How To Use AI Personalization in Negotiations to Save Time and Money

Many factors affect the outcome of negotiations, time constraints, opponents unwilling to compromise, and limitations of budget, to name a few. AI can assist in your negotiations by leveraging those factors to save you time and money.  Many companies use personalization as part of their digital marketing, content marketing, and e-commerce strategies to make stronger connections with their customers. Incorporating AI personalization into your negotiation strategy will help you connect with your opponent for more mutually beneficial agreements.

Many companies use artificial intelligent agents to negotiate, usually in the form of bots. Some businesses may negotiate bot to bot, others may negotiate bot to human, and others may use them to assist humans throughout the negotiation.

Read below to learn ways AI personalization can enhance the negotiation process:

  1. Negotiate thousands of contracts simultaneously

Companies that regularly negotiate or renegotiate hundreds to thousands of supplier contracts are using AI to negotiate them simultaneously and in minutes. They are also personalizing the terms based on data that is unique to each supplier. This new process has led to significant efficiency for Walmart. Michael O’Brien, who managed BPs $2bn budget for IT services from 2012 to 2020, stated, “We had a problem at BP. It was taking us 90 to 120 days to get a contract done,”. O’Brien worked with an AI developer to create a machine learning tool to analyze current and past supplier contracts. After implementing this tool, there was an 80% reduction in work and, the same types of contracts only took one to eight days to negotiate, reducing the negotiation cycle significantly.

Negotiation opponents often limit the information they share to reduce the risk of manipulation. There are instances where corporations can uncover information about the suppliers’ terms to which they will agree. Even with limited information about the opponent’s preferences, machine learning models can combine that data with data from prior negotiations and predict the probability of the opponent accepting future terms. The machine can then make personalized offers to multiple entities with a high probability of reaching an agreement, resulting in a faster close rate. The AI agent can even complete the entire negotiation process, including signing the contract without human intervention.

  1. Learn about your negotiation opponent and simulate their behavior

It is always important to create a plan prior to negotiating. Knowing about your opponent will enable you to prepare for multiple scenarios. AI can analyze a person’s sentiments to determine how genuine they are when making offers. Computer vision can also analyze the opponent’s facial expressions and body language and combine those data points with other data in machine learning models. These models can predict a person’s trustworthiness, whether they will accept or reject an offer and predict personality types, such as Machiavellianism[1]

While the system can decipher tones such as anger or happiness, it cannot put them into context. For example, someone’s tone could have changed during the negotiation because of what was occurring in their environment independent of your situation, and much like humans negotiating via telephone, the system cannot detect it.  For this reason, a good rule of thumb is to avoid negotiating on one factor in isolation.

Research exists on algorithmic models that can simulate your opponent’s behavior in a negotiation. Imagine knowing what they will offer before they offer it. The opponent model can determine the reservation value[2] of the person with whom you are negotiating. The reservation value is the maximum they are willing to pay or the minimum price they will take. Once the model reveals this, you can prepare multiple methods in advance to reach your optimal price. The model can also predict the deadline of your opponent, which means you can leverage their time constraints to achieve more concessions from them.

With AI combining multiple data points to yield insights into the person with whom you’re negotiating, you can use personalized strategies to adapt your concessions to save money and gain more mutual beneficial agreements.

What to consider before investing in AI Negotiations

The type of machine learning, a subset of AI, that yields the best predictions is very costly.  The high cost is in part because of the computational infrastructure and the employees it requires to manage it. Costs also escalate because you must continuously process data. If you are a small to medium-sized company, you can still use AI to negotiate by selecting vendors with pre-built AI negotiation platforms, which provide significant cost advantages.

One must consider the number of customers or suppliers with whom you negotiate and your capacity to do so. Evaluate the length of a typical negotiation cycle and if reducing that time is worth investing in AI. Your analysis should help you reveal how often time constraints cause you to accept new offers or renew contracts you should be renegotiating, thereby leaving money on the table. There are multiple ways to implement AI negotiation technology. AI Business Partners can help you evaluate your options so you can arrive at an optimal decision.

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[1] https://onlinelibrary.wiley.com/doi/epdf/10.1111/nejo.12348

[2] https://link.springer.com/article/10.1007/s10458-015-9309-1#Sec1

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