Economic theories rely on the assumption that humans act as rational beings. Richard Thaler, professor of economics at the University of Chicago’s Booth School of Business, is changing this belief. “In order to do good economics, you have to keep in mind that people are human,” he remarks. The idea, elegant in its simplicity, earned him the Nobel Prize in Economics this year.
Traditionally, economists have argued that a person’s purchasing decisions are, overall, driven by logic. However, Thaler shows that this idea only explains ordinary, frequent purchases, like groceries. However, bigger, less-common decisions present us with new complexity revealing flaws in our decision making. The energy needed to tackle these decisions may explain why “people have a bias toward the status quo.”
However, overcoming this inertia requires leveraging enough influence to create what Thaler calls a “nudge.” Doing so is less complicated than one might think because, as Thaler explains, there are consistencies in the ways in which people exercise irrationality. For example, all people facing a decision are highly influenced by the way in which choices are presented. This phenomenon — called “framing” — is so common that Thaler uses the phrase “choice architect” to describe those who regularly influence others with framing. “If you are a doctor and must describe the alternative treatments available to a patient, you are a choice architect,” offers Thaler.
These findings matter in » Continue Reading.
Successful sellers are moving beyond the adversarial approach to negotiating. Winning the sale today requires a consultative style. In the end, the relationship between the buyer and seller strengthens winning the sale today and tomorrow.
On October 30th, Miriam Abbey, Richardson Senior Training Consultant will present a webinar on Winning the Sale without Thinning the Sale: Negotiating with the Modern Buyer, and we would like to extend an invitation for you to join us.
The webinar topics will include:
Strategies and countermeasures needed to control and guide negotiation and successfully shape the perception of value to increase deal size, reduce discounting, and attain a higher win/loss ratio How sellers can avoid resorting to concessions by using questioning that converts inflexible customer demands into needs How sellers can influence the customer’s receptiveness to the value of a solution with “priming,” which, in turn, maximizes the scope of the solution
The webinar will take place on October 30th at 1:00 p.m. EST. If you are interested in attending or think that your colleagues may be interested, you can register here.
With a collaborative approach, sellers gain more information allowing them to satisfy the customer’s needs without “thinning the deal.” These 4 guiding principles of consultative sales negotiations will lead to better outcomes for your team and your client’s.
1. Build Trusted Relationships
Earning the sale starts by earning the customer’s trust. Doing so requires the seller to remain consultative by engaging in a dialogue rather than a competition. Trust emerges when a seller views a customer need as an opportunity to move the sale forward rather than a hurdle.
2. Use Persuasiveness as a Process of Promoting Value
Create a compelling connection between the value of the seller’s solution to the customer’s priorities. This process begins by converting demand to needs. Take the time to understand what basic goals reside beneath blunt statements like “I need a lower price.” Use this information to underscore how the solution addresses the issue. This is a critical step that should be exhausted before trading in which the seller gains an agreement through changing terms.
3. Maintain Control and Confidence
Manage reflexes. Sellers too frequently succumb to an impulse to trade before first fully exploring the customer’s needs. Take the time to consider a response to a demand before relinquishing a term. Sellers will be surprised to find that when they handle trading as a last resort, they can preserve their optimal outcome.
4. Focus on Arriving at Mutually Successful Outcomes » Continue Reading.
A consultative negotiation is not just about the give and take of terms. It’s also about the equitable exchange of information builds relationships. Rember these core tenets of negotiations throughout the sales process to improve the outcomes or your deals.
Negotiations Occur Throughout the Selling Process
From the first conversation, sellers are building trust and creating a collaborative environment that helps move negotiations forward. Sellers can spark this collaboration by sharing information thereby inciting the customer to do the same. According to the established social norm of reciprocity, we are inclined to respond to another person’s action with a similar action. “We are obligated to give back to others, the form of behavior that they have first given to us,” remarks Dr. Cialdini, “There’s not a single human culture that fails to train its members in this rule.” In fact, science reveals that holding back on sharing information has a negative impact on desired outcomes and reduces trust. If we want information, then we need to share our information—which builds a customer’s willingness to share and trust.
Look for Early Indicators of How One will Respond to Negotiations
Sellers must identify all demands early in the negotiation process. Doing so avoids the common pitfall of the “fixed-pie bias,” the notion that a scenario is only win/lose because the size of the potential gain is fixed. Research published in the journal of Organizational Behavior » Continue Reading.
Effective Consultative sales negotiations serve 4 key objectives:
Increasing Deal Size Reducing Discounting Improving win/loss ratios Realizing greater value (proposed vs. closed) Tips for Effective Sales Negotiations
So, how do effective negotiators keep their goals in tact through the contract? They:
(1) Use Preparation Time
Sellers must come ready with relevant insights that demonstrate their detailed knowledge of industry specific challenges. This shared knowledge “primes” the customer. Priming is the basic principle of prompting a person to think a certain way. This effect is helpful to sellers who want to encourage a customer to recognize the value of a proposed solution. This influence of the customer’s decisions begins with the first conversation. Effective priming helps customer’s change their mindset from “someone is trying to sell me something” to “this solution can get me to where I need to go.” Priming is trust building. The seller is helping the customer become comfortable with sharing information from their side of the table.
Building trust at this early stage creates an environment that’s conducive to successful consultative sales negotiations. The reason: trust signals fairness. This sense of equitable interests has been shown to bring efficiency to selling. Research published in Psychology & Marketing revealed that by “priming a consideration for fairness, a seller can increase a customer’s satisfaction without sacrificing profit.” Additionally, “Fairness-primed buyers consequently had a more positive attitude toward the seller.”
(2) Lead By Opening
Effective » Continue Reading.
Too often we think of selling and negotiating as two separate ends of a timeline. In truth, they exist together on a spectrum. Every moment of selling involves some amount of negotiating. Therefore, every conversation places another brick in the road toward closing a sale. Effective sellers keep this in mind by shaping the customer’s perception of value. Keeping this approach in the context of the customer’s needs and priorities creates negotiations that are mutually beneficial rather than an exercise of blunt force. The result is a handshake – not an arm wrestle.
How Consultative Negotiations is Different
A consultative approach to sales negotiation training helps sellers learn to understand the deeper needs of the customer as the finish line comes more clearly into view. This collaborative engagement rises above the adversarial dynamic that many associate with the word “negotiation.” However, being consultative doesn’t mean relinquishing ground. In fact, consultative negotiators understand how to control a negotiation and arrive at a mutually-beneficial outcome.
They win by:
Relationships are powerful. In fact, Gallup reports that “B2Bs win by building relationships, not selling on price.” Their research concluded that nearly one-quarter of accounts that had “high engagement scores” with sellers grew by 20% or more in the following year. Strengthening a relationship helps keep the seller at the fore of the customer’s mind. A stronger connection establishes trust and respect, both of » Continue Reading.
Running a race is more than simply crossing a finish line. Along the way, you need to know your pace and stamina. You need to know your capabilities. However, too often we ignore these factors and simply head for the tape. When we measure only the single factor of completion, we miss all the crucial data points in between. We need more measurements.
Outpacing the Dunning-Kruger Effect
“Even if you are just the most honest, impartial person that you could be, you would still have a problem — namely, when your knowledge or expertise is imperfect, you really don’t know it,” remarked psychologist David Dunning. This sentiment encapsulates his work in social psychology which culminated in the discovery of the Dunning-Kruger Effect.
This cognitive bias asserts that we often fail to recognize shortcomings in our performance. Simply put we generally lack awareness of our inabilities. This problem stems from insufficient feedback because “giving feedback is a tricky business,” explains Dunning.
Social barriers make feedback difficult to give and perhaps even more difficult to hear. Nonetheless, it’s a critical step in the learning process. Dunning urges that it’s important “to give feedback that is concrete, as opposed to feedback that’s about the person’s character.” This kind of objective focused feedback is possible today with digital learning tools.
By offering multiple points of feedback, digital learning offers real-time information that helps learners move beyond a false perception of their abilities. Participants take » Continue Reading.
We need to make assumptions in life; we would never move forward without them. However, we need to periodically check, or even change, them because unquestioned assumptions can appear as facts. Proof of this is found in the unlikeliest of places: the tomato, a plant once so feared people called it the “poison apple.”
Those living in the 1700s frequently became sick after eating tomatoes. Many died. People believed that it was so dangerous that it was classified in a family of plant species carrying the name “deadly nightshade.”
Yet, the tomato they feared was identical to the one we enjoy today. So, why were people terrified of tomatoes? The answer lies in their assumptions.
Many Europeans at the time ate from plates made of pewter, an alloy high in lead. The acidity in tomatoes is strong enough to leach this lead from the surface. For 200 years, they assumed the tomato was to blame.
Even the most faulty assumptions can persist for centuries.
The story of the tomato serves as a reminder of how assumptions can mislead and cause bad decision making — two big threats for people in sales. Pursuing an opportunity or growing an account has a lot to do with making frequent strategic and tactical decisions. If those pursuit decisions are based on faulty information — due to assumptions versus facts — the path chosen can lead to » Continue Reading.