Thursday Thought-- Tradeables: Swapping Freebies for Goodwill

Posted By Khushi Desai , Apr 14, 2016

When we talk about “tradeable” issues in the negotiation context, we usually mean trading something of low cost to us but high value to the other party, in order to get that other party to move closer to a deal in our favor. But in their recent scholarship, Habib Chamoun and Randy Hazlett use the term “tradeable” to mean something very different—something that people have been doing for centuries.  

According to Chamoun and Hazlett, tradeables are not things to be traded as part of a deal, like money for a watch. Rather they are actions, products, or services outside of the transaction that facilitate a successful negotiation and positively impact a long-term relationship. For example, using tradeables in a relationship between a jewelry shopkeeper and a customer might mean throwing in a free 24/7 watch-repair service. A deal would be complete with the exchange of the watch and money, but adding in this opportunity to meet the customer’s interest in a consistently functional watch will make a big difference in creating goodwill for their next deal. Similarly, if during this interaction the customer indicates that he has just recently moved to the city with his family, the shopkeeper could employ a tradeable by offering restaurant suggestions or inviting him and his family to a neighborhood block party. These wouldn’t be part of the transaction, but they would help facilitate a long-term relationship.

But how does giving away something for free help us? Weren’t all of us taught never to make a unilateral concession, to always make a trade? The psychology of giving provides an interesting perspective on altruistic contributions during a negotiation.

Giving something during a negotiation that meets the other party’s needs, even though not directly related to the transaction at hand, can generate the positive emotions of gratitude and appreciation. In the jewelry store example, the customer would now have a very positive perception of the new city and be appreciative of the shopkeeper’s genuine kindness. These emotions form a mutually experienced empathy that can enable a more collaborative, forward-looking relationship. The shopkeeper might even experience more business from this customer, or perhaps a positive Yelp-review!

So, to the important question: how do we correctly use tradeables to help our position in a negotiation?

Build Trust: When you give a tradeable, don’t expect anything back immediately. Understand that tradeables are more of a long-term tool. By satisfying the other party’s extrinsic needs now, you are improving the relationship and ensuring a more collaborative subsequent interaction. In order to gather information about another party’s extrinsic needs, however, trust is essential. Trust can help us create an environment in which parties are comfortable sharing their true interests. As a negotiator, you can trigger this trust-building process in different ways. Just as an outrageous opening offer can destroy trust, a well-justified offer can preserve and may enhance it. Connecting offers to identified interests and emphasizing joint gains can demonstrate active listening and competence. Building trust through these types of tactics can help lay the foundation for an effective tradeable.

Actively Communicate: An effective negotiator will listen to understand and recognize the other party’s interests. The other party might say what they want, but sometimes you have to draw it out of them. Perhaps there’s an interest that they themselves have not yet recognized, but that you can deduce from their non-verbal cues. Recognizing a party’s needs requires information gathering. What might they want from us that would be valuable for them? What can we do for them that’s easy for us to give? Once you figure this out, affirm your understanding of these needs and confirm that they are truly unrealized needs. A tradeable can then be used to satisfy these unrealized needs, promoting a more collaborative relationship moving forward. Imagine a conversation with the customer looking to buy a watch. While inquiring about the customer’s interests in finding a watch (e.g., the purpose, the style, etc.), the shopkeeper could also discover that the customer has an old ring they’ve been meaning to sell, but don’t know how to price. Arranging a meeting with a well-reputed ring appraiser would be an effective tradeable. The opportunity to create this tradeable arose from the shopkeeper’s active listening skills.

Think about Context: Even if everything above is followed, using a tradeable could go very wrong in particular contexts. Think about it this way – one person gives a gift that is not relevant to the deal at hand, but is simply given to further a long-term relationship. “Thank you for working with me on this software deal. Here’s a gold pen for you to keep”. In some cultures, this could look like a bribe! It’s important to make sure that the gift is given without conditions (expressed or implied) and in a non-manipulative and unselfish way. The best way to do this is to ensure that the gifts you give satisfy a party’s needs effectively and are perceived as genuine unilateral concessions. Instead of gifting a gold pen, an effective tradeable would be to extract the other person’s interest in, let’s say, networking, by inviting her to attend a conference.

The next time you walk into a negotiation, especially one in which the parties could benefit from a long-term relationship, use a tradeable and see if it turns a competitive negotiation into a more collaborative one.

 For more information on negotiating with tradeables, see Habib Chamoun & Randy Hazlett, The Psychology of Giving and Its Effect on Negotiation, in Rethinking Negot. Teaching 151, 151-66 (2009).