Want to Make More Money? Ask For What’s Fair, Not What You Deserve
By Dustin J. Sleesman
University of Delaware
This article originally appeared on Data Freaks on Forbes. Check it out for some of the best advice and examples of how Qualtrics customers are moving from data to insights, and uncovering knowledge that will rock your world!
To make more money, you have to get other people on your side – whether that means convincing them to make a purchasing decision or encouraging your boss to give you a raise. We’ve found that by simply invoking fairness during the process, you’ll be in a better position to get what you want. This simple tweak in how things are framed can lead people to engage in psychological perspective-taking, resulting in prosocial, other-focused behaviors. How do we know this? Interestingly, a lot of our insights into this arena started with the rock band Radiohead and their decision to spurn record labels.
You may remember that in 2007 Radiohead made waves in the entertainment industry by offering their In Rainbows album for whatever price consumers wanted to pay – including paying nothing at all. It was such a stark departure from the past that it shocked not only the industry, but outside observers as well. This was not the first time anyone had sold something and left the price up to the buyer – most commonly referred to as “pay what you want” – it’s just that it was arguably the most high profile and far reaching example of it.
Not many studies have examined the pay what you want system, but the few that have found that people don’t behave as traditional economic theory would suggest, meaning most people actually pay for goods and services they don’t have to.
Following Radiohead’s experiment, my colleague Don Conlon of Michigan State University and I partnered with a British music magazine which surveyed its readers across the world to learn how much they paid and why. As we analyzed the data, we found something interesting. When people mentioned anything about fairness, they paid more on average.
After this initial study, we ran two additional studies using Qualtrics to test how the concept of fairness played into how much people were willing to pay.
In the first follow-up study we tried to replicate the Radiohead experiment by presenting a hypothetical situation where people’s favorite musical artist was releasing an album. Half of the participants were asked to pay what they wanted. The other half were asked to pay what was fair. Prices paid by the fairness group were 37% higher on average than those in the pay-what-you-want group. Interestingly, 18% of participants chose to download the album while paying nothing. Only one of those individuals was in the fairness group.
These two initial studies relied solely on the willingness to pay for music albums. To further expand on these studies and determine the generalizability of our findings, we ran a third study to survey people from across the US. This time the hypothetical product was an electronic textbook that could also be purchased as a physical copy for $90 in a store.
Again, study participants were randomly divided into two groups – the first being asked to pay what they wanted and the second being asked to pay what was fair. While neither condition resulted in prices even close to the in-store cost of the physical book, the “pay what is fair” condition resulted in a price over 40% higher than the traditional “pay what you want” condition ($27.25 versus $19.43). Only 5% of individuals chose to download the textbook without paying anything at all. None of those individuals came from the fairness group.
What caused the difference? Statistical analysis revealed that the fairness condition resulted in higher prices because it led people to engage in perspective-taking. In other words, they put themselves in the shoes of the seller and paid more as an act of prosocial, other-focused behavior.
And then there is the concept of uncertainty, which we also investigated. To stimulate feelings of uncertainty – for example, uncertainty about the quality of the product or how useful it would be – half the participants were told no reviews were available while the other half was told that they were. We found that the price difference between the pay-what-is-fair and the pay-what-you-want groups was even larger when people experienced feelings of uncertainty during the transaction. In fact, prices were 22% higher in the fairness condition when people had low levels of product uncertainty, but 74% higher when individuals experienced high uncertainty. Simply mentioning fairness nudges people to pay more, especially to the extent they are experiencing uncertainty.
These results are consistent with theories of fairness perceptions where fairness has an outsized impact on people during periods of uncertainty. For example, while it may be meaningful to an employee to observe his manager going out of her way to act fairly toward him, it would mean even more to the employee if he were new to the company and uncertain about his boss’s personality, trustworthiness, etc.
The implications of these findings may have far-reaching impact in many areas, including negotiations, employee compensation, and efforts to combat piracy or fight against consumer acquisition of counterfeit products, just to name a few. For example, companies wishing to stop piracy or at least encourage consumers to abstain from buying fake goods may want to consider emphasizing the role of fairness in their advertisements and other communications to consumers. While some people may be willing to steal a song online or buy a bootlegged DVD because they don’t care about sticking it to Warner Brothers, they may be much less willing to take pirated music if they knew it could eventually cost many people their jobs and put their families in trying financial positions.
The implications of this data provide some insights in other areas such as negotiating a raise. For example, focus on fairness in your persuasion efforts. Is your pay below the market rate? Are you compensated less than coworkers even though you are performing at the same level – or even better? Don’t be afraid to highlight the inequity of top-notch performance in exchange for mediocre rewards. Don’t just sit back and let them pay you what they want. Invoke fairness.
And remember, fairness is especially meaningful to people in the presence of uncertainty. So, a fairness argument may be even more effective if your boss is experiencing uncertainty – for instance, if there is some leeway in terms of how performance is measured or maybe even if she is uncertain about whether you’ll stick around with the company for another year.
Before you start putting this formula in action, however, you should only invoke fairness if it is authentic. Studies have found that people are good at detecting manipulation, so your fairness argument may backfire if you’re not sincere.
The bottom line is that if you want your customers and others on your side, focus on fairness.
This research was presented at the 2014 Annual Meeting of the Society for Industrial and Organizational Psychology in Honolulu, Hawaii.
Dustin J. Sleesman is an Assistant Professor of Management at the Alfred Lerner College of Business and Economics at the University of Delaware.