¶ Introduction to Negotiation Nudges
Hello and welcome to Nudge, the consumer psychology podcast with me, Phil Agnew. This is the second episode of Nudge, and if you haven't listened before, I'll explain a bit about what this is. The Nudge hopefully will provide you with some insights from the world of behavior science and consumer psychology. I'll be talking to some of the world's leading authors and pioneers in the industry. asking them about all of their great work and condense it all into easy to listen to 20 minute podcasts.
Today I'm sharing the first part of a great conversation I had with Steve Martin. Steve is CEO at Influence at Work UK and Visiting Professor of Management Practice and Behaviour Science at Columbia University Graduate School of Business. He's also a Royal Society-nominated author and New York Times bestseller for his book The Small Big. His work, which is featured in the New York Times and the Wall Street Journal, amongst other things, looks at the small but powerful ways of influencing people.
In my first conversation with Steve, we focused on the art of negotiations. Now, negotiations are something all of us have to deal with at some point in our lives, but... I don't think most of us are actually very good at it. I actually tried to negotiate the price of my energy bill recently and realised I was woefully underprepared. I didn't know what to say, I didn't know how to say it, and I didn't know any tactics to reduce the price.
It's not just energy bills. If I was trying to sell my house, if I was trying to agree a contract for my new job at work, or if I was trying to convince my partner to come to my parents for Christmas, I just wouldn't know where to start.
¶ The Power of Precise Numbers
but there are small and significant nudges you can use to influence others. So I started my conversation with Steve by asking him about a study he reported on in his book, The Small Big. The study stated that in a negotiation, suggesting a precise number, like £207, rather than, say, a round number, like £200, actually gives you the upper hand in the negotiation. Here's what Steve says.
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forward slash register to secure your spot. I do. Well, first of all, Phil, thank you very much indeed for the invitation to take part in your podcast. And I should... perhaps correct one thing at the start which is in terms of the precision of numbers that wasn't me specifically or my co-authors that conducted that research we merely reported on it in one of our books
However, you are right that it is the case that when we influence, when we seek to persuade others, often it's not the merits of the incentive itself or the merits of any case itself. that carries sway across or over that audience, but rather how that incentive or that message is actually framed. So you picked up rightly on this idea that audiences typically pay attention more to those.
Numbers that are given precisely so 9.9% more than 10% 2.1 times rather than two times and Primarily the reason for that is is that it seems more credible it seems like someone has actually done the work and there's a reason why you know it's 2.179 rather than just two or three and there's some really interesting work that was just published
not so long ago, maybe 12, 18 months ago with Uber. You'll know about the price surge feature on Uber, where as more and more passengers are requiring a ride. that the price surges you know 1.6 1.7 etc to account for that supply and demand challenge that's going on at that time and and the researchers they got access to a huge body of data from uber finding that this precise number plays out in that environment as well so people are much more likely
and willing to accept a surge of 1.9 or 2.1 than 2. So, you know, if you go into Uber and you try to... order a ride and it says you know the price surge currently is two times it's double the price that actually reduces demand in that instance compared to 1.9 or 2.1 even though if you think about it
That's exactly the same thing. And it's largely this idea of credibility. If the number is 2.1 or 1.9, or it has some... precision or preciseness to it we deem that to be a more credible perhaps more trustworthy message in that instance and we find this same precision aspects play out in negotiations as well so one of the examples we write about in the book is those negotiators when offering or tabling an initial offer if they use a precise number let's say
£9,815 rather than just £10,000. The counter offer that comes will often be a lot closer to that because that negotiating partner... deems that there must be a reason why the number is so precise. So let's say you're negotiating a pay rise with your boss. If you ask for a pay rise, you're more likely to be successful if you actually ask for something specific like 13% rather than, say, 10%.
the work steve cites shows categorically that specific precise offers not only seem more reliable but actually anchor any counter offers made The same goes for negotiating rent. If the rent is £2,000 a month and you negotiate down to something specific like £1,755, you'll be more successful than if you try and work down to a round number like £1,800. It's because it's more like...
likely that counter offer will be closer to a precise initial offer. It creates this feeling of trustworthiness and expertise that influences other. The uber insight is really interesting as well. Rob Metcalf's study shows that at a macro scale, the power of precise numbers really works.
¶ Anchoring Beyond Pricing
I started to wonder how important anchoring was and I asked Steve if he sees connections between anchoring and specific pricing. Well I think there are certainly connections there.
um you know so for example let's let's think for a few moments about um recruit recruitment for example one of the things that we know about this anchoring effect or or more broadly in in psychology this contrast phenomena is how we perceive an offer or a recommendation will often be a function of what we are exposed to immediately before. 15 pound bottle of wine appears better value if we see a 25 pound bottle of wine.
first but if we're offered a 10 pound bottle of wine first then we see the 15 pound bottle of wine it seems a little bit more expensive but what's interesting is that that target product there the 15 pound bottle of wine doesn't change it's just what we're exposed to first. There's an example of contrast or anchoring effect. One of the things I've been interested in is how this plays out in recruitment. You know, so imagine you're in a situation where you are either applying for a job.
Or perhaps you're an agency that is in a competitive pitch for a piece of work with a potential client. Does it matter when in the process or... where in the order of those pitches your organization or you as an individual represents yourself. And it turns out that all other things being equal, it matters quite a lot. Going first...
particularly in those situations where there's multiple options or candidates. Let's say, for example, you're an agency and there's five other... agencies including yourselves pitching you know going first actually puts you at a slight disadvantage and there's a couple reasons for that the first is that there is a comparison there is an anchor there
But the anchor is largely an imagined one. You know, the organization concerned have got this theory or this idea of the ideal agency to work with. And that's kind of, if you go first, that's what you're being...
paired to some agency nirvana which never exists. The second disadvantage of course is that if you do perform first you are often disadvantaged by being scored lower you know if there's some sort of scoring system you know how they do these things sometimes feel where they assign certain points to agencies or candidates and then they don't the candidate or the agency with the biggest total gets the job or gets the work if you go first you know
judges tend to be a little harsher at the beginning of the process, primarily because they're thinking, well, if a better candidate or a better agency comes along, I want to give myself a little bit of room to be able to score slightly higher. So for a couple of reasons, sometimes this anchoring or this contrast effect against you so the advice here is that you know in situations where you're in some sort of performance to win a job or a piece of work
you're probably better off going towards the end rather than at the beginning in these kind of competitive pitch situations. So we often think as anchoring is purely a pricing mechanism. As Steve says, if I offer you a £10 bottle of wine first and then offer you a more expensive £15 bottle of wine... you'll just see it as less value for money. Whereas if I switch it and offer you, say, a £30 bottle of wine first, the £15 bottle looks better value.
But we don't often think about the power of anchoring outside of pricing. Steve suggests that there are more nuanced versions of anchoring. For example, going first in a job interview actually puts you at a disadvantage as you'll be compared to an ideal dream candidate rather than the real candidate.
¶ Humanizing and The Reciprocity Rule
Keeping on this theme of negotiations, I asked Steve about a study he cited which suggested sending a cartoon to the person you're negotiating with. I think in this case, in the study there, it was Terry Kutzberg, I believe, from Rutgers University who conducted this research.
Sending a Dilbert cartoon of a negotiation going badly wrong at the beginning of the negotiation led to a much more favorable outcome. And I think there's two important things here. So the first is that these were negotiations that were taking place online and via email. So the face-to-face elements was missing here and I think we're increasingly finding that to be the case in all
domains of business. It's much easier now to deal with people by firing off a quick email or a text or a WhatsApp message. Increasingly these interactions are taking place in arguably a bloodless environment. It's a series of texts and letters and messages that are being exchanged. And so what the cartoon does there is essentially humanize what is broadly...
a largely inhumane or bloodless interaction or conversation between parties. It's almost sending a signal, look there's another person at the end of this email chain. and by doing that first it kind of acts as a nice prompt or prime that there is you know flesh and blood and a heart and a mind at the other end of this interaction which is often lost in these
you know, quick, pithy types of email exchanges. So that's primarily what's actually going on there. And what the research found was that in those electronic environments where you're interacting and engaging, trying to get agreement, trying to influence, trying to get a decision made. Very early on signaling that humanity was an important aspect and led
the recipients to be much more likely to reciprocate in that instance, to remember that there's a human in return as well. That's primarily what's actually going on. Now this sounds like a pretty mundane insight. Crack a joke and negotiating gets easier. But it leads on to a pretty significant consumer psychology rule, which is something called the rule of reciprocation.
It's this idea that if you give something first, you're far more likely to influence others. Obviously this idea that people tend to return favours has... been around forever, but it was first researched in the 1970s when university professor Philip Kunz sent 600 Christmas cards to complete strangers. He was wondering and looking to see if anyone would actually reply to a stranger. He expected a few dozen replies, but instead he received hundreds.
Despite not knowing the professor, the majority of strangers went out of their way to reply. The experiment revealed this rule of reciprocation. He gave them something and they responded. I'll hand over to Steve to introduce and explain this rule. The first thing to remember is that this is nothing new here, Phil. The norm of reciprocity isn't something that has suddenly emerged in these last few years.
were taught as a child by your parents to not take without giving back in return and your parents parents would have taught your parents you know such is the
The universality of this effect that every society, every culture lives by this rule. And so when you think about it in that context, those who want to increase their... ability to ethically influence and persuade others, the first question they really should be asking themselves is not who can help me achieve my goal, but instead to ask whose goals can I help?
people achieve because in that context you are essentially installing, and I use that word advisedly, a social obligation in others to reciprocate. And that's how it works. But I think the important thing to notice here is it's the person or the entity that goes first that then holds that persuasive power.
Now again this sounds like the simplest nudge in the world but it's really undervalued and really underused. Very few people acknowledge its power and therefore don't always think about it unless it comes up naturally. The professor Dennis Reagan back in 1979 conducted a seminal study.
that really revealed how powerful it was. In this study, Dennis placed two volunteers in an art gallery under the guise that they were there to rate the art. They were asked to walk around the gallery and pick the paintings they liked the most. However, one of the volunteers, let's call him Paul, was actually Dennis Reagan's assistant. During the first instant of the experiment, Dennis's assistant, Paul, heads out of the gallery to the vending machine and buys two cans of Coke.
One for him and one for the other volunteer. In the second instance of the experiment, Paul only buys one can of Coke for himself. So Reagan's experiment has two instances, one where the volunteer gets a gift and one where the volunteer doesn't get a gift. Later in the experiment, after they've left the gallery, Paul asks for his own favour. He's selling raffle tickets for his local charity at 25 cents a ticket. In the instance where Paul hadn't provided a favour,
He sold around two tickets on average. In the instance where Paul had provided a favour, he sold ten. That's five times more. It's quite simply an incredible, measurable difference that is just solely down to the rule of reciprocation. But this rule isn't only seen inside experiments, it's measurable in the real world. Steve gives a great example of how waiters use it to get larger tips. Waiters who provide a mint. at the end of the meal, one for each person at the table, will often receive a
a modest increase in the amount of tip that they receive. So there's something there about not only giving something first, but also making sure that what we give first is significant and is unexpected. And one of the things I like about this particular rule of influence if you like is that it doesn't just work with between individuals it works between organizations as well so my my co-author Noah Goldstein a
Professor at the Anderson School of Business at UCLA found that the little cards that you put in hotel bathrooms, if that hotel points out that if the guest reuses their towels... the hotel will donate some of those savings that they make towards an environmental charity. The amount of tower use actually goes down, not up, which is somewhat surprising, until you think about this rule of reciprocity and who goes first.
If a hotel chain promises only to donate to a charity when a guest has already made a purchase or done something. The order there is wrong. It's not a give and take strategy. It's a take and give strategy. What Noah then found was that by just changing that card and pointing out to hotel guests that the hotel had already...
the previous year donated towards an environmental charity, they were much, much more likely to reuse their town. And that's a really good point from Steve there. The rule won't affect us all of the time. And when it's used in the wrong order, it's less effective or actually not effective at all. So don't go telling someone you'll buy them a Coke if they buy raffle tickets off you. Buy them a Coke and then sell the tickets.
This rule is powerful. It's one of those invisible, powerful things that can subtly shape how we behave even years after somebody has given us something. Consider that case of the professor, Philip Kunz, who sent those Christmas cards. His family got Christmas cards not just the one year after he sent them. them in 1974, but for 15 years after, these strangers constantly sent him cards.
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¶ Summarizing Tactics and Conclusion
So to sum up, if you're entering a negotiation, there are a number of things that you can do to influence and persuade the person you're negotiating with. You can offer gifts initially to activate this rule of reciprocation. You can humanise the interaction by perhaps sending a cartoon, a joke or a meme, whatever it is. You can use anchors to influence the price or the result. and you can use precise numbers to influence even further.
So that's it from me today. Huge thank you to Steve Martin for joining me. If you found any of this interesting, I highly recommend purchasing Steve's book, The Small Big. It's just £7 on Amazon and includes 52 insights like the ones I've mentioned. you can use to influence and persuade anyway thank you very much to listening to this episode of nudge the consumer psychology podcast