Why We Negotiate: How to Use Motivation and Incentives to Your Advantage

Negotiations are a critical part of any successful business-to-business relationship. That’s why, in today’s competitive market, the ability to close a deal is something that any business person should possess. Skilled negotiators are more likely to reach their personal goals, increase customer loyalty and satisfaction, and attain higher levels of profitability for the company. Therefore, it is important to understand what strategies can be used to help you become a more successful negotiator, and one such strategy is the use of incentives. 

Why is it Advantageous to Offer Incentives?

When you are sitting at the bargaining table trying to close a deal with a customer, it can be helpful to offer incentives. Offering incentives such as discounts, free shipping, or “bonus” products  can help sweeten the deal and make it more appealing to the customer. Consider this example. A man is riding a donkey while holding a stick with a carrot tied to the end. He dangles the carrot in front of the donkey to motivate it to move forward. This same principle can be applied to negotiations. When you dangle a “carrot” in front of the other party, you create an incentive that now motivates the other party to move forward and close the deal. 

How to Know Which Incentives to Use

In order for incentives to be an effective negotiation tool, you must first identify which incentives to use. In other words, what will motivate the other party to move forward? It is important to keep in mind that each situation is unique, because what is a powerful motivator for one customer, may not matter at all for another. Therefore, you must conduct research to figure out the interests of the other party. Prior to the negotiation, you need to learn about the other party’s needs, wants, and desires. Throughout the negotiation process, you can also ask open ended questions to gather additional information about what is most important to your counterpart. Then, you will be able to offer a meaningful incentive that the other party will find appealing. 

The Incentive Theory of Motivation

Research has shown that extrinsic rewards and incentives are among the most powerful motivators to drive people’s actions. Essentially, people are more likely to behave in a certain way when they are promised rewards and incentives. This means that offering incentives during a negotiation greatly increases your chances of closing the deal.