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.
Nice coverage of Burger and Regan.
ReplyDelete