Adapted from “Pitch Your Offer—and Close the Deal,” by Deepak Malhotra and Max H. Bazerman (professors, Harvard Business School), first published in the Negotiation newsletter.
When you’re having trouble persuading someone, you might be tempted to sweeten the pot with hefty financial incentives. Before doing so, consider whether there are cheaper ways of gaining compliance.
A national trade association for construction subcontractors learned this lesson during a survey of its membership. The association was aware that target audiences of market research are notoriously reluctant to respond to surveys. Hoping to find the key to increasing response rates, they worked with researchers Jeannine James, president of the American Research Company, in Fairfax, Va., and Richard Bolstein, a professor at George Mason University, to test the power of providing financial incentives for filling out the survey.
The association sent the questionnaire without a financial incentive to one randomly chosen subgroup of members. Of this group, 20.7% returned a completed questionnaire. The association promised to pay a second group of members $50 for completing and returning the questionnaire. This time, 23.3% of members responded—an insignificant increase. A third group of members was sent a single dollar bill with the questionnaire (and no other incentive). A surprising 40.7% of members from this group returned completed questionnaires.
The behavior of these respondents violates the predictions of standard economic theories. Not only was the $1 “incentive” considerably lower than the $50 incentive, it wasn’t an incentive at all—it was a guaranteed payment regardless of whether the member complied with the request. It appears that recipients felt obliged to comply precisely because the dollar was not an incentive but rather a unilateral concession, or gift, to be reciprocated.
Even a token concession may be sufficient to induce compliance with your request. Here are a few low-cost “gifts” you might give in your next negotiation:
- Agree to meet at a time or location that’s more convenient for the other side than it is for you (such as his office rather than yours).
- Arrive at talks with enough doughnuts and coffee to share with your counterpart.
- Begin substantive discussions by agreeing to a small request made by the other side.
Note that your counterpart is more likely to feel compelled to reciprocate in substantive ways if you make your concession salient—for example, by making sure he knows that you’ve agreed to his preferred location despite its inconvenience for you.