why it could be smart to use the contrast effect in price negotiations
In price negotiations, it’s always better when someone accepts your offer rather than rejecting it, right? Actually, rejection can sometimes be a smart way to get to “yes” on your second-best offer.
Apple is selling AirPods 3. Generation for $179, and AirPods Pro for $ 249 on their website. Eventually in December 2020, the company also began selling, Airpods Max the ultimate high-end product. This one priced at $549. Which Airpods are right for you?
Apple doesn’t disclose any sales figures of the model series, therefore it’s difficult to assess realistically which serie is the most successful. But chances are high, that it’s definitely not the AirPod Max.
Here’s a story about consumer behavior in financial negotiations, as described in by Itamar Simonson of Stanford’s Graduate School of Business and the late Amos Tversky in a pivotal 1992 article in the Journal of Marketing Research.
Williams-Sonoma, a speciality retailer selling cookware, cooking utensils and kitchen decor was selling a bread-making machine priced at $275. Eventually, the company also began selling a similar but larger bread-making machine, this one priced at $429.
Williams-Sonoma sold few units of the more expensive machine, but after it was on the market, sales of the less-expensive machine almost doubled. Apparently, the $275 model didn’t seem like a bargain until it was sitting next to the $429 model.
Translated to the context of price negotiations, the contrast effect suggests a strategic move: ask for more than you realistically expect, accept rejection, and then shade your offer downward. Your counterpart in the price negotiation is likely to find a reasonable offer even more appealing after rejecting an offer that’s out of the question.
The psychologist Robert Cialdini of Arizona State University gives another story: Real-estate agents sometimes play on this tendency by taking buyers to see overpriced, run-down homes before showing them ordinary homes that appear stunning by comparison.
Try putting forth several equivalent offers that aim higher than your counterpart is likely to accept. Her reaction to the offers will help you frame your next offer, that thanks in part to the contrast effect, is more likely to strike home.