CPP Price Negotiation & Deal Management 1 — Questions and Answers
Question 1: What does BATNA stand for in price negotiation?
- Best Alternative to a Negotiated Agreement (Correct answer)
- Basic Approach to Negotiating Agreement Amounts
- Baseline Adjustment to Net Agreement
- Budget Allocation for Total Negotiated Amounts
Correct answer: Best Alternative to a Negotiated Agreement
BATNA (Best Alternative to a Negotiated Agreement) defines a negotiator's fallback position and establishes the minimum acceptable outcome before walking away.
Question 2: Which negotiation tactic involves stating an extreme initial price in order to influence the final negotiated outcome?
- Nibbling
- Anchoring (Correct answer)
- Bracketing
- Mirroring
Correct answer: Anchoring
Anchoring sets a high or low initial reference point that exerts disproportionate influence over the final negotiated price.
Question 3: What is the 'zone of possible agreement' (ZOPA) in a negotiation?
- The range of prices a seller is willing to accept under any circumstance
- The overlap between the seller's minimum acceptable price and the buyer's maximum acceptable price (Correct answer)
- The geographic territory where a pricing agreement can be legally enforced
- The time window during which a price offer remains valid
Correct answer: The overlap between the seller's minimum acceptable price and the buyer's maximum acceptable price
ZOPA is the range between the seller's reservation price and the buyer's reservation price, representing the space where a mutually acceptable deal is possible.
Question 4: In deal management, 'price leakage' refers to:
- Unauthorized disclosure of pricing strategies to competitors
- Revenue lost through unauthorized discounts, exceptions, and off-invoice costs (Correct answer)
- The gradual erosion of list prices caused by inflation
- Price reductions mandated by government regulation
Correct answer: Revenue lost through unauthorized discounts, exceptions, and off-invoice costs
Price leakage describes the gap between the quoted or list price and the actual revenue received after all discounts, allowances, and off-invoice deductions.
Question 5: What is a 'walk-away price' in a negotiation?
- A special discount offered when a customer threatens to leave
- The threshold price beyond which a party will not finalize a deal (Correct answer)
- The list price before any negotiation begins
- A price offered when prematurely exiting a negotiation
Correct answer: The threshold price beyond which a party will not finalize a deal
The walk-away price is the point at which a negotiator concludes that no deal is preferable to the proposed terms, serving as their absolute limit.
Question 6: Which negotiation strategy focuses on creating additional value for both parties rather than dividing a fixed amount?
- Distributive negotiation
- Positional bargaining
- Integrative negotiation (Correct answer)
- Competitive bidding
Correct answer: Integrative negotiation
Integrative (win-win) negotiation seeks to expand the total value available by addressing both parties' underlying interests rather than simply splitting a fixed pie.
Question 7: What is 'nibbling' in the context of price negotiation?
- Making small concessions early in a negotiation to build rapport
- Requesting additional concessions after the main deal appears to be closed (Correct answer)
- Gradually reducing an offer price across multiple negotiation sessions
- Testing buyer price sensitivity with incremental price increases
Correct answer: Requesting additional concessions after the main deal appears to be closed
Nibbling involves asking for small additional concessions—extra discounts, added services, or improved terms—after the principal agreement has been reached, exploiting the counterpart's commitment bias.
CPP Price Negotiation & Deal Management 1
What does BATNA stand for in price negotiation?