Discuss about the Negotiation Process of Advertising Campaign.
Negotiation is a discussion done to resolve a particular issue in such a way that both of the parties find it acceptable. In this, both the parties try to persuade and agree with their point of view and try to gain more from the negotiation (Ahammad et al., 2016). In this report, there is a detail description of the negotiation of the advertising campaign happen by the celebrity endorsement. In the following, the celebrity for the endorsement is MS Dhoni, an Indian cricket player. The company for which the celebrity will do the endorsement is DeGrandi, a Geelong established company. This is established in the year 1929, by George De Grandi. So, the negotiating parties include the Agent of Elite Sports Star’s Tsungai Michelle Mayoyo and the agent of DeGrandis who is Gautham.
The various stages of the negotiations are (Arief and Supriyono, 2018).
The Pre-Negotiation includes the answers to the basic questions necessary to conduct any kind of negotiation (Barak et al., 2018). This includes three parts which are the BATNA and Reservation Value of both of the parties, and lastly, the ZOPA of the negotiation is been described.
The BATNA stands for the Best Alternative to a Negotiated Agreement. This means the next solution given for a deal if the party is not agreed with the final price of the negotiation.
BATNA of Gautham: In this case, if Elite Sports is not agreed with the final price. Then they will start their deal to sign the alternative sports star Sachin Tendulkar for the DeGrandis.
BATNA of Tsungai Michelle Mayoyo: In this case, he will try to negotiate till the time he will get the best price for the brand endorsement of MS Dhoni.
The reservation value is the least favourable value for any kind of negotiation. This means the minimum acceptable amount any party can get from the negotiation (Bennett, Hatfield and Stefaniak, 2015).
Reservation Value from Michelle: The reservation value from the Elite Sports agent is $600 000 for three months.
Reservation Value from Gautham: The reservation value from the Degrands Sporting Goods agent is $300 000 for four months.
The reservation value is the least favourable value for any kind of negotiation. This means the minimum acceptable amount any party can get from the negotiation (Betzold, 2014).
Reservation Value from Michelle: The reservation value from the Elite Sports agent is $600 000 for three months.
Reservation Value from Gautham: The reservation value from the Degrands Sporting Goods agent is $300 000 for four months.
Strategy: Both the parties had given the example of third-party negotiation for the consideration for claiming high ZOPA rate. They started the negotiation with $600 000 but the Degrands agent wants to start by $300 000. At last, they decided to start the negotiation by $495k for three months and plus 12% commission based on sales if the sales are as per the projection. Michelle, the Elite sports agent had given the example of fitness fanatics’ prices, as a strategy to increase the maximum price for the negotiation. They told them that fitness organization had offered 347,820 for their particular advertisement campaign. Gautham had given the example of the price they are going to offer to Sachin Tendulkar for the deal. They said that they are going to offer Sachin the price of $674,060 and they believed that they can negotiate it down by 15%. For this, the Michelle had said that MS Dhoni is still the captain of Indian Cricket Team. He had a lot of exposure and experience in his particular field. He is a very growing and strong brand in the market. According to Forbes 2018, he is twenty in the top paid sportsman. More than 80% of his net worth is just from the endorsements so they are very sure that he can generate $1.8m sales for the organizations (Derek et al., 2018).
Negotiations with their counterparts for the endorsement contract: In this negotiation, there are some of the important counterparts. In this, the agent of Degrands Sports had informed that they are interested in making a negotiation deal and the Elite Sports Stars are interested in the contract. They want the deal of $300 000 for four months. But the other party wants to start the negotiation by $600 000 for three months. So, by this, the range for the negotiation will be $600k-$300k. Both of the parties try to negotiate the price by giving reasons for the price negotiation by giving other examples like Degrands Sports had given the example of Sachin Tendulkar and the Elite Sports had given the example of Fitness Fanatics for their negotiation, at last, the final price decided is $420k plus 12% of the commission on $1.8m sales for four months. The commission will be given only when the company is able to make the sales of 1.8m from the endorsement (Chien, Post and Siu, 2018).
The negotiation is the process with the aim of transferring the particular ownership of a product or a service. In the following, the Communication Log is being prepared (Crocker, Hampson and Aall, 2018).
|
Date |
Method |
Items discussed |
Outcomes |
|
12/4/15 |
|
Introduction of Agent and company |
Acceptance of offer |
|
14/4/15 |
|
Cash transfer on closing |
$300000 for 4 Months |
|
16/4/15 |
|
Starting offer and assurance of minimum amount of sales. |
$600000 for 3 months and can assured earning of $1.8m |
|
18/4/15 |
|
Offer by competitor and next amount. |
$347,820 is Fitness Fanatics price and next offer is $305 000 |
|
20/4/15 |
|
Offer of Fitness Fanatics and offer price of Sachin |
Fitness Fanatics offer is $347 820 and price offered to Sachin is $647060 |
|
22/4/15 |
|
Range of offer and the starting price. |
Range is $300k-600k and $495k for 3 months plus 12% commission on sales. |
|
25/4/15 |
|
Contingency clause and final figure (Gastinger, 2016). |
clause states 12% commission is given only if $1.8m sales are due to endorsement and figure can increase or decrease from $495k |
|
27/4/15 |
|
Value by the consultation of High officials. |
value is $420,000 |
|
30/4/15 |
|
Final value for 3 months (Howson, 2017). |
$420k+12% commission on sales (only when projected sales target is achieved). |
|
2/5/15 |
|
Not agreed |
not agreed with 1.8m sales |
|
4/5/15 |
|
Take it as a sample first (Kaynak and Herbig, 2014). |
Degrants wants to try for $420k+12% commission of $1.8m sales. |
|
6/5/15 |
|
Try to find a mutual solution. |
Increase it to 5 months. |
|
8/5/15 |
|
Not agreed (Kukucha, 2017). |
Not practical for the trial. |
|
10/5/15 |
|
Months |
For four months |
|
12/5/15 |
|
Conformation |
Negotiation over with mutual consent |
This basically includes the implementation steps taken assuming that all the planning of a particular negotiation had taken place. In the following, the letter of outcome is provided by the entire negotiation (Wang, Wang and Ma, 2016).
There is a negotiation is taking place between the DeGrandi Cycle & Sports Pty Ltd. and Global Elite. In this, the agent of Degrand Sports had offered negotiation deal to Elite sports to sign MS Dhoni for the endorsement of their bats. Michelle who is the agent of Elite sports want to accept the offer at the price for the endorsement as $600 000 for three months. But the Gautham, who is the agent of DeGrand Sports wants to do it for $300 000 for four months. The negotiation ended by the “win-win” strategy by both of the parties. This negotiation had taken place with mutual discussion. The negotiation is settled on the $420k plus 12% of the commission and the commission is payable only when the company will get $1.8m from the endorsement for four months. Then, after three months the length of the advertising campaign is measured and from that, it has been concluded that negative effect is been observed in the three months on the product sales revenue. After signing MS Dhoni for the brand endorsement, there are some of the effects that had been observed. In the first month of campaign, the company had a loss of $500,000. In the second month of the campaign, there is a decrease in the loss, this means the loss is of $250,000. In the third month, the company was in a situation of no profit or no loss. This is also known as a breakeven point. In the fourth month of campaign the company had started making profit. They had earned $250,000 in addition due to the advertising campaign. In the last and fifth month of the campaign, the company had earned $500,000 in addition to these sales revenue. As per the negotiation deal, the company had expected to generate $900,000. The Elite Sports Stars had a much higher estimate. So the company will give the $420,000. But the company will not give the additional 12% commission on sales. The reason behind this is the contingency clause, which states that the additional 12% commission is given only when the company is able to generate 1.8m from the advertising campaign in four months (Meinera, 2017).
Conclusion
This report is based on the negotiation deal taken place between two organizations. These are DeGrandis Sporting Goods and Elite Sports. In this, there is a detailed description of the negotiation stages which are described. In the pre-negotiation stage, there is detail description BATNA (Best Alternative to Negotiating Agreement) is been explained by both of the parties. Then after, the brief description of reservation value is given and the reservation value for both of the organization has been given. The next part contains the ZOPA (Zone of possible agreements) of the negotiation. This also includes the basic strategy to decrease the minimum value of the negotiation. Then in the negotiation part, the communication log is being prepared. This includes the result of the entire conversation that happened between the agents of the organizations through e-mail. Then, the last part of the report consists of Post-negotiation strategy. This includes the letter of the outcome of the entire negotiation and also the actual price paid to the celebrity endorsement. The major result of the entire report is the actual price paid to MS Dhoni. This price is $420,000 only.
Reference
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Arief, S. and Supriyono, S., (2018) THE ANALYSIS OF PRE AND POST NEGOTIATION OF FRAMING AND PARTNER’S OBJECTIVE ON TRANSFER PRICES. International Journal of Economics, Business, and Entrepreneurship, 1(01).
Barak, K.S., Krane, V., Ross, S.R., Mann, M.E. and Kaunert, C.A., (2018). Visual Negotiation: How Female Athletes Present Intersectional Identities in Photographic Self-Representations. Quest, pp.1-21.
Bennett, G.B., Hatfield, R.C. and Stefaniak, C., (2015) The Effect of Deadline Pressure on Pre?Negotiation Positions: A Comparison of Auditors and Client Management. Contemporary Accounting Research, 32(4), pp.1507-1528.
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Chien, J.H., Post, J. and Siu, K.C., (2018) Effects of Aging on the Obstacle Negotiation Strategy while Stepping over Multiple Obstacles. Scientific Reports (Nature Publisher Group), 8, pp.1-9.DOI: 10.1038/s41598-018-26807-5
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Derek, Y., Joshua T. Weinhandl, J. T., Fairbrother, S. Z. (2018) Wide step width reduces knee abduction moment of obese adults during stair negotiation. Journal of biomechanics,75, pp. 138-146. DOI: https://doi.org/10.1016/j.jbiomech.2018.05.002
Gastinger, M., (2016) The tables have turned on the European Commission: The changing nature of the pre-negotiation phase in EU bilateral trade agreements. Journal of European Public Policy, 23(9), pp.1367-1385.DOI: https://doi.org/10.1080/13501763.2015.1079233
Howson, P., (2017) Due diligence: The critical stage in mergers and acquisitions.1st ed. London: Routledge.
Kaynak, E. and Herbig, P., (2014) Handbook of cross-cultural marketing.1st ed.London: Routledge.
Kukucha, C.J., (2017) Federalism and Liberalization: Evaluating the Impact of American and Canadian Sub-federal Governments on the Negotiation of International Trade Agreements. International Negotiation, 22(2), pp.259-284.
Meinera, E. B. (2017) Role Negotiation as Role Enrichment: A Study of Working College Students. Communication Reports, 31(1), pp. 28-40.
Wang, Y., Wang, K.Y. and Ma, X., (2016) Understanding International Business Negotiation Behavior: Credible Commitments, Dispute Resolution, and the Role of Institutions. International Negotiation, 21(1), pp.165-198.
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