Posted in News Story
Georgetown McDonough researchers uncover a surprising negotiation tactic
By Bob Woods
Illustration by Marc Rosenthal
The last time you purchased a car, you may have heard this sales pitch: “What do I have to do to put you in this baby today?” A cliché in the used-car world, yet it could apply to a number of purchasing situations where negotiating the price is a delicate dance between seller and buyer. But what if there was something simple a seller could do to persuade a buyer to tango?
That is the question a pair of marketing professors at Georgetown University’s McDonough School of Business posed in a recent research project. The results, presented in their report, “The Favor Request Effect: Requesting a Favor from Consumers to Seal the Deal,” was published in the April issue of the Journal of Consumer Research.
THE FAVOR REQUEST
In the report, Simon Blanchard and Kurt Carlson, along with Jamie Hyodo, a doctoral candidate in marketing at Penn State, maintain that requesting a favor from a buyer who has been offered a discounted price can significantly increase the odds of sealing the deal. The tactic works, their research reveals, because it creates a reciprocal interaction, where both parties walk away satisfied with the outcome. What they call the “favor request effect” might level one of the most common, and too-often contentious, playing fields in the game of everyday life.
“What’s new in our study,” Blanchard says, “is that by asking for the favor, even though it doesn’t have to be verified, the seller is switching the way the consumer sees the interaction. It changes from some-thing that’s competitive to something that’s more reciprocal or cooperation oriented.”
The researchers offer two scenarios to illustrate their technique:
- The prospective buyer of a $100 painting asks if the seller will drop the price. The seller reduces the price to $80, leaving the buyer to ponder the final offer.
- In a similar scenario, the seller reduces the price of the painting to $80. While the buyer ponders the new offer, the seller says it would be nice if the buyer considered doing a favor, such as writing a positive review online of the gallery or recommending it to a friend.
Conventional wisdom, Blanchard says, backed up by extensive research on reciprocity, suggests that to get somebody to do you a favor, defined as compliance, you have to do something first — the old tit for tat. “But that tends not to work very well,” he contends, therefore the first scenario should yield more deals than the second. This study suggests the opposite.
“We find that sellers who add a favor request to a price discount are 40 to 50 percent more likely to close the sale than sellers who do not ask for a favor,” Blanchard says.
THE ART OF THE DEAL
To explain this counterintuitive phenomenon, the researchers looked at the nature of price negotiations in several consumer settings, including art, antiques, electronics, and furniture.
“Consumers in general seem to be under the assumption that it’s ‘us versus them,’” Blanchard says. They may not believe that a discount serves their best interest. Instead, they may think the seller is the one getting the upper hand and dig their heels in deeper, even to the point of refusing a great deal.
We find that sellers who add a favor request to a price discount are 40 to 50 percent more likely to close the sale than sellers who do not ask for a favor.”
—Simon Blanchard Assistant Professor of Marketing
The first step in breaking that competitive stalemate, the researchers surmised, could be the enticing push and pull of reciprocity — “I’ll do something for you if you do something for me” — where the bene-fits are viewed as mutual. Yet they wanted to go a step further, Blanchard says.
“We wondered if it’s always necessary for the buyer to offer a favor first so that the seller responds in kind. Our original hypothesis was that if favors are so prevalent in our lives, just mentioning favors might change the perceived nature of the interaction and lead to a mutually beneficial deal.”
By eliminating the contentious back and forth, the consumer is not only satisfied with the price, but believes the seller has gone as low as possible. In other words, the deal struck is a genuine win-win.
PULLING IT OFF
To demonstrate the favor request effect, the researchers conducted a series of five experiments. In addition to showing that the pairing of a price discount with a favor request increases the probability that the consumer will accept the deal, the results also outlined conditions under which the effect occurs.
Surprisingly, Blanchard reports, “we found that there needs to be some level of uncertainty that the dis-count is good or bad.” For instance, if the seller’s discount is big, the favor request becomes pointless, because consumers usually accept such deals. “We found that 10 to 30 percent discounts work best,” he says, “so it actually tends to be more effective when the discount is fairly moderate.” On the other hand, if the discount is small, the buyer might think that the seller is pulling his leg and turn it down.
The nature of the favor request matters, too. The favor should be appropriate, even if the consumer does not need to follow through. For example, the owner of a furniture store may ask a consumer to send a photo of the buyer sitting on the new sofa to post on the store’s Facebook page. “But let’s say you’re buying a pair of designer jeans,” Blanchard says. “It’s creepy to ask for a photo of you in them, even though you don’t have to do it.”
The study did not explore favor requests across different cultures, where negotiating and reciprocity might vary from country to country. “It might be that the way to change the nature of the [buyer-seller] interaction is slightly different,” Blanchard says, “and that favors might not work the same way in certain cultures.”
Beyond that, Blanchard wants to continue researching how to best present, negotiate, and close deals. “Maybe there are other ways to change how consumers see their interactions with salespeople, ways for the seller to present information that suggests it’s not ‘you versus me’ all the time.” He cites prevalent instances, such as new and used car sales and real estate transactions.
In the meantime, Blanchard envisions the favor request effect becoming another tool in the salesperson’s arsenal, though he also hopes that consumers recognize the tactic when employed on them. The technique can still produce a desirable, mutually beneficial result, but at least the consumer knowingly goes along. “I’ve taught my girlfriend a couple of these techniques,” Blanchard admits. “She uses them on me sometimes, and they still work.”
Published in Georgetown Business magazine, Spring 2016