Behavioural economics result in successful negotiations

Be careful what emotional state you are in when you make any big decisions. Although this may seem obvious, I had never seen a scientific justification for this until I read the book Predictably Irrational by Dan Ariely.

Sue Unerman, chief strategy officer at MediaCom
Sue Unerman, chief strategy officer at MediaCom

But then this is my first exposure to the science of behavioural economics. The idea is that you can predict how people behave through a series of observations, and then apply that behaviour to business for your own benefit.

In times of cutbacks, for example, Ariely suggests the counter-intuitive move of creating more free stuff for your customers.

So, offered the choice between a free $10 gift certificate and a $20 certificate for $7, his experiment in a Boston shopping mall showed that nearly everyone went for the free certificate, even though it is less valuable. In this way, "free" is perceived as better than offering more value.

Part of this book focuses on the emotional triggers for decisions. For instance, Ariely says that you shouldn't bother trying to try to teach teenagers about safe sex purely in a cold rational state.

If that's all you do, you really can't expect it to work, as they are engaged with a totally different part of their thinking when they're actually about to have unsafe sex.

His studies show that there really is no access to the rational brain in the heat of passion.
The most shocking example of this is his experiment on male students at Berkeley who have predicted and then answered questions in different states of sexual arousal.

First, the participants in a "cold, rational state" are asked to predict what their answers will be when aroused. Then we get the comparison with when they are aroused (let's spare ourselves the details of the technique here).

There is a 70% difference in the answer to the question: "Would you tell a woman that you loved her to increase the chance that she would have sex with you?" and 100% difference in the response to the question: "Can you imagine being attracted to a 12- year-old?"

There's a lesson here for people running focus groups. Opinion depends on emotional state - don't expect rational answers from overexcited people, and vice versa.

So often when we think we're being true to our individuality, we are in fact following predictable herd behaviour. Being more conscious of this will help us in negotiations of all kinds and to sell more products when times are hard.

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