Pitfalls of negotiating with your best customers

Recent research from Stanford suggests we don’t negotiate well with our best customers because we know them too well: we don’t create value for our best customers in negotiations.

Margaret Neale (John G. McCoy–Banc One Corporation Professor of Organizations and Dispute Resolution) studied the effect of having too much information on creating value when negotiating. Neale says "Because I think I know you well, I'm not going to be as attuned to the specifics of the negotiation, I'm going to think I know what you care about, but I don't test out those hypotheses."

In brief the research showed that participants who ignored useful information created far less value in negotiations. So how can you be more effective? First, prepare for the issues and prepare for the person. Prepare on paper so you can see your thinking and so you can ask others to test your preparation.

Second, write down your assumptions. Often this act alone will make you realise some assumptions are wrong and others are questionable.

Third, as part of your planning ensure you plan some questions to test your assumptions. In our experience the best negotiators ask the best questions. Asking the best questions is not something to leave to chance in the hope that you will find the best questions during the normal stress and uncertainty of business negotiations. The best questions come from the best preparation.

A final tip is test your preparation on someone who does not know your best customer well. Often, in their innocence they ask you questions that show you where there may be opportunities to create value for your best customers. But, just as in all negotiations you must listen hard for those soft signals that offer opportunities to create more value for your best customers.