Using the Power of Reciprocity to Win Over Tenants, Lenders, and More

You will catch more flies with honey than vinegar, as the old saying goes. And it’s true in more ways than just that being kind to others is more likely to make others be kind to you.

Reciprocation—or more appropriately the longing to reciprocate (both favors and wrongdoings)—is at the core of human psychology. Indeed, evolutionary psychologists refer to “reciprocal altruism” as the basis for human friendships.

It should, therefore, not be surprising that one of the best sales techniques out there is “the old give and take.” For a more in-depth discussion on this, I will turn to Robert Cialdini. Cialdini is probably the foremost expert on persuasion and the man Scott Adams refers to as “Godzilla” (the “Godzilla of Persuasion,” at least).

In Cialdini’s extremely valuable book Influence, he discusses the power of reciprocation using the famous Regan experiment:

“A subject who participated in the [Regan] study rated, along with another subject, the quality of some paintings as part of an experiment on ‘art appreciation.’ The other rater—we can call him Joe—was only posing as a fellow subject and was actually Dr. Regan’s assistant. For our purposes, the experiment took place under two different conditions. In some cases, Joe did a small unsolicited favor for the true subject. During a short rest period, Joe left the room for a couple of minutes and returned with two bottles of Coca-Cola, one for the subject and one for himself, saying ‘I asked him [the experimenter] if I could get myself a Coke, and he said it was OK, so I bought one for you, too.’ In other cases, Joe did not provide the subject with a favor; he simply returned from the two-minute break empty-handed. In all other respects, however, Joe behaved identically.

“Later on, after the paintings had all been rated and the experimenter had momentarily left the room, Joe asked the subject to do him a favor. He indicated that he was selling raffle tickets for a new car and that if he sold the most tickets, he would win a $50 prize. Joe’s request was for the subject to buy some raffle tickets at 25 cents apiece: ‘Any would help, the more the better.’ The major finding of the study concerns the number of tickets subjects purchased from Joe under the two conditions. Without question, Joe was more successful in selling his raffle tickets to the subjects who had received his earlier favor. Apparently feeling that they owed him something, these subjects bought twice as many tickets as the subjects who had not been given the prior favor” (Cialdini 22-23).

Cialdini later notes that this was during the 1960s, when the price of a Coke was only a dime. Even if the subjects had only bought one more ticket because of the gifted Coke, they had still over-reciprocated by 150 percent!

Cialdini provides many further examples of how reciprocation can work, such as political campaign contributions, the books and other small gifts Hare Krishna members would hand out when fundraising on the streets, as well as the “free samples” many businesses provide.

He also notes that the same general principle can work with what he calls “rejection then retreat.” I would call this either “low balling” or “high balling.” Namely, make an extreme request, and then once rejected, come back with a more reasonable request (which was what the salesman wanted in the first place). This could be a lower price or a different item altogether. I discuss this concept more in my article on psychological anchors, which you can read here.

What to Know About the Rule of Reciprocation

First and foremost, I need to point out that the ethical lines with sales tactics are something we should take very seriously. Just because a certain method works doesn’t mean we should use it. And in this case, using this knowledge of the human mind’s longing to reciprocate to create wildly unequal exchanges is simply wrong.

So the first thing to know is how to avoid falling victim to someone who is trying to pull one over on you using reciprocation. The major key is to be able to recognize it for what it is: a sales tactic. As Cialdini puts it, “…accept the offer of others but… accept those offers only for what they fundamentally are, not for what they are represented to be” (46).

Mindfulness is the key here. No, you don’t need to be rude and reject a simple favor being offered by someone trying to sell you something or negotiate with you. But you do need to proactively tell yourself that this could be used against you.

“All she did was give me a cup of coffee. I don’t need to buy a car just because of that.”

I would add that in larger negotiations, if you can counter their small favor with a small favor of your own, that would be all the better (although the context won’t always allow for that). This would negate the psychological pressure on you to reciprocate on the big things by reciprocating with something small. But the most important thing is that you recognize what is happening.

Reciprocation for Real Estate Investors

Again, one needs to be very careful with any sales tactics as to not use them in a way that simply takes advantage of other people. That being said, I think understanding this rule is a great way to build a general sense of good will for everyone from tenants to employees. Here are a few examples:

Buy your employees a company lunch once a month.
Offer to buy lunch if you are meeting with a lender.
Offer a coffee or soda to a tenant when signing a lease.
Send out Christmas presents to key vendors and lenders each year.

These small acts create goodwill and a sense that such a person would want to reciprocate that goodwill. You’ll notice in the above examples, other than perhaps buying lunch for the lender, you’re not actually selling anything. But these small acts will make tenants think better of you and make employees happier. And happy employees are productive employees.

My brother does this in a bit of a reverse fashion when a maintenance issue goes sideways. When a lease is signed, he asks the tenant for their favorite restaurant. Then, if such a maintenance issue drags on or isn’t dealt with properly, he sends them a gift card for that restaurant. We have found that this more personalized gift does a lot to smooth things over and is a lot less expensive than a rent discount.

Some more direct ways to use this method might be offering a small gift to potential tenants or sellers just for viewing a property. We once did this with concert tickets in Oregon, and it was fairly effective. Some took advantage of it, obviously showing up for no other reason than the tickets. But most were genuinely appreciative.

In negotiations, obviously the “rejection then retreat” method is almost a must. Never start with your best offer. As someone once told me, “If you aren’t embarrassed by your opening offer, you are offering too much.” While that’s not always true, of course, it’s not a bad rule of thumb.

People will always feel better and be more willing to follow through with an agreement if there were concessions along the way. So, don’t start with your best offer. You know for sure that they won’t start with theirs.

No matter what you think of various sales tactics, they exist and many of them are quite effective. At the very least, you need to be aware of them when others are using them on you. And while it’s critical not to take advantage of people, it’s also important to know how psychology works in whatever business you’re in—but particularly in real estate.

Do you use this tactic, consciously or without even knowing, in your real estate business?

Let me know with a comment!

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.