By: Michael Sos, Director, Prime and Digital Strategy
Negotiation asks how both parties can get their interests satisfied while keeping their relationship strong. Often times, people enter negotiation from the stance of mutual gain. In fact, 84% of individuals believe they will cooperate with their partner. However, the problem is that when asked about their counterpart, people tend to believe the other party is just looking to win.
Again and again, businesses attempt to gain the trust of their consumers. Yet, they may be trying for a lost cause. Here’s why:
1. Power is a fixed resource
The reality is that even if the playing field is level, both parties rarely view it as being so. As a dealer, you have the “upper hand” because you possess more information about your product and pricing; you have expert power. While you may be negotiating a fair price, your customer often resents the power asymmetry and feels cheated.
2. Negotiation is irrational
Individuals tend to overvalue how much they like or dislike the person they are negotiating with. As a result, they are unable to look at the deal objectively. Cognitive science shows that people often believe that their perceptions directly reflect reality; those who see things differently are therefore biased.
3. Negotiation is unpleasant
It is difficult to check your emotions at the door when money and peace-of-mind are on the line. Also, it is common for both parties to focus on their position vs. the actual outcome. Lack of preparation, or lack of information, can also cause customers to panic.
Negotiation and Your Dealership
According to DealerRefresh, 73% of car buyers wish there was one fixed price for each car. Why? Because negotiations are founded upon lack of trust, irrationality, and displeasure.
The reality is that there are many expenses associated with owning a car: fuel, interest, insurance, maintenance and repair, tax, etc. Even though the modern car shopper is armed with information, he/she is still unable to estimate the final price that will show up on their bank statement in a few months. Giving the customer more stability through an initial fixed price helps them better estimate their final cost so that they make an informed decision.
Even if fixed pricing is not right for you, help your prospect estimate the cost of ownership of your vehicles. You receive distinct advantage over competitors because they look at other options and simply say: “I don’t really know what I’m going to pay.”
The easiest way to build trust within sales is to provide a solution that is in the customer’s best interest. It is easy to fall into the trap of complicating the financing process due to the factors mentioned above. However, simplifying the customer experience actually does more to support your interests. Short-term sales are beneficial, but if a customer feels that they have been cheated, they will not only stop returning to your dealership, but spread the news about their dissatisfaction. And as we all know, reputation is key!
Have you considered fixed pricing within your dealership?