it ironic how aspiring entrepreneurs and start-ups would always tell others that the main reason why they want to enter business is that they want to help the poor, but end up just growing their profit instead? Aren’t they akin to politicians and the so-called public servants who promised to help the poor if they get elected or appointed to office but eventually got eaten by the system and forgotten their promise?

Multi- national corporations, often have this kind of purpose in their infancy stage- to help the poor by producing and providing affordable goods and services. However, as they grow bigger, they also leave behind this commitment and focus instead on producing products that only the rich or Tier 1 consumers can benefit from. Why would they sell products to the poor knowing that these consumers can’t afford them? Why would they involve themselves with the BoP at all? Shouldn’t the government or NGO’s take care of them instead?

This kind of mentality and many other orthodoxies contribute to the ever-widening margin between the Tier 1 and Tier 4 segments of the pyramid. The BoP is left behind wallowing in poverty while Tier 1 continues to enjoy wealth. Fortunately, there is now a growing trend among MNCs who are veering away from these traditional frames of thinking, and are recognizing the potential of the huge but untapped, undeveloped and unpenetrated BoP market. Those who pioneered in exploring these previously uncharted territories are now ripping the fruits of their experiment with large profit margins while helping marginalized people through affordable and accessible products. They have proven that doing business with the poor is profitable and sustainable.

Meanwhile, many challenges await those who wish to unlock this massive potential because the so-called Triple Bottom Line approach (People, Planet, Profit) is easier said than done. For start- ups, the challenge is on developing sustainable business models that would promote economic involvement among the masses. For established MNCs, the question is whether to stick to their existing models or develop new ones and take on the challenge. How do they integrate and take advantage of the human dimension to create a sustainable business with the BoP? What kind of innovations do they need to undertake? How do they create affordable, accessible and innovative solutions that would benefit and deliver the maximum value to the BoP? How do they promote and deliver it to the consumers?

For development managers, the challenge rests on persuading and co-opting leaders of the business industry to focus on the Tier 4 market. How do we convince them to partner with government, non- government and civil-society organizations as they expand their economic base so that economic development trickles down to the poor? What interventions are needed so that we can “teach them how to fish” instead of just giving them fish? How do we promote the “trade not aid” concept to narrow the gap between the classes without necessarily and radically disrupting the socio- cultural aspects of their lives? And the list of challenges goes on.

“Notes on Sensing Opportunity” By Robert J. Dolan

Recently, Manila’s social media community was taken by storm when a new group of “Facebook-ers” emerged- the “The Classic Titos and Titas (the Uncles and Aunties) of Manila. This group has thousands of members and followers and became viral after flooding pages with memories of the recent past- the 80’s and 90’s. Some members would post pictures and videos of events, places, foods, actors and actresses, and yes, various products from the olden days. They would ask each other who have experienced, seen, tasted or used the items posted, and I am amused at the varied reactions every time. Some of these things are still around in modern Manila, but most are no longer in circulation or never heard of again. And this makes me wonder: Why did some products last long, and why some did not? What is the key to success of these products? What is the secret behind their market longevity?

The Filipinos are a sentimental people. We love holding on to our priceless belongings especially the “pamana”- the hand- me-downs from our parents or elders. It would usually take ages for us to replace something we own and have gotten used to. I, for one, have the penchant to be attached to my belongings. My wife would often chide me for wearing the same shoes or denims over and over again. I would only replace them if they become too shabby already (or if she intentionally gives them away without me knowing). Gourville was right when he said that “consumers tend to value the advantage of the products they own than the benefits of new ones…” Why would I get a new laptop when the one I have is still working perfectly? Why would I want an iPhone if the phone she gave me on our anniversary is still awesome?

These kinds of sentiments pose a big challenge for aspiring marketing managers and would be entrepreneurs. They ought to consider the psycho-social and socio-cultural dimension of every market segment they wish to target and carve a niche on. They should understand what people across all classes need and want, if they want to establish a solid position or foothold in the market. Should we compete, or should we build our own niche? What do the consumers- the people Value most? What Solutions are we offering that would be of greatest benefit to them- both in the short run and in the long run? How would I help them gain the best Access to my products- anytime anywhere? Is my product providing Education through information to the consumers?

The Innovation Sandbox

When I was kid, I used to play with sandboxes I made myself. They are cheap, easy to build and there is no limit to the size I can create as long I had enough sand (or plain soil), and plywood/ wooden slab to serve as walls so that sand or soil will not spill over. There was also no limit as to what I can do WITHIN the box so I can go as far as my imagination can bring me.

The Innovation Sandbox is built around this idea. We can build our own Innovation Sandbox with its own creative area (the sand) and boundaries (the wood)- the walls that surround them. Inside the creative area, we can pour out all ideas to create any world we want. We can add or reduce the sand and introduce other elements or materials depending on our resources to suit our concept and design. However, the sand does not easily take shape because of its powdery and non-cohesive nature hence we need to be patient and skilled in making it to the desired form. The walls or bars on the other hand limit us from going beyond our innovation space. They are constant reminders that, in everything we do, we are always bound by a few tough constraints and limitations. Through time, these walls are taken down or scaled as we aim for a bigger and wider innovation space.