Win-Win, Win-Lose, Lose-Win, and Lose-Lose are the game theory terms to indicate the possible negotiation outcomes. While the Win-Win is, of course, the most desirable and Lose-Lose is the most undesirable outcome, the remaining two outcomes are very curious and thought-provoking. If Win-Win is not possible, then one might wonder what the next best outcome could be.
One may consider Win-Lose as the next best outcome. In this case, you win the negotiation, but more often than not, you lose the person. It is futile to consider just the binary Win and Lose while evaluating the effectiveness of Win-Lose or Lose-Win outcomes. We also need to consider the magnitude of this Win or Lose. Let's measure the Win in an imaginary unit. In a range of 0 to 100, where 100 is a complete win, and 0 is a complete loss. We can now broadly have two more possibilities for each Win-Lose and Lose-Win outcome:
- Win-Lose with a big margin say 100-10 (You get 100 and the other person gets just 10 units of win)
- Win-Lose with a small margin say 100-95
- Lose-Win with a big margin say 10-100
- Lose-Win with a small margin say 95-100
The Lose-Win with a big margin outcome is, of course, undesirable for us. The Win-Lose with a big margin outcome might look good in the short-term. But, more often than not, it turns out to be making losses to us in the long-term, as we'll see in the examples below.
Out of the two remaining small-margin cases, our greedy human mind might favor the Win-Lose with small margin. But, remember that the other person involved in the negotiation is also a human being with possibly the same greedy mind as you have. Even the loss of 5 units can generate resentful emotions in their mind. This is how most humans, including ourselves, are. Therefore, the Lose-Win with a small margin outcome leads to optimum benefits from both short-term and long-term perspectives.
In this case, you let the other person leave the table with the feeling of winning the negotiation, and at the same time, you haven't lost much. Let's understand this more with the help of some example cases:
Deepak and Pramod are two friends who run the readymade garments shop. Deepak is very strict with the price of his products. He doesn't allow his customers to negotiate and ensures that he wins every negotiation. On the other side of the street, Pramod always allows his customers to negotiate. He ensures that his customers leave the shop with a feeling of winning the negotiation and that he doesn't lose much. Which customer, according to you, would return to the same shop for their next purchase? Although Deepak gains good profit in a particular sale, he loses the value that the customers provide Pramod by buying from his shop again and again.
But, what if Pramod's customer is not ready to accept the small margin of Win that he is offering and is adamant about negotiating to an outcome of Win-Lose with a big margin. And, one might wonder what a customer might lose in the long term for customer-centric negotiation. In this case, quantifying the customer's long-term loss may not be possible, but, in reality, it leads to a loss. To understand this better, consider one more instance involving Pramod from the earlier example:
Vinod visits Pramod's shop to buy some cloth and negotiates the price very hard. Pramod reluctantly agrees but feels very bitter about Vinod and takes note of Vinod's miser behavior. After a month, Vinod again visits his shop for some new purchase and asks for a particular exquisite item of cloth that only Pramod sells exclusively. Pramod recalls the bitterness about the last encounter and sees no long-term value in Vinod due to his customer-centric negotiation. Therefore, Pramod lies to Vinod that he doesn't have that item in his stock. Pramod also talks about Vinod's miser behavior with other shop-owners in the town, and they also start seeing no value in Vinod as a customer. As a result, Vinod loses a lot in the long-term.
There are many occasions in life where we encounter negotiations. In most cases, we reach the optimum at Lose-Win with small margin. Take, for instance, salary negotiations. Loyal employees switch to other organizations because the current employer chooses to Win the salary negotiation over winning that employee. At the same time, salary negotiation more than your true worth sets the performance expectation bar high and might land you in a very stressful situation.
Negotiation may not always involve money or material things. It sometimes involves emotions. You will find that the Lose-Win outcome is helpful in all of those cases.
The famous saying in the Bollywood movie Baazigar goes as, "Har kar bhi jitane wale ko Baazigar kehte hai," which translates to English as "The one who wins even by losing is known as Baazigar."
Be wise with your negotiations. Be a Baazigar!