Newsportal - Ruhr-Universität Bochum
How managers make their employees optimal price negotiators
If managers want their employees to be skillful in price negotiations, they themselves must be convincing role models. This is the conclusion of a study by marketing and sales researchers at Ruhr-Universität Bochum, European School of Management and Technology (ESMT Berlin), and the Bocconi School of Management in Milan. The researchers surveyed sales representatives and customers in the automotive sector and evaluated price negotiations. The results are published online in the Journal of the Academy of Marketing Science.
Cutting prices too much often causes problems
In many sectors, such as in car dealerships, it is customary to negotiate the price. A company can remain profitable only if employees do not grant the customers too great price reductions. “In practice, companies often have problems making sure their salesforce defend their firms’ price levels,” says Prof Dr Sascha Alavi, one of the authors from the Sales and Marketing Department in Bochum.
Managers leading the salesforce have to demonstrate convincingly how they defend and enforce prices. Employees then emulate their behavior. This is particularly successful when the leadership is charismatic. “Managers who are open to their employees, take their concerns seriously, and use positive motivation are especially successful in exemplifying price negotiation tactics,” explains Prof Dr Johannes Habel, ESMT. It is also helpful when leaders can convey a long-term vision for the company.
Leading by example does not help all employees
“However, leading by example does not work for all employees,” says Bochum researcher Prof Dr Jan Wieseke. “It only works when the employees are motivated to learn and also have the ability to negotiate with the customer.” Therefore, the authors conclude, some employees need more than just having negotiation skills demonstrated to them. Those who are not very motivated or unable to negotiate confidently need more support and a stricter management style.
Surveys of 92 sales representatives as well as observations from 264 customer discussions were included in this study.
Sascha Alavi, Johannes Habel, Paolo Guenzi, Jan Wieseke: The role of leadership in salespeople's price negotiation behavior, 2017, DOI: 10.1007/s11747-017-0566-1
3 November 2017