Adapted from “What Makes Negotiators Happy?” First published in the Negotiation newsletter.
We all know that people have a strong need to compare their outcomes with those of others. So a negotiator’s mostly likely target of social comparison is her opponent, right?
Maybe not. Nathan Novemsky of the Yale School of Management and Maurice E. Schweitzer of the University of Pennsylvania’s Wharton School conducted a series of studies examining the effect of internal social comparison (comparisons made with a negotiation counterpart) and external social comparison (comparisons with others outside one’s own negotiation) on negotiator satisfaction. Their surprising conclusion: external social comparisons affect satisfaction more than internal social comparisons.
Why? Consider that, in the real world, buyers’ and sellers’ vastly different roles make performance comparisons difficult. A purchasing agent for an HMO, for instance, cannot compare her results to those of her negotiating partner, a salesperson from a pharmaceutical firm. But she could easily compare how much she paid for a particular drug with the price obtained by another purchasing agent.
Negotiator satisfaction affects the likelihood that the other side will do business with you in the future, fully honor the contract, and act in good faith. How does social comparison on price affect negotiator satisfaction? Novemsky and Schweitzer warn that you’re unlikely to ensure customer satisfaction simply by explaining that you earned only a moderate profit from the deal. If your counterpart later finds out that his competitors paid less, he’s likely to be dissatisfied—and to avoid negotiating with you in the future.
Of course, price is the easiest basis for comparison in negotiation. Customers are far more likely to compare themselves with others on price than on a host of other important dimensions, such as timing of delivery, payment schedule, servicing of the contract, and so on. For this reason, you’d be well advised to ensure that customers won’t receive bad news when they compare prices with those outside the negotiation.
As always price is a major consideration but price should never be the top priority in choosing a negotiator or attorney. Working on complicated divorces and child support matters in Hudson County, New Jersey has taught me that price is defintely not the key factor in working with mediators and negotiators.
That is an interesting insight into the human nature as it seems to play into the innate sense of fairness and justice of human beings, and we can see this outside the business or corporate environment, like for example, if a consumer purchases a product such as a television in store one day, but then later sees that same product model listed on a price comparison site and being sold for a price much lower than what they have already paid, their level of satisfaction with that purchase will plummet. Their rights will not have been violated as they willingly chose to spend where they did, but the sense of value and satisfaction decreases and they may feel wronged for not being provided with good value.