Letting Them Down Easy

By on / Business Negotiations, Daily, Negotiation Skills, Webcasts

First published in the Negotiation newsletter.

In recent years, a number of new Web-based systems have changed the very structure of negotiation as we know it. One of most famous of these is Priceline.com, which allows consumers to make bids for rental cars, hotel rooms, and air travel-bids that the car-rental firms, hotels, and airlines can accept or reject. Consumers often are given the opportunity to revise an offer if it is rejected.

Researchers Aleksander Ellis, Stephen Humphrey, and Donald Conlon of Michigan State University and Catherine Tinsley of Georgetown University have studied this new transactional form, which they call brokered ultimatum games, or BUGs. They define a BUG as any transaction involving an intermediary in which one side offers an ultimatum price that the other side either accepts or rejects.

These researchers are particularly interested in bidders’ fairness perceptions of the negotiation. As the success of Priceline indicates, when it comes to BUGs, the faster the response, the more satisfied the consumer. In addition, study participants are more satisfied with a BUG and more likely to use it again and to refer others to the BUG when their offers are accepted—no surprise there.

More interestingly, when an offer is rejected, long-term customer satisfaction can be enhanced by a detailed explanation of the rejection. This finding has broad implications for organizations that must reject offers and bids from suppliers or customers with which they may want to do business in the future. Naturally, a company is likely to be satisfied when you give it your business and dissatisfied when you take your business elsewhere. When you’re delivering bad news, procedural justice-the perceived fairness of a given negotiation-becomes an important consideration.

So the next time you’re forced to turn down an offer, consider giving the other firm a thorough explanation of your decision. In doing so, you may gain more options and more favorable trading partners in the future.

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