Businesspeople commonly assume that customers’ requests correspond closely to their underlying needs. If he asks for the S version, he must want a sportier (yet costlier) ride. If she asks for a specific species of tree, she must want something beautiful (yet eventually ginormous). The customer is always right! But I’m here to tell you that the correlation between whatever people ask for and whatever they’re actually trying to accomplish—in business and many other arenas of life—is not statistically significant. And appreciating as much can make business (and life) more negotiable.
To see what I mean, imagine a customer in the process of renovating their kitchen—not that I’ve been there. The friendly contractor asks the dutiful customer: Can you please go to this website, take a look, and let me know what type of countertop material you want? Then, the customer dutifully examines the website and comes back to the contractor with a specific request. Quartzite!
Now what will the typical contractor assume? This customer wants something beautiful and durable and doesn’t mind an exorbitant price, not to mention continuous maintenance . But why might that conclusion be mistaken? Consider three reasons:
- The customer doesn’t know what they’re trying to accomplish. It’s a fact. Many people just don’t know what they’re really trying to accomplish, especially when considering a complex, multifaceted, and multidimensional problem like the countertop that will best suit their needs in the long run. So they dutifully examine the website and pick a countertop they think will meet their needs, but it won’t because they haven’t identified those needs very accurately in the first place.
- The customer knows what they’re trying to accomplish but doesn’t know how to accomplish it. Many customers, confronted with a website detailing thousands of countertop options, each with several thousand attributes, simply go into cognitive arrest. They simply can’t fathom the overwhelming volume of information, much less the time involved in considering it all carefully. So they simply select the first one that seems, at first glance, to minimally satisfy whatever bar they’re trying to clear. This tendency, commonly known as satisficing, can easily lead to a suboptimal request even if the customer knows exactly what they’re trying to accomplish.
- The customer knows what they’re trying to accomplish and how to accomplish it but is too afraid to ask. Many customers, facing a busy contractor booked out months in advance, know they would be best served by something cheap. Formica’s what I need! But they’re afraid the contractor will laugh at them, make a haughty snorting noise, or decide the project’s not worth their time. So the customer asks for something better than what they really need. But wait—isn’t that good for the contractor? Any contractor worth their salt knows it won’t be in the long run, when the bills come in or the customer starts talking to friends who really need a contractor to install some quartzite.
So never assume that requests correspond with needs! And don’t think selling is the only context when that assumption falls flat! Spouses, children, and work colleagues have all been known, on occasion, to make requests that correspond loosely with their underlying needs. Anticipating as much can make life negotiable!
We’ve all been there: We’ve seen something BIG—and I mean BIG—start to break in the house. A roof, a furnace, a major piece of plumbing: the feeling of dread is the same. So is the need to get several bids, lest you expose yourself to outrageous bids from unscrupulous repairmen.
But what to do with the multiple bids as they arrive? It’s not obvious, but it’s negotiable. This post will discuss three traps to avoid when soliciting multiple bids for a major repair. Since you should really entertain multiple offers in any negotiation, though, these traps are truly universal.
So imagine the dreaded day has arrived: your ailing roof now needs replacement. You’ve set a budget ($30,000 or less), solicited three bids, and just begun to receive them (gulp). Here are three traps to avoid as the bids roll in, each grounded in a particular psychological state and each likely to produce a particular type of poor agreement:
- Satisficing: Grounded in laziness, satisficing involves accepting the first offer that satisfies your minimum requirements. Supposing that the initial bid was $31,000 and the next was $28,000, satisficing would involve accepting the second bid before waiting for the third or continuing the discussion with the first two companies. Why would anyone do that? Because it’s easy (and easy to justify). Instead, wait for all three bids, then continue the discussion with the best two (at least), in order to see which can fulfill your fundamental interests best. Note that those interests might have nothing to do with price (e.g., the timeline for the work).
- Hubris: Grounded in anger, hubris involves walking away from a negotiation even though it serves your interests better than the alternatives. Suppose that the third bid came in at $27,000, which made you so angry at the initial $31,000 bid that you tore up their offer and shot off an email chastising their greediness. But oops! Reading the fine print on the remaining two offers, you now see that both are offering to complete the work in six weeks. You seem to recall that the first bid promised immediate repairs, which sounds a lot better in light of the impending rainstorm. So hubris involves rejecting a better offer. Why would anyone do that? Because it feels good to voice our irritation. Instead, try to retain and compare all offers against your fundamental interests (e.g., preventing the drowning of your daughter’s stuffed animals), staying at the table with the parties that meet them best—even if certain aspects of their offer, well, make you displeased.
- Agreement Bias: Grounded in fear, agreement bias is pretty much the opposite of hubris. It involves staying in a negotiation and actually reaching an agreement that serves your interests less well than the alternatives. Having ripped up the first bid, imagine you’re now negotiating with the second company ($28,000 bid). You’ve since learned that their offer is essentially identical to the third, except for the additional $1,000, which they refuse to remove. But there is the salesman from the second company—sitting across the table, smiling sweetly, and pushing the contract in your direction. Agreement bias involves signing it even though you know the third offer is better. Why would anyone do that? Because it feels uncomfortable to say no to somebody’s face—many of us are actually afraid of it. Instead, and again, try to stay focused on your interests, one of which must be saving $1,000. If that’s too hard, now would be a good time to try ratification.
Bottom line: When comparing multiple bids, it’s all about staying focused on what you really want and need. That sounds unbelievably obvious, but decades of research show people falling into these traps, then struggling to climb out solvent and satisfied.
Have you or someone you know ever fallen for one of the traps?