Naughtily flicking through the tabloids on a steamy Summer night, I just learned about the Endowment Effect.
I was instantly hooked. Here’s some web definitions to help those also new to it.
The “endowment effect” explains our irrational tendency to overvalue something just because we own it.
People often demand much more to sell an object than they would be willing to pay to buy it
The latest research quoted in the first-mentioned paper concludes:
Affirming a seller leads to elimination of the endowment effect
Or as the tabloid sums it up;
Complimenting or flattering sellers lowers their guard – and their selling price.
So, we take it that the person being flattered is prone to lower their financial demands in the upcoming transaction.
I do wonder how this translates into the b2b world.
I well remember twenty years ago the first time I ever appeared in a ‘buyer’ role. I played a part in selecting a marketing company at that time. I was amazed at how ‘nice’ the competing agencies were to me.
And the pattern was repeated throughout the Nineties, when buying such as sales reporting software (not yet called crm), a recruitment partner, a car fleet supplier and training services.
I was disturbed at how obsequious, sycophantic and fawning the potential vendors all were. And I got quite worried that I should not come across in the same ridiculous way.
My suspicion is that most buyers take compliments as irritating fake attempts to butter them up and generally let them wash off with great haste.
Yet I do like the final advice from the article;
Next time you are buying a second-hand car, for example, you may want to start the negotiation by telling the car owner what a wonderful family she has.
Because I bet going too far the other way is fatal.
I’m shaking my head in astounded disapproval as I write this, but I have been in first meetings alongside a rep that has said, directly to a year-crowning prospect, ‘so, what is it you do here…?’
With absolutely no knowledge on them nor any prep done to find something out.
Surely it is totally better to start such a conversation with anything that suggests some admiration for a particular area;
… I love what you do with [xyz], what’s next…?
Anyway. I guess this strictly only applies when you ‘own’ that which you hope to sell. Yet how sticky is this principle? How much do you feel your wares are part of you? Or to what extent does your buyer see the funds to be released as custodially theirs or from completely abstract corporate coffers?
Either way, a touch of genuine admiration combined with healthy curiosity can I’m sure do no harm in preserving your precious margins.