What The Nova Scotia Business Journal knows that you don’t

There was a recent article in the Nova Scotia Business Journal that contained a fundamental principle for successful negotiators.  In the article titled “Five Fatal Business Mistakes”, the author included the following: “The psychology of the customer is vital to marketing and sales success.  …The prescription has three parts: do the research, listen very carefully and, most importantly, act decisively for the long term.”

How simple is that?  Yet in consulting session after consulting session, we see failures to perform on these basic tasks. Let’s take a look at how these simple precepts work, and where the failure to perform occurs.

Do the research. Many sellers provide references and high-level benefit statements, such as these:

  • “99 satisfied clients can’t be wrong.”
  • “Our solution is highly reliable.”

These statements focus on the seller’s interests and generic values, but are not compelling.  Contrast those to these:

  • “A client similar to you used our solution, and it improved their inventory turnover by 12%.”
  • “As you told us, when your systems are down, and reservations cannot be taken, your lose $4000 / hour in revenue. Our solution is 20% more reliable than your present system.”

Moving from value statements about generic interests to value statements about the buyer’s interests takes research.  What issues concern them?  What are their goals and objectives?  Research takes time.  Many sellers fear the passage of time.  So they go with what they have, as unfocused and generic as it is, and hope that the buyer makes the connection on their own.

Sometimes the buyer does exactly that… when they get around to it.  This, of course, works against the fear of lost time that sellers have.  If you want the buyer to act promptly, there is no substitute for understanding their business. That takes research.

Listen very carefully. In a recent negotiations consulting session, I heard a list of client demands. “The client wants simpler contract terms and language.”  Later I heard, “The client wants different terms for the production and non-production systems.”  I stopped for a moment, and asked this: “What am I missing?  These two requests are conflicting.”  No one else had considered it.  I don’t deny that the client had a problem.  I just don’t think we knew what the problem was.

If we run around trying to satisfy every demand without listening, we are going to hit a dead end.  One of the things we see in the negotiation role-plays that we run as part of our training is a negotiation flaw related to listening.  Someone will ask a question of the other side.  For whatever reason – discomfort, time needed to make a thoughtful response, etc. – the other side will be slow in answering.  In many cases, someone else from the original team will jump in with another question or will change the subject.  The chance to learn something new and potentially valuable is lost.  The author of the article gets it right again.  Listen very carefully.

Act decisively for the long term. One of our clients was asked to quote a sale price for products including 4 years of maintenance.  She dutifully went off to get approval to do it, and found out that it was so hard internally to figure out how to do it that they were willing to give the fourth year of maintenance away for free.  This salesperson worked where the business model was to do complete replacements every 3 years, including new product and service.

It is not unlike a car lease for cars where maintenance is included (BMW or Audi, for example, in the US).  If she gave away the fourth year of maintenance, then she would lose the replacement sale 3 years out – the customer’s incentive to act would be significantly reduced if the system is still performing well.  We advised her to wait before giving it away – or to at least ask for a corresponding concession from the client.  She waited, and the client never brought it up again.  Business decisions with significant investments are long term decisions for the buyer.  The seller should remember that their own actions also affect the long term.

Now…does the Nova Scotia Business Journal really know something you don’t?  Or are you just forgetting the basics in a rush to close?  Remember: do the research, listen very carefully and act decisively for the long term.  (td)

  1. KaplanP04-06-2009

    I have often heard that there is very little or no correlation between price and Ts and Cs and the customer’s satisfaction with a deal or a transaction. Do you have any thoughts or statistics on this?

  2. Tim Delaney04-06-2009

    While we don’t track statistics for customer satisfaction, we know the following things which apply to this question…

    It is reasonable in most cases to presume that the customer is “satisfied” with the prices and terms at signing. Why? They have the power not to sign. Our experience would suggest that dissatisfaction comes later, and thus was not driven by the terms or prices themselves.

    Customer satisfaction plummets when the transaction execution/delivery is poor. The same terms and prices that may be acceptable in a well-delivered transaction will become “terrible” when execution is weak. While the prices or terms become major negotiation issues, they may or may not be the actual cause of the dissatisfaction.

    Based on our analyses, you can expect lower customer satisfaction when the underlying value of the transaction to the client business is unknown or is not communicated. In those circumstances, expectations regarding the impact of the transaction on the part of management on either side are not managed. Therefore, there is no reference point to apply to the price paid, and there is a tendency from the client to see any price as “higher than it should have been”. This may or may not affect an individual transaction, but will almost certainly affect renewals or subsequent agreements by depressing prices over time. There is interesting work on pricing reference points, and how pricing influences the perception of value. However, even when the value is known, if the seller does not verify back after delivery what actually happened, satisfaction can be expected to suffer. Again, this is a matter of expectation management.

    Terrific question. Hope this helps, and that our thoughts (limited by the nature of blogs, e-response and length) are useful to you. Write again. Tim D