Reciprocity - the great (vehicle) exchange!

 

 

 

 

In March 2012, five American car dealerships were forced to adhere to Federal Trade Commission settlement orders when it was found the terms of the above deal advertised were unclear. The advert was banned after customers, understandably, became confused into thinking they would be exempt from repaying any remaining loan balance they had on a vehicle trade-in with a previous car dealership. Instead of paying off existing customer loans as the advert may suggest, dealerships were offering to buy customers out of existing loan contracts they may be bound to, in one go, immediately, if they entered into a new vehicle agreement with them. The equity would then be rolled into a new contract with the new company.

Misunderstandings and unclear advertisement aside, the above advert appeals to the principle of reciprocity to attract new customers.

Firstly, it promises that if a customer trades in their old vehicle with the company, not only will they get a new vehicle, the company will pay-off the existing equity they owe to a previous car dealership, in one go, therefore immediately terminating any existing contract the customer has. Paying off the amount the customer owes in full to a previous car dealership frees them from the contract and allows them to upgrade and trade in their vehicle again immediately. Burger (1986) found that offering customers an additional item with their purchase, the ‘that’s-not-all’ technique, doubled sales of the original item. The company is not only advertising a vehicle trade-in service, but on top of this they are offering the extra promise of paying off a previous loan amount (albeit rolled into the next) to free the customer from a previous contract. The customer is receiving something extra other than a vehicle trade-in service. The customer feels they are gaining something extra, an additional service and further, it appeals to the idea of freedom from a previous contract, responsibility or debt.

It also utilises reciprocity on a very basic or literal level. The text even includes the term ‘owe’. The potential new customer physically owes money to a car dealership; car dealerships can almost be seen as a whole, an institution or body of interrelated companies to whom they ‘owe’ money.  The fact that the customer owes suggests action is needed to change the state they’re in. By choosing to re-invest in the new car dealership, the customer is proactively restoring this balance of indebtedness. Evidence for this technique comes from Regan (1971) who found that a confederate was able to sell twice as many raffle tickets to a participant if they had previously brought them a bottle of Coke verses times when they hadn’t. Participants had first been given something by the confederate, they then felt they owed them or were obliged to return the favour; the only way immediate to restore this balance, purchasing raffle tickets. This appeals to both co-operation and altruism, we’ll do this for you (buy you out of a previous contract) if you do something for us (enter into a new vehicle trade-in contract with us); an ‘eye for an eye’.  

Burger, J. M. (1986). Increasing compliance by improving the deal: The that's not all technique. Journal of Personality and Social Psychology, 51, 277-283.

Regan, R. T. (1971). Effects of a favor and liking on compliance. Journal of Experimental Social Psychology, 7: 627-639.