As we'll see in a moment, understanding the power of reciprocation is not only a valuable instrument in controlling the outcome of a negotiation, but when deployed skillfully, the party you negotiate with will feel more engaged and responsible in carrying out their fair share of the agreement. A win-win-win. How can we achieve this?
Let’s dive into the psychological principle of reciprocity.
Definition
> “ Reciprocity is behaviour in which two people or groups of people give each other help and advantages.” - Cambridge dictionary
Do you remember feeling a little indebted to someone after receiving a valuable favor? This is a great example of psychological reciprocation, a mechanism that is built into all of us as part of being social animals. After receiving a favor or a concession from someone else, most often you will justifiably feel like giving something back in return.
The principle of reciprocity is not only especially relevant in politics, business and diplomacy, both systematically and organically, as well as legally and illegally (in the form of corruption), but also a critically important factor in our daily lives, a fact that is quite interesting when examined more closely.
Essence of reciprocation
One can trigger the feeling of reciprocity by giving something first, and only then asking for something in return. Reciprocity is a powerful method that, when used in order to gain something, should always be used sparingly, and never in “bad faith”.
Often used by various “compliance professionals” as Cialdini tends to call them, or con artists, especially in a world where being a noble person is all about giving things without expecting anything in return, is a big and socially condemned no-no.
If you recognize early that this principle is used against you in a deceiving or a malicious manner, you can retaliate appropriately, and for this I recommend you read Cialdini’s book. In the context of this article however, I am taking a slightly different angle.
Reciprocation in negotiation and deal-making
Reciprocity does indeed have a couple of important implications that you need to consider when doing business. It has entered the culture of commercial negotiations and deal-making so deeply that by now any salesperson or a negotiator employs this principle every time. This is for the simple reason that among buyers it is nowadays assumed that it will be used against them.
Depending on industry and characteristics of the deal, particularly if it's a larger agreement or a frame contract that is strategically important for both parties, one must be ready for a lot of back and forth in the form of reciprocations.
To name a concrete example, buyers often expect the price named by the seller to have some amount of built-in markup coming into a negotiation, and the seller is expected to give some of it away in the form of discounts to trigger reciprocal actions from the counterparty to seal the deal, e.g. pushing the buyer to make the decision more quickly.
Salespeople in particular, for better or worse, have to employ this principle, and employ it skillfully, by asking for appropriate favors in return. In case they aren't prepared and start by calling the first price too low in the beginning of a complex sale, they risk driving themselves into a corner and tanking the whole business. This is because the price as an important driver of perceived value is usually driven down as negotiations proceed (outside a couple of occasional exceptions that prove this rule).
Reciprocity is thus not just a factor you have to deal with, but as we'll see in a moment, can be used as a valuable instrument for controlling the flow and outcome of a negotiation. Not only that, but the party you negotiate with will feel more responsible in carrying out their share of responsibilities (pay on time, deploy the product as intended etc.) all the while being more satisfied to boot. What gives?
Reciprocity as an instrument in driving better negotiation outcomes
Interesting side effects of skillfully employing reciprocal actions in a negotiation can be boiled down to their single word versions below:
- Responsibility
- Satisfaction
I will not launch into explaining all the psychological studies that have been conducted to study this phenomenon, but I will describe these two factors in a little bit more detail below.
First of all, the counterparty that participates and perceives having had an impact on the outcome tends to feel more responsible for the outcome itself. It is this person or group who were able to bring and show their impact into forming the agreement. It is this person who made the agreement happen in this form, and it is this person who "co-created" it. Thus, they now feel more involved and responsible for the outcome.
Not only will the stakeholders of the negotiation feel more responsible when they feel they are impacting your terms, but there is a high chance that psychologically, they are likely to be more satisfied with the agreement. Interestingly enough, the effect does not remain short-lived, but will often remain in effect long after carrying out the agreement details after the contract has begun.
The key is, of course, to find a balance and not go too far with either the initial indication, nor the amount of the concessions to be made, otherwise your counterparty will rightfully accuse you of negotiating in “bad faith”. One has to embrace the tension of the negotiation while understanding what is happening on a psychological level which we've discussed today.
My question to you
How can you increase the involvement of your customers in agreements that you seek to make? Provided that you want your counterparty to be more involved and satisfied, what could be some of your concessions to be given away in exchange for things that are more important?
On the other hand, what does it mean when you keep giving concessions and the other party does not reciprocate?
Gifted negotiators understand, measure and do this naturally. But whether gifted or not, these thoughts are often worth reflecting upon.
If you understand the potential of carefully employing the power of reciprocity, I'm thinking that by now you might be getting some thoughts on how to get a better grip on negotiations you undertake, while at the same time making your counterparties more satisfied to boot.
Finally, as a side note, yet another good tip for successful negotiation outcomes is to keep the long-term perspective in mind as highlighted by Zhao Hanbo from Supermetrics.
Good luck!