Customers have the Power to Negotiate

by | Dec 20, 2015 | Customer Service | 0 comments

“The balance of power has shifted from brand to consumers. And the impact of consumer empowerment cannot be underestimated.” – slideshare.net

The balance of power as mentioned in the quote, encompasses every aspect of the relationship between companies and their customers. This has enhanced the customer’s power to negotiate more than ever before. Not only can they decide what and from whom they want to buy, their opinions influence the views of others too. Companies that realize this power to negotiate that, customers now have will be more successful in closing deals and expanding their customer base. The power to negotiate does not apply only to pricing control, it is covers the entire gamut – kind of products, quality, service, channels of communication and all else.

Improved technology has enhanced the customer’s power to negotiate by empowering them with access – to more information, channels of communication, social networking, smart devices and apps – equipping them to find whatever they want in the shortest possible time and with ease, reducing their dependence on companies for information. However, the customer’s enhanced power to negotiate has thrown up bigger challenges for companies, who are now struggling to keep pace with their ever-increasing expectations and demands. Companies just have to comply else, they would end up losing their customers to those that can.

The needs and expectations of customers vary – a lot, making the job of companies even tougher and increasing the customer’s power to negotiate. While for some customers, the efficiency of the product or service is more crucial than pricing, there are others for whom lower costs could form the basis of the association, while there could be others for whom both these aspects would be at par. These are vital considerations but still keep the power to negotiate in the hands of the customers, thereby forcing businesses to rethink their strategies and policies if they are to remain competent. Customers, as mentioned, are now able to get a lot of information about a company before actually investing in it, making it difficult for companies to provide any misleading information or keep control centred with them. It would be rare to find customers, who are ill informed, since that would deprive them of their power to negotiate and allow them to be ‘played’ by the companies. Most customers understand their rights and power and are unwilling to give it away.

The amount of information, product choices and companies from which to buy them from has increased manifold and customers love all the attention and enhanced power to negotiate these reasons have brought them. Research shows that before making any buying decisions, at least 81% of the consumers read reviews, ratings and testimonials and more than a third write reviews and contribute towards such online ‘discussions’. This means that potential consumers would rather believe what current customers say than trust what a company tells them. This in turn ensures that in order for customers to say good things about their company and offerings, they should receive top class service, pricing and products – in effect furthering their power to negotiate.

Another critical element for companies is their ability to get customers – both existing and potential – to trust them. It is a humongous challenge for companies since a lot of information about them reaches customers long before they have the opportunity to connect or let customers know about their offerings and company policies. By that time, customers have usually formed a perception and if the perception is negative, it becomes almost impossible for companies to convince customers otherwise. The mind-set of customers towards companies determines their buying decisions, which in turn drives a company’s growth and profits. When a group of customers get together and speak a ‘common language’ about a company, their power to negotiate becomes seemingly insurmountable, leaving companies with no choice but to comply to their terms. This compliance then further strengthens the ability of customers to drive products, features, pricing and other such aspects.

The great advantage customers have, leading to enhanced power to negotiate, is the ability to draw out information from the source of their choice. They prefer to associate with companies that give allow them to engage with it directly and visibly – such as social media. Companies too make every effort to encourage their happy customers to post positive views and comments in order to draw attention toward them and gaining the attention of other potentials too. In any scenario, it is the customers, who have the final say as they can interact with each other directly and get opinions for use to make decisions for or against a company.

With technology advancing so rapidly, customers now do not only have access to information but can also ‘spring’ ideas for companies to work on. This means two things for a company – the experience shared by a current customer would influence the mind-set of another, who could want the product albeit with some changes and tweaks. The other aspect is that a customer could conceive an offering based on the plans of their company and expect their partner company to produce an offering exclusively for them. While this enhances the power to negotiate and control for customers, it could pose problems and costs for a company. If they can comply in a limited timeframe, they would benefit, else, the customer could go on to search for a company that would give them exactly what they want.

The other reason for the enhanced power to negotiate for customers is the fact that their spending capacity has increased. They are willing to spend extensively on things that catch their fancy and would address their emotional needs such as looking good or staying one up over their associates. However, while the company may gain on the pricing front, customers still hold the reins with regard to the kind of products they would spend on, thereby exerting huge amounts of pressure on the companies – since failure to comply could mean driving away customers by the hordes.

Customers that ‘shop’ in groups – that is those that are well connected and or are great influencers, have even greater power to negotiate and force companies to follow strict quality and pricing control. A single comment – positive or negative – from such influential customers has the ability to sway the decision of a very large group of customers, both existing and potential. It is no wonder then that companies often use celebrities and famous people to endorse their products and campaigns. These luminaries are perhaps at the peak of the heap with regard to their power to negotiate and other customers emulate this power wherever they can – such as in smaller stores or vendors and even companies that are just setting up business.

While mushrooming of new companies is lowering the staying power of companies, the trend is further enhancing the power to negotiate for customers. Spending more and often on one particular brand is not viewed as essential anymore – they can switch companies and brands whenever they want and for no apparent reason. Unless companies give customers consistent reasons to be delighted with them, there is no real requirement for customers to remain loyal to a brand. Customers keep adding to their power to negotiate whereas companies need to work a lot harder to retain customers even for a short time. It would be imprudent on the part of companies to underestimate this power to negotiate that customers now have – use every opportunity to serve customers exceedingly well to gain the maximum for whatever duration they may be with a company.

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