CHAPTER 5

The Phases of Sales Ethics

For the professional, work is more than a market exchange; it is, rather, a source of meaning and identity within a community of like-minded practitioners.

—Rakesh Khurana, From Higher Aims to Hired Hands

As we made clear from the first chapter, ethics may find practical application in everyone’s life. In the following pages, we will present a model that effectively uses the precepts and theories presented so far. To support you in acquiring and using these tools, we will provide examples from our professional life and the experience of salespeople with whom we have worked. The case studies given in these pages do not refer to large corporations and do not describe managers endeavoring to establish business strategies; instead, they are built around the small scale daily work of each seller. They recount the difficulties and struggles of individuals, providing suggestions and proposing innovative ways to incorporate ethics in your profession while ensuring optimum results.

The approach of Sales Ethics is in fact bottom-up. By influencing the actions of individual sales professionals, we can bring about change from the bottom to the top, thereby modifying the strategies of the whole organization and helping to redefine the competitive dynamics of the market in an ethical sense.

As the interest in disciplines related to business ethics grows, more and more people are wondering about the connections between success and ethics and wondering, “Do ethics pay?”¹ Through our study of the various phases of any sale, we will discover that our answer to this question is a resolute yes, and not only in the long term. An enhanced reputation, positive word of mouth, customer loyalty, moving beyond competition based on price alone, increased performance, and motivation of sales personnel are just some of the benefits that Sales Ethics can generate. However, to achieve this we must make sure that ethics comes out of university lecture halls, books, and corporate mission statements to be put into concrete action. The pages that follow are just a starting point to carry out this process. But before venturing upon an analysis of the different phases of commercial negotiation, we want to explore the reasons that led us to integrate ethics in the sales process by adapting and framing the most effective negotiation techniques according to the theories and concepts presented in the previous chapters.

Long Term Versus Short Term

The business world seems mainly concerned with short-term logic: Costs and wages require a continuous stream of revenue, the share price of companies fluctuates rapidly according to daily variations in results, and managers demand sales targets that are set over ever-shorter periods. The least scrupulous companies base their strategies on achieving results whatever the cost without bothering to build a relationship of trust with their customers. Is it still possible to adopt and maintain a business strategy that considers ethics central in such a scenario?

To answer this question, let’s start with an example. During the holiday season, we received a new smartphone from the telephone company we use, although we had not placed an order. At first, we assumed the phone was a gift but later discovered that we had been charged for it! We were not the only ones, as many other customers received phones they had not ordered or were billed in advance for services they had not yet received. Why do certain companies behave this way? It is likely that the aim is to have positive end-of-year results and that the sales staff are pressurized into using whatever means to boost sales, including the sending of unsolicited goods. But what follows such action?

Personally, we called customer service and expressed our dissatisfaction for the inconvenience caused. The lack of satisfactory answers and the company’s clumsy attempt to shift the blame onto the individual seller made us feel badly let down and our dissatisfaction increased to the extent that we considered cancelling the entire service. After hearing that our friends and colleagues had a similar experience, our trust in the company declined further. Many users shared their displeasure on social networks, triggering a rapid spread of negative word of mouth that undermined the phone company’s attempts to increase its customers with promotional offers in the same period.

If we focus on the economic aspects, the unethical behavior adopted by them generated administrative and logistic costs for the company, which was forced to take back items and cancel invoices, thus leading to extra expense. Such consequences are the immediate result of pursuing a strategy that concentrates only on obtaining short-term results and entrusting strategic choices to people who have an exclusively opportunistic idea of sales. As we argued in Chapter 2, sales is an activity that unfolds over time and comprises a series of phases related to each other; each of these is necessary to build value for the customer and for the company. If you adopt this new point of view, short- or long-term considerations are practically redundant, as your vision broadens to encompass the whole process, it becomes clear that an ethical approach is required to achieve concrete results. We will now analyze the main reasons why we consider this to be true:

•  Investments and returns: As mentioned in the section on “Reciprocity and Cooperation” in Chapter 2, investment precedes revenues. The adoption of short-term strategies reflects the shortsighted attitude of those who want to obtain income in advance without considering the costs that will be generated. We can’t forget that present results must be built on foundations and the choices you make today will affect your future. The section entitled “Well-Being and Well-Having” in Chapter 2 is equally pertinent here, as in this section we clarify the tangible and intangible components that make up the balance sheet of any business.

•  Externalities: If we were to give a name to the current economic phase, we could call it the period of dominant externalities. Since the advent of Internet, and with the global spread of social networks, concepts such as trust, reputation, and loyalty have become essential to ensuring successful business. The prophecies of Nash and other experts in game theory, who have rehabilitated cooperation based on customer trust as a successful strategy (see the section on “Incremental Negotiation” in Chapter 3), are proving increasingly appropriate in enhancing our understanding of sudden fluctuations of the stock market based only on rumors or investments made by companies to build reputation.² Do we really wish to ruin everything by adopting the approach of “Take the money and run?” With information traveling around the globe rapidly, there are very few places to hide.

•  Follower and leader: But what if competitors in my market adopt an opportunistic strategy focused only on short-term results? Should I continue to follow an ethical approach? If you focus only on what your rivals are doing when deciding your strategy, you are acting as a follower and not as a leader. Real innovation is born when you observe customer behavior closely and study the dynamics that underpin demand. Sales Ethics therefore focuses on satisfying our customers and not on beating the competition. By adopting a broader view of each sale and adopting a style of incremental negotiation, you will stimulate purchases further and generate positive word-of-mouth factors that can expand the market and lower the level of conflict between competitors. An ethical approach to sales does not mean sacrificing success in the short term but gaining benefits in terms of positive reputation; thus increasing the number of new customers and ensuring loyalty, leading to increased turnover even in the short term.³ And if you’re thinking that building a solid reputation will take time, bear in mind that it only takes a few seconds to destroy it. The choice between being ethical or opportunistic has many implications in the short term.

•  The last link in the chain: In our view, sales is strategically fundamental to business activities because the salesperson is the one who fosters a direct relationship with the customer and exchanges value. This role requires specific skills, and especially a particular breadth of vision. As the example of the phone company illustrated previously, the approach of an opportunistic seller may appear effective (achieving year-end targets) yet it actually harms both sellers themselves and the entire company (damaging reputation and losing customers). When the perspective changes, the various company goals may appear in contrast. How would the communication strategists react, were they to find out that their advertising campaign based on customer satisfaction had been impaired by the opportunistic behavior of the sales department? The salesperson is the last link in the chain that directly represents business strategies and value to the customer. If something goes wrong at this level, all the investments upstream will prove ineffective, and the company and salesperson will drop back to the level of skepticism in the circle of trust, with a reputation that is blemished by a negative precedent.

•  Personal branding: When we discussed the concept of value in Chapter 2, we stated that the assets of sellers are their customers, and any professional insurance is dependent on the good relations that they are able to develop with customers. What will happen to the salesperson at the telephone company when his or her boss becomes aware of the many complaints engendered by this misconduct? What company would offer a job to a salesperson who has a reputation for unfair behavior? Remember that all your actions will affect your professional image, affecting results in both the long and short term!

You do not need to act against the interests of your customers and against their values to get immediate results. Rather, it is essential to build a relationship based on trust and exchange. The only way to do this effectively is to bring ethics into the customer–seller relationship, developing your negotiation skills on this basis. If you think about it, no sales manager is going to instruct his or her sales staff to act in a nonethical way, but rather the emphasis will be on producing results. If you introduce ethics and improve sales by using this approach you will break down the paradigm short-term results = opportunism, helping to change the dynamics of the organization you work for from the bottom as well as the market culture in general.

By the way, we actually needed a new smartphone and if the company had contacted us suggesting the purchase we would have taken up the offer. All the salesperson had to do was contact us to assess our needs and the sale would have gone through and the seller would have obtained the required results immediately while reinforcing a relationship of trust.

Bottom-Up Approach

A quick search on the Internet revealed that the phone company we discussed in the previous section has a code of ethics that states, “We aim to listen well, understand our customers and provide reliable solutions, exceeding their expectations”—this hardly seems to describe the approach we experienced. The history of business is littered with companies that act in a noncoherent manner, and we constantly encounter sellers in our professional activity who are unsure how to interpret the general precepts of their company’s mission and put them into practice. In fact, business ethics often seems to be considered purely from the perspective of management or strategy, so that individual salespersons will find few clear operational guidelines for translating company ethics into everyday relationships with the customer. From the point of view of professional salespersons, the ethical problems are more subtle than obvious; thus, we are not talking about paying bribes or selling counterfeit products, but rather the grey area that may affect and inform the relationship between the seller and the customer. There is no doubt when an action is illegal, but each individual salesperson must take responsibility for their own choices in the customer– seller relationship. To understand how ethics will inform our actions, we must consider it in our own particular context and adapt our behavior to manage and overcome conflicts of interest and identity. Let’s analyze some of the other reasons that made us choose to adopt a bottom-up approach:

•  Revolutions come from below: History teaches us that true cultural change always comes from below. It will take more than a code of conduct or mission statement handed down by top management to restore ethics to our business transactions— this requires a change in our everyday behavior that maintains the effectiveness of our sales activity. We will truly accept the idea that ethics is a powerful economic engine only when we have used this approach ourselves in an authentic relationship with our customers, while also increasing our sales.

•  The Judo lesson: Anyone who has had a Judo lesson knows that it is divided into three parts. First, the master explains the theory of a principle. Then, he demonstrates the technique that translates this principle into action. Finally, the students practice applying it. In fact, Judo holds that real learning takes place only when the mind and body act together. “Tell me and I forget, teach me and I may remember, involve me and I learn” said Benjamin Franklin,⁴ and this is exactly the approach we adopt in the second part of the book, where you will find techniques and exercises to apply ethics to your work.

•  Sell twice: Do you remember what we said in Chapter 4 when talking about internal customers? The goal of your work is not only to sell to your customers but also to help colleagues develop an authentic customer culture that allows them to contribute to customer satisfaction. Your role is therefore to introduce this new culture and change; you can be the instigator of the transformation that will lead your organization to integrate ethics as a key element of its strategy.

•  The marketing analysis: The starting point of any serious marketing plan is a sound analysis. Perhaps, of all the research carried out, the most important is that focusing on customer behavior. Who is best placed to make such an analysis? We believe salespeople are, as they come face to face with customers every day, discussing objections, dealing with complaints, and listening to their opinions. Any strategic or operational decision, whether drafting the budget or choosing an advertising slogan, should be made after serious reflection on the feedback coming from the front line. Thus, both strategies and change can be instigated from the bottom up.

Effective and Ethical Selling

Why do we discuss ethics in the opening chapters of this book and then give you tools to help you sell? Can we really introduce ethics into an activity as materialistic as sales? We could have replaced the word ethics with code of conduct, thus pre-empting any concerns of those who argue that professions are not compatible with ethics because there is a profit motive. In our opinion, however, the difference between code of conduct and ethics is mainly linked to the context: The former refers to moral obligations in a professional environment and the latter refers to relationships. Both in the professional world and in life, in fact, all interactions are aimed at obtaining an advantage, but this does not mean that they can’t have a virtuous goal. We chose to use the word ethics because we want to emphasize that we are not just talking about good professional behavior but actual tools to generate shared well-being. Those who persist in thinking that because you earn money from a sale you can’t talk about ethics, are probably victims of a sneaking identity conflict and see wealth and morality as two contrasting goals; this outlook will make it difficult to achieve any professional target as we all sell something to someone.

Another key reason for weaving ethics into your negotiations is that if you work with no more than a list of rules to follow each time you must tackle a moral dilemma, you will lose the ability be proactive and anticipate problems or to add value to every customer relationship. When the time comes to deal with an ethical issue it may already be too late to act. You must choose prevention rather than cure by founding your relationship with the customer on ethics right from the start. To reach this fundamental goal, we will work through the entire sales process and not consider solutions to specific moral dilemmas alone. Rather we propose a method of effective negotiation based on ethics that can produce results and confirm that ethics pays in the short term too. So how does an ethical salesperson differ from a standard seller? Let’s try to summarize the main qualities that set the ethical salesperson apart:

•  Negotiations are integrating and not distributive, that is, the idea is not to seek compromise to convince your customers but to integrate your idea of value with that of your interlocutor to reach a result that completely satisfies both.

•  Any sale is considered from a broader perspective, as an activity made up of moments and important phases that build shared value. This view helps move beyond the categories of short and long term when assessing results.

•  There is an awareness that economic activity is affected by forces such as externalities, reputation, and trust, which may lead to an apparently sure deal failing or, alternatively, lead to the success of a seemingly unlikely deal.

•  Both material and nonmaterial costs are considered as tangible and intangible gains.

•  Your behavior makes it possible to resolve potential market failures, such as those caused by information asymmetries.

•  You are ready to take greater responsibility for the sales process, becoming the bearer of cultural change in your company and contributing to the evolution of colleagues.

•  You are ready to argue fully the value of your entire offer system, including the price, and to improve your organization’s results.

•  Your actions trigger an exponential increase in contacts and number of purchases over time, helping to expand the cake and not just compete for a single slice of business.

•  Your customers become promoters who will generate new business opportunities for you without you applying any pressure on them to do so.

•  You reduce costs by shortening negotiation times and avoiding objections and complaints.

•  You positively reinforce the company’s image by translating its mission and vision into concrete actions.

•  You love your job and your relationships with others, thus improving morale and motivation within your company.

All six phases of negotiation that we will consider help to anticipate, manage, and transform into opportunities the most common ethical dilemmas internal to negotiation, which are summarized in the following box. If not sorted out, they can lead to a conflict of interest with the customer or a conflict of identity within you. At the beginning of each phase, we will consider Renato’s doubts and difficulties as he struggles to work through them, thanks to the techniques of Sales Ethics:

Our approach and work has helped dozens of companies to enhance their sales performance. The example of a particular NGO⁵ is especially important for us. The organization provides canteens and accommodation for children in need. In 2012, at the height of the economic crisis, the Italian government decided to reduce drastically the economic subsidies paid to such associations, so the NGO turned to us to launch their first business activity: A restaurant open to the public whose revenue would help fund the organization’s activities. The staff, however, felt unprepared to sell and were plagued by conflicts of identity and feared there would be conflicts of interest in the relationship with the restaurant’s customers. We worked together over many months to implement and develop a marketing approach that was ethical, to nip any possible crisis of confidence in the bud and ensure that the staff involved could approach their work serenely. Now, two years later, the business has grown and the organization can help more children. The staff now appreciate that market logic, and sales in particular, may be virtuous and perfectly integrate their social and altruistic objectives. This has allowed the NGO to launch new and more challenging projects, bringing value to users of the restaurant, the children and young people who enjoy its services, as well as the entire community.

¹ For further information on the answer to this question we recommend reading Chapter 2 of the book Value Shift: Why Companies Must Merge Social and Financial Imperatives to Achieve Superior Performance (Paine 2003).

² For example, following the problems of Goldman Sachs in 2010, the bank created a committee that reported directly to the Board of Directors and set out 39 ethical principles for managing the company’s reputation.

³ N. Kossovsky, one of the leading experts in corporate reputation, carried out research that demonstrated how a crisis of trust can lower a company’s share price by an average of 7 percent, while a positive reputation can produce an average increase of 13.5 percent (cited in Bonime-Blanc 2014).

⁴ This quote is generally credited to Benjamin Franklin, but it seems to be written by the Chinese Confucian Philosopher Xunzi in the book “The Teaching of the Ru” (refer Hutton 2014).

⁵ NGO—this acronym indicates a nongovernmental organization, that is, neither a part of a government nor a conventional for-profit business.

⁶ André (2008); Miceli (1998).

⁷ McBride (1997).

⁸ The physical location where the sale takes place also plays a key role. The theories and techniques that help you design and manage the selling space deserve detailed treatment and are outside the scope of this book. Anyone wishing to explore the topic can find further information on our blog www.diariodiunconsulente.com where we refer to the knowledge of industry experts in our discussion of this issue.

⁹ We will discuss benefits and advantages for customers in Phase 3.

¹⁰ Self-trust is a prerequisite for a proper approach to the customer relationship. Your trust in yourself is indissolubly linked to a customer’s trust in you.

¹¹ This aphorism derives from the famous saying attributed to Oscar Wilde: “You never get a second chance to make a first impression.”

¹² Mehrabian (1972).

¹³ Do note that what we are suggesting here should not be taken as a contradiction of what we said earlier about overcoming information asymmetries. We are not, in fact, suggesting that you withhold information from the customer, but rather that you limit the length at which you discuss them. You should provide the customer with sufficient information to choose, while avoiding confusion by adding irrelevant detail.

¹⁴ If you’re thinking that by doing so Renato has created embarrassment in his customer and has forced her to declare something which she had decided not to talk about, remember that a need—even if not expressed—still exerts its power in the choice and if not satisfied generates discontent.

¹⁵ To be precise, we should in fact say that apart from resolving the information asymmetry with a customer, we are helping to resolve one they have generated against themselves. We’re putting them in a position to be more aware of their own needs and buying motivations.

¹⁶ Grant (2013).

¹⁷ Asking a question in negative terms not only causes the client not to act, but also betrays the underlying desire of the seller that things go that way. As we have said, our conflicts, in fact, emerge from our questions. If you have a tendency to ask negative questions you should examine the relationship you have with yourself and your profession—ask yourself what you are really trying to achieve.

¹⁸ Mazzi (2010).

¹⁹ Watzlawick and Fusaro (2013).

²⁰ At first glance it may not seem ethical to proceed in sales by levering the customers’ fears, but remember that our goal is to meet their actual need and—in the case described—the only way to stimulate the customer to act in his or her self-interest is to use a language that they can understand: in this case, the escape from the pain!

²¹ Lewitt (1986).

²² Remember that the objective of customers traditionally coincides with the maximization of their purchasing power (buying at the lowest price possible) while the sellers’ corresponds to the maximization of profit (to sell at the highest price).

²³ Frequently the salesperson’s fear conceals not only the fear of a conflict of interest with the customer, but finding himself or herself victim of an identity conflict. If you, like the customer, are asking yourself “Is this product worth the asking price?” perhaps you should take a moment to think about your idea of value and compare it with that expressed by what you sell and draw the necessary conclusions.

²⁴ In fact, the information asymmetry has not been resolved.

²⁵ The use of this technique is also linked to the concept of the purchaser’s reserve price, that is, the maximum price they are willing to pay to satisfy their need. If you start at the top and go down you can gauge the customer’s reaction to discover what this figure is. This allows you to maximize the economic value of the sale while respecting the customer’s spending limit.

²⁶ It is interesting to recall that the concept of artists being paid for their intellectual rather than manual labor was established in Renaissance Italy. As early as the 14th century, figures such as Giotto were no longer considered artisans but artists and were paid for the intangible value of their work. The challenge for the ethical salesperson is to incorporate and assess the intangible components of the exchange in the value.

²⁷ You could find yourself having to deal with comments, questions, or objections at any time during the negotiation. For your convenience, we have grouped the discussion of this sensitive issue in the phase after the presentation of the offer, because it is here that you will most commonly find yourself dealing with a customer who is puzzled or worried. The description remains valid even if the test of trust that an objection implies would have to be addressed by the seller at an earlier or later stage.

²⁸ You should remember here that what the customer is looking for in the relationship with you and your offer is not perfection but truth and frankness in the exchange; a flaw can actually be a feature that makes your solution different, original, and credible. You are presenting a proposal in a context where nothing and no one is free from imperfections.

²⁹ If your customer cannot decide without seeking someone else’s permission, maybe you were wrong to consider that person as your real prospect! The phases of analysis and passing the filter should permit you to identify the decision maker. In this case, you have to go back to identify the name needed to close the deal.

³⁰ To achieve this reread the section on “Finding and Meeting New Customers” dedicated to getting past the filter.

³¹ If the person you first talked to is convinced about the purchase, involve them as an ally in the search for arguments. Be careful though, it may be that the newcomer does not consider this person’s opinion relevant or may even deliberately behave in a different way. Take a little time to examine the relationship between the two before deciding which strategy to use. Open-ended questions such as “Could you explain the relationship between your roles?” may help you understand.

³² In fact, the fifth phase is the moment when both the conflict of interest with the customer and the salesperson’s identity conflict may resurface. If you are not respecting your idea of personal value you will have little motivation to successfully close the deal; indeed, in some cases we subconsciously do not want to sell, and boycott ourselves! If they have to choose between economic gain and self-respect, many salespeople choose the latter.

³³ Cialdini (2007).