The Art of Negotiation in Customer Service

Not a single day passes without negotiation for a customer service agent. It could be during conflict resolution or feature requests or when you are recommending an upgrade. Being a customer service agent is more than just dealing with difficult customers. Strong understanding and effective persuasion are the guiding stars to conduct a good negotiation. One also requires top-notch people skills to be adept in the art of negotiation.

Though there is no specific formula to it, there are two kinds of approach to negotiation.

Position-based negotiation

This is a win-lose approach where both sides maintain fixed positions in a negotiation. They defend their positions until one of them or both reach a compromise. This method develops “you vs me” attitude between the customer and agent which leads to dissatisfaction.

For example, Bob recommends his customer to upgrade his antivirus software from Best to Premium plan. The customer agrees on everything except the pricing. The upgrade costs $400 but the customer can afford to pay just $300 due to budget issues.

They negotiate for a while and both come to terms with $350. The deal is closed with the customer having to pay $50 extra and the company having to reduce $50 from its original price. This leaves both sides dissatisfied and creates a poor relationship.

Interest-based negotiation

This is a win-win approach where both parties value each other’s interests and try to achieve mutually beneficial agreements. This method is a collaborative way which leads to satisfaction and boosts long-term relationship.

Consider the same scenario where Bob tries to raise the offer but to no avail. Finally, he suggests that the customer can pay $400 in two installments by relaxing the one-time payment option. The customer agrees to this proposal and the deal is closed.

In this approach, Bob considered the customer’s issue rather than having a fixed payment option. The customer got what he wanted and Bob didn’t have to reduce the price of the software.

So, which approach is the best way to satisfy your customers?

With customer acquisition costing seven times more than customer retention, interest-based negotiation is the wise route to retain your customers.

It also helps in acquiring new ones where both the customers and company get what they want in the best scenario or at least half of what they want in case of varying interests.

Such win-win negotiations require instant thinking to arrive at solutions beneficial to both the company and the customer. There are many such dynamics people don’t pay attention to which make up a successful interest-based negotiation. These factors are a must-know for all customer service agents as they are powerful enough to decide the flow of any negotiation.

1. Set the Limit for Concession

Knowing what can and cannot be done comes in handy when the negotiation involves pricing. Let’s say a new product is out in the market which is priced lower than yours. When the customer asks for a discount in order to continue using your product, it is necessary to know the maximum discount your company can give.

Setting the limit beforehand helps you focus on convincing the customer rather than worrying over the limit for the deal breaker. In addition, you will know when to stop negotiating with a customer who over demands.

2. Listen, Listen, Listen

People spend 45% of their time listening to other people but retain only 20% of what they heard. But, agents in customer service cannot afford to miss the important details in a customer interaction. Proactive listening skills are crucial for customer service agents even during their bad days. Being a good listener not only makes the customer feel heard but also helps you identify their pain points. It lets you put forward the apt solution while negotiating with the customer.

3. Ask Questions

Interest-based negotiation is for the benefit of both parties and so is asking questions during a negotiation. Asking the right questions gives insights into what exactly bothers the customer and moves the negotiation towards the solution. Take a look at the questions you can ask a customer during various situations.

Ask questions

These questions will help you frame your own and gain a better understanding of your customer’s issue. When you position your product in a way that solves their problem, customers get the confidence that the negotiation is in favor of their interests and not the product.

4. Give up Smart

Every agent dreads the product failure call and gets worked up dealing with it. Such issues will occur and every agent has to be prepared to negotiate them like a pro. Once the service recovery is done, make sure to retain the unhappy customer by asking if there is any way you could compensate for the inconvenience. Negotiate with them on what they need and go the extra mile by giving them a discount or an exclusive add-on feature. The frustrated customer might make absurd demands but give up smart based on the customer’s lifetime value. While you can deny the demand of an occasional customer, you cannot risk losing your loyal customer.

5. Apologize Only If Necessary

When the customer contacts you regarding an issue, it is okay to apologize for the trouble caused by the product. But, many agents try to pacify their customers by bombarding them with sorries. This frustrates the customer further when all they want to know is whether you have a solution or not. Including sorry in every line of your conversation makes you appear fake to the customer. Focus on fixing the problem and apologize only if there is no solution to their issue.

6. Explain Your ‘No’

Customers don’t like to hear ‘no’ and every agent struggles with this issue to this day. There is no perfect way to tell ‘no’ as it depends on the customer you are dealing with. But make sure to give them a clear explanation. Tell them why the feature they requested for is not possible rather than a plain refusal. This lets the customers view the interaction in a transparent manner without any room for misconception.

7. Be Honest

Overselling the product during negotiation helps in closing the deal but fails to create value for customers. Honest customer service policies help in making the customers understand what to expect from your product. This also lessens negative feedback as the customer already knows if your product doesn’t have a particular feature. When the agent dons the role of an honest negotiator, it fosters trust among the customers and builds the brand value of the company.

8. Give Discounts in Installments

The win-win approach needs mutual understanding and discount is one way to come to an agreement. But, according to Deepak Malhotra of Harvard Business School, “Concessions often go unappreciated and unreciprocated”. If you are prepared to give a discount to your customer, offer it in installments. Let’s say you can offer a maximum concession of $10,000 to a customer. When you offer it one go, the customer might want to reduce the price further thus undervaluing it. This can be avoided if you split the total amount into two concessions: one $6000 followed by $4000. In this case, you appear flexible to the customer while negotiating which creates a positive outlook.  

9. Shut the Bias Out

Psychological biases are bad influencers and affect the decision-making of negotiators. The top among them is affinity bias where the unsuspecting agent gives extra concession to the customer who shares his/her dialect, gender, identity or cultural background. A customer service agent should give no room for any sort of bias and work towards attaining the objective outcomes. Taking a step back under these circumstances objectively helps in achieving a bias-free negotiation.

Within every agent lies hidden an interest-based negotiator. Tap into it using the above factors and yeah, don’t forget about empathy as that’s what makes you a customer champion as well. The next time you negotiate with a customer, don’t forget to create your very own win-win approach.

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