Introduction to Negotiation Strategy
At Oak Spring University, we provide corporate level professional Negotiation Strategy and other business case study solution. The High Price of Customer Satisfaction case study is a Harvard Business School (HBR) case study written by Timothy Keiningham, Sunil Gupta, Lerzan Aksoy, Alexander Buoye. The The High Price of Customer Satisfaction (referred as “Satisfaction Customer” from here on) case study provides evaluation & decision scenario in field of Sales & Marketing. It also touches upon business topics such as - negotiation strategy, negotiation framework, Marketing.
Negotiation strategy solution for case study The High Price of Customer Satisfaction ” provides a comprehensive framework to analyse all issues at hand and reach a unambiguous negotiated agreement. At Oak Spring University, we provide comprehensive negotiation strategies that have proven their worth both in the academic sphere and corporate world.
What’s my BATNA (Best Alternative To a Negotiated Agreement) – my walkaway option if the deal fails?
What are my most important interests, in ranked order?
What is the other side’s BATNA, and what are his interests?
This is an MIT Sloan Management Review article. "Satisfaction guaranteed or your money back"is a business promise made to consumers since 1875, when Montgomery Ward used it to differentiate his mail order catalog. It is now a vow many businesses make. However, the correlation between increasing customer satisfaction and increasing customer spending with your company is very weak, according to the authors. Their research finds that changes in customers'satisfaction levels explain less than 1% of variation in a company's share of category spending.Is customer satisfaction worth the cost? To find out, the authors investigated the relationship between customer satisfaction and business outcomes, gathering data from more than 100,000 consumers covering more than 300 brands. Although high customer satisfaction ratings are typically treated by managers as being universally good for business, the authors'findings indicate that the benefits are not nearly so clear-cut. There is a downside to continuously devoting resources to raise customer satisfaction levels. Managers are rarely able to accurately quantify the cost associated with increasing customer satisfaction scores (for example, from 8.7 to 9.1 on a 10-point scale), nor are they able to determine precisely what such an increase is actually worth. It turns out the return on these investments is often trivial or even negative. Knowing a customer's satisfaction level tells you little about how he or she will divide his or her spending among the different brands used. As a result, changes in customer satisfaction levels are unlikely to have a meaningful impact on the share of category spending customers allocate with your brand. Why? Single-brand loyalty, which was common in our parents'and grandparents'generations, has been replaced with loyalty to multiple brands in a category in many sectors. Because of this divided loyalty, more customers partially defect (in other words, they give more of their business to a competitor) than completely defect from a business or brand. As a result, improving customers'share of spending with your brand tends to represent a far greater opportunity than efforts to improve customer retention. kThe measure that really matters, according to the authors, isn't your percentage of delighted customers or promoters. What matters is the relative "rank"that your brand's satisfaction level represents vis-A?vis your competitors.
By interests, we do not mean the preconceived demands or positions that you or the other party may have, but rather the underlying needs, aims, fears, and concerns that shape what you want. Negotiation is more than getting what you want. It is not winning at all cost. Number of times Win-Win is better option that outright winning or getting what you want.
Options are the solutions you generate that could meet your and your counterpart’s interests . Often people come to negotiations with very fixed ideas and things they want to achieve. This strategy leaves unexplored options which might be even better than the one that one party wanted to achieve. So always try to provide as many options as possible during the negotiation process. The best outcome should be out of many options rather than few options.
When soft bargainers meet hard bargainers there is always the danger of soft bargainers ceding more than what is necessary. To avoid this scenario you should always focus on legitimate standards or expectations. Standards are often external and objective measures to assess the fairness such as rules and regulations, financial values & resources , market prices etc. If the negotiated agreement is going beyond the industry norms or established standards of fairness then it is prudent to get out of the negotiation.
Every negotiators going into the negotiations should always work out the “what if” scenario. The negotiating parties in the “The High Price of Customer Satisfaction” has three to four plausible scenarios. The negotiating protagonist needs to have clear idea of – what will happen if the negotiations fail. To put it in the negotiating literature – BATNA - Best Alternative to a Negotiated Agreement. If the negotiated agreement is not better than BATNA then there is no point in accepting the negotiated solution.
One of the biggest problems in implementing the negotiated agreements in corporate world is – the ambiguity in the negotiated agreement. Sometimes the negotiated agreements are not realistic or various parties interpret the outcomes based on their understanding of the situation. It is critical to do negotiations as water tight as possible so that there is less scope for ambiguity.
Many negotiators make the mistake of focusing only on the substance of the negotiation (interests, options, standards, and so on). How you communicate about that substance, however, can make all the difference. The language you use and the way that you build understanding, jointly solve problems, and together determine the process of the negotiation with your counterpart make your negotiation more efficient, yield clear agreements that each party understands, and help you build better relationships.
Another critical factor in the success of your negotiation is how you manage your relationship with your counterpart. According to “Timothy Keiningham, Sunil Gupta, Lerzan Aksoy, Alexander Buoye”, the protagonist may want to establish a new connection or repair a damaged one; in any case, you want to build a strong working relationship built on mutual respect, well-established trust, and a side-by-side problem- solving approach.
According to
Harvard Business Review
, there are three types of negotiators – Hard Bargainers, Soft Bargainers, and Principled Bargainers.
Hard Bargainers – These people see negotiations as an activity that they need to win. They are less focused less on the real objectives of the negotiations but more on winning. In the “The High Price of Customer Satisfaction ”, do you think a hard bargaining strategy will deliver desired results? Hard bargainers are easy to negotiate with as they often have a very
predictable strategy
Soft Bargainers – These people are focused on relationship rather than hard outcomes of the negotiations. It doesn’t mean they are pushovers. These negotiators often scribe to long term relationship rather than immediate bargain.
Principled Bargainers – As explained in the seven elemental tools of negotiations above, these negotiators are more concern about the standards and norms of fairness. They often have inclusive approach to negotiations and like to work on numerous solutions that can improve the BATNA of both parties.
Open lines of communication between parties in the case study “The High Price of Customer Satisfaction” can make for an effective negotiation strategy and will make it easier to negotiate with this party the next time as well.
Timothy Keiningham, Sunil Gupta, Lerzan Aksoy, Alexander Buoye (2018), "The High Price of Customer Satisfaction Harvard Business Review Case Study. Published by HBR Publications.
Feel free to connect with us if you need business research.
You can download Excel Template of Case Study Solution & Analysis of The High Price of Customer Satisfaction
Technology , Software & Programming
Transportation , Misc. Transportation
Financial , Misc. Financial Services
Consumer Cyclical , Auto & Truck Manufacturers
Financial , Misc. Financial Services
Technology , Office Equipment
Capital Goods , Aerospace & Defense
Basic Materials , Gold & Silver
Consumer/Non-Cyclical , Food Processing
Services , Printing & Publishing
Technology , Software & Programming
