What does Prospect Theory suggest is the best strategy for salespeople hoping to
ID: 1162862 • Letter: W
Question
What does Prospect Theory suggest is the best strategy for salespeople hoping to come to a successful agreement with a potential customer?
Be sure to make the first offer, because the final settlement is highly correlated with the starting point of the negotiation
Remind the potential customer of the consequences of not reaching a deal
When possible, present the outcome of a deal as a gain relative to the initial starting point
Wait for the customer to make an initial offer, because they will automatically like the same offer less if it comes from you
John is being recruited by XYZ Company for a highly specialized position. XYZ has offered $90,000 in salary and John then countered with $100,000. Both sides believe they have made fair offers, but they both would very much like to reach an agreement. John would be willing to take any offer over $93,000 rather than lose the job offer. XYZ would be willing to pay up to $97,000 in order to get John to accept.
Which of the following is true of this situation?
John and XYZ Company will eventually reach a deal for John's employment
There is a zone of acceptance here where a possible deal could happen
John and XYZ Company are unlikely to reach a deal because of the difference in their initial offers
The final deal will be closer to $90,000 than $100,000, because XYZ made the first offer.
Be sure to make the first offer, because the final settlement is highly correlated with the starting point of the negotiation
Remind the potential customer of the consequences of not reaching a deal
When possible, present the outcome of a deal as a gain relative to the initial starting point
Wait for the customer to make an initial offer, because they will automatically like the same offer less if it comes from you
Explanation / Answer
Answer 1: According to Prospect Theory the best strategy for salespeople hoping to come to a successful agreement with a potential customer would be:
(C). When possible, present the outcome of a deal as a gain relative to the initial starting point.
Explanation:According to Prospect Theory of behavioural economics, an indivisual experiences greater emotional impact from a loss than from an equivalent gain. So it is more likely that the indivisual will buy a product which offer gains than losses. Hence, a salesperson should present a deal as a gain relative.
Answer2: In this situation, Option A is true i.e. John and XYZ Company will eventually reach a deal for John's employment.
Explanation: Both will reach to an agreement because there is a zone of acceptance from $9300 to $97000, now whoever makes the first deal the other will accept unquestionably.
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