Salesperson Dual Agency in Price Negotiations

Abstract

When should B2B firms encourage their salespeople to advocate for the customer in pricing negotiations? This research extends dual agency theory to the sales domain to address this question. In Study 1, the authors examine discount negotiations with secondary data from a major U.S. industrial distributor. They find that the customer and seller both experience the most favorable outcomes when the salesperson engages in both customer advocacy toward the seller and seller advocacy toward the customer; either type of advocacy alone is counterproductive. Study 2 confirms these results using matched survey, pricing, and profit data and demonstrates a key boundary condition: broad customer–seller ties enable the synergy between customer advocacy and seller advocacy by enhancing the firms’ abilities to monitor the salesperson. In Study 3, experiments with B2B buyers replicate key findings and provide evidence for theorized mechanisms. This research emphasizes the interdependence between the salesperson’s dual roles and demonstrates how the salesperson can serve as an effective agent of both the customer and seller, thereby mitigating challenges associated with role conflict.

Customer-oriented salespeople’s value creation and claiming in price negotiations

“…Specifically, claiming high prices as a reward for created value might hurt customers' emotional connection with salespeople, while salespeople perceive that "the most important thing is that the customer is satisfied" (SM1). The argument that customer-oriented salespeople may be reluctant to claim value is in line with prior research (e.g., Lawrence et al 2021) and our reasoning on the link between customer orientation and other-concern (e.g., Greenhalgh and Gilkey 1993;Amanatullah et al 2008;Schroeder et al 2014).…”

“…Third, we contribute to research on salespeople's price negotiations (e.g., Wieseke et al 2014;Alavi et al 2018;Lawrence et al 2021) by illuminating how the tension between customer-oriented salespeople's self-concern and other-concern influences their price negotiation outcomes. Building on dual-concern theory, we propose that salesperson's customer orientation fosters their other-concern, which poses a risk to their claiming of value in negotiations (e.g., Jap et al 2013;Wieseke et al 2014;Lawrence et al 2021).…”

“…Third, we contribute to research on salespeople's price negotiations (e.g., Wieseke et al 2014;Alavi et al 2018;Lawrence et al 2021) by illuminating how the tension between customer-oriented salespeople's self-concern and other-concern influences their price negotiation outcomes. Building on dual-concern theory, we propose that salesperson's customer orientation fosters their other-concern, which poses a risk to their claiming of value in negotiations (e.g., Jap et al 2013;Wieseke et al 2014;Lawrence et al 2021). We advance prior research by identifying two management levers that increase customer-oriented salespeople's self-concern and, thus, counteract their other-concern in price negotiations: (a) Stimulating salespeople's confidence to benefit from the value that they created by negotiating lower discounts and (b) aligning salespeople's compensation to profit-related incentives.…”

“…Other-concern is a key driver of negotiation outcomes, leading negotiators to set less ambitious negotiation goals, negotiate less assertively, and make greater concessions, thus achieving worse distributive negotiation outcomes (e.g., Greenhalgh and Gilkey 1993;Amanatullah et al 2008;Schroeder et al 2014). The negotiation literature agrees that a concern for the opposing party's needs poses a risk to negotiators' claiming of value in negotiations (e.g., Jap et al 2013;Lawrence et al 2021).…”

Making agency theory work for supply chain relationships: a systematic review across four disciplines

“…the optimal outcomes of the principal-agent relationship/system as a whole. For example, Corbett (2001) analyses the lot sizing problem from perspectives of both parties, Inderfurth et al (2013) report on a laboratory experiment predicting the performance of the whole supply chain through the agent's (the supplier) choices based on the principal's (the buyer) signals, and Lawrence et al (2021) provide insights for sellers, customers, and the sales agents in between in their dual agency role.…”