Reciprocity is a word many people have heard of before however few can define the mechanisms of this concept in business even though they may experience it all the time and as it happens right in front of their eyes. Let's look at what we mean by 'reciprocity' and how businesses can take advantage of the phenomenon.
In our world today, reciprocity means responding to an action made by another individual/company. The principle is quite simple - it is the experienced obligation to give back the form of behaviour that was received in the first place.
Most of the time it happens unconsciously, but even if we take notice of it people feel obligated to follow the rule of reciprocity. This is a social construct that has developed and integrated itself globally across ages and cultures.
An everyday example of reciprocity is a birthday invitation. The invited person feels obligated to bring a present because it is culturally expected. Beyond the present, the invited individual is also very likely to invite the person, who first invited him to his own birthday, in return. This phenomenon occurs because one senses that one wants to fit into cultural expectations/behaviours and wants to avoid potential unpleasant feelings caused by arguments or social refusal.
Reciprocity is also a concept applied in business. Companies give samples and discounts for example. Some are straightforward and others make subtle use of human psychology. In addition, not all are materialistic (eg. service or gesture), and the receiver almost never gives back something that is of less value than what was given in the first place.
So how do good tacticians do it accurately? Here are two examples:
The Restaurant: A restaurant notices a customer coming in more frequently. The restaurant “unintentionally” offers the customer a free dish. The experience of his visit at the restaurant will be completely different. He will appreciate it more. Like one appreciates a gift. The customer is very likely to become a regular because he feels like he received something special and has to give back something in return. In this case, loyalty.
The Consultancy Firm: A consultancy firm offers their service to a company for $50k. They get the job and upon completion of the work inform the client that because they were so well prepared and good to work with, the costs will be discounted by $5k. The client will be pleasantly surprised and likely hire the consultants again.
So why were the customers in the restaurant and the consultancy firm more likely to become loyal clients because of a small “gift”? Gift-giving is a highly valued behaviour in all cultures. When people receive a gift they create a personal connection to the giver. By returning a gift or behaviour to the giver the relationship becomes even tighter.
The key point to remember is that in order to build a bridge and create a connection, it is important to give something that is of reasonable value to the receiver.
Reciprocity in business is also relative depending on the cultures in which one operates. For example, in relationship-based cultures, such as Japan or China, reciprocity is built into the very fabric of business and social culture. It is used to maintain relationships, build networks, and gain traction within the business place. In fact, it's one of the most important topics in Japanese and Chinese cultural training programmes.
Another important facet of reciprocity is knowing that if one party decides to give something of little or unappreciated value, the receiver is likely to return the favour with little effort too. The diminishing returns of reciprocity are important to understand - once the methods are predictable they are not as highly valued as an unexpected gift.
Here are three key points to keep in mind in order to effectively use reciprocity in business:
- Ensure the ‘gift giving’ is genuine and of reasonable value
- Be creative - it does not always have to be material
- Take culture into account to avoid faux pas
The following video provides a useful summary of these points:
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Max Dahlgaard is a German business-psychology student . He focuses his studies and work on customer behaviour and cross-cultural employee-motivation. He has worked and lived in Central- and North America as well as in several European countries.