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. The purpose of this blog is to explain why one feels the need to return favours and how businesses or anyone 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 which has developed and integrated itself globally to people of all ages and cultures. The concept of reciprocity in business is one of Robert Cialdini’s 6 key principles of influence – today he is an expert in the field.
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 most certainly not want to face 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 tell the company something after having finished their work. The consultants will tell their client that because they were so well prepared and good to work with, the costs were lower and therefore they will receive a discount of $5k. The client will be pleasantly surprised and likely hire the consultants again.
Reciprocity in business is also relative depending on the cultures in which one operation. For example, in reactive cultures like Japan or China this is very important to ensure reciprocity in order to maintain relationships, in fact it is a key topic of business etiquette.
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. It is also crucial to take note of the diminishing returns of reciprocity - 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
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.
Max Dahlgaard is a German business-psychology student who is currently an intern at the international training and business consultancy Kwintessential . 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.