Getting to the negotiation table is hard. Upon reaching this critical final stage, sellers are often compelled to close at any cost. The problem is that these costs aren’t merely figurative. Sellers concede on critical pricing terms to ensure that a customer’s commitment solidifies to a close. However, there is an alternative, which allows sellers to maintain the value and scope of the deal to the end. Moreover, this approach provides for mutually beneficial outcomes that reinforce the prospect of future business. The solution is a consultative approach to negotiating.
Sellers can become more consultative in negotiations by seeking to understand the customer’s psychology, converting demands to needs and, eventually, trading to protect the deal size.
Understanding Customer Psychology
Protecting the size of the deal means helping the customer understand the value of the proposed solution. Sellers can guide this process with priming. The concept behind this psychological principle is simple: The seller prompts the customer to think in a certain way. This process begins by exuding a tone of fairness. When sellers signal the goal of an equitable outcome, customers respond positively. Research published in Psychology & Marketing revealed that “by priming a consideration for fairness, a seller can increase a customer’s satisfaction without sacrificing profit.” The long-term benefits are equally powerful, as fairness-primed buyers have “a more positive attitude toward the seller.” This positivity primes the customer into recognizing the value of your proposed solution.
The value of establishing fairness extends beyond the negotiation table. Fairness gives rise to trust and credibility. A signed document is a legal formality; trust is what keeps the relationship going. “Formal contracts are often ineffective in taking care of uncertainties, conflicts and crises that a business relationship is bound to go through over time,” explain researchers in MIT Sloan Management Review. “Trust and confidence, have been pointed out in several of the studies as being more effective for the development of relationships.” View the negotiation as a commitment not to only the sale but also to the business relationship.
Converting Demands to Needs
Incisive questioning is the core of a consultative approach, because it gives the seller a way to position the value of the solution. However, questions serve another critical purpose: They help a seller convert the customer’s demands to needs.
Why do sellers need to do this? Needs are easier to meet than demands. They represent a requirement that a seller can meet in a multitude of ways. A demand, however, is more burdensome. It is often immovable and resistant to creative solutions. In the worst cases, a demand represents one’s ego in hiding. Sellers can move past this problem by identifying the base need residing below a stated demand.
In many instances, a customer will demand that he or she “needs a lower price.” Sellers can dig deeper to find out which aspect of the solution the customer believes is too expensive. In doing so, the seller can then help shape the customer’s perception of value by connecting the capabilities of the solution to specific customer challenges. The core of this approach is information exchange. Research from Clemson University determined that “buyers’ monetary cost increased as information increased, suggesting that sellers might profit from information exchange and indirectly, from trust.” This is a valuable finding for sellers, because it illustrates that more dialogue can convert demands to needs and, in some cases, even boost the value of the sale.
Trade to Protect
Nearly every negotiation requires trading to reach a close. Effective trading is critical because it’s a way for a seller to control the value of the final deal size. Sellers reach this stage when they’ve exhausted all other efforts to maintain their ideal terms. Before trading, sellers must recognize how it differs from conceding. A concession is the act of giving up something without receiving anything in return. Sellers can protect the deal by avoiding concessions.
Sellers must take time before the negotiation begins to understand what they’re willing to trade and the true value of those trades. Additionally, trading doesn’t signal a departure from the collaborative tone of consultative negotiations. Sellers should be careful to avoid an adversarial tone at this stage. Findings from the Harvard Negotiation Law Review “serve to shatter the myth that adversarial bargaining is more effective and less risky than problem solving.” Be assertive, not adversarial.
Effective, mindful negotiations balance the objectives of maximizing the deal size while ensuring mutually beneficial outcomes that create a foundation for future sales. The path to the sale is in the customer’s words; keep listening.