Are you my friend? Social norms versus market norms

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Social norms and market norms are separate and you must not mix them. Social norms prevail in social situations. For example, if two friends go out skiing and one friend gives the others some pointers just for fun, that’s a social situation and social norms prevail. The “instructor” would find it absurd to be given cash tip at the end of it, but might feel slighted if the “student” didn’t invite him to his Super Bowl party. If a person goes out and hires a professional ski instructor for a private lesson, the instructor will most definitely appreciate a tip and in fact, expect it. But the instructor has no expectation of being invited to the student’s Super Bowl party.

In most of our lives, it’s clear which realm were in, but not always. In our <a href=http://yosemitehouse.com”>Yosemite vacation rental business, when a really good repeat customer calls to make a reservation, we often have this “Oh, they’re so nice, we should charge them” feeling. Of course, that feeling just speaks to how powerful social norms are. In Predictably Irrational, Dan Ariely shows the danger of mixing social norms and market norms. If you do, market norms typically win. Surprisingly, though social norms can have a bigger effect. For example, when researchers paid people small amounts for simple tasks, motivation and productivity rose as pay rose. But the highest paid workers are out-produced by one group: those being paid nothing at all. Volunteers actually worked harder than any of the paid subjects (see Ariely, pages 70-75). Why? Because they were asked to do something to help out, and people love to feel that they have helped other people. They will work harder for that feeling than they will for money. Other research shows that giving to others makes us happier than does buying something for ourselves.

We are social animals first and market animals second and most of us get more satisfaction out of satisfying social norms than we do from satisfying market norms. But you screw all this up if you tell Aunt Marge how much your gift bottle of wine cost. Even if she knows it’s cheap or expensive, even if she knows the exact dollar worth of the wine, a gift fits within the context of social norms right up until moment when the price is made explicit. Then, no matter what the price, it fits within market norms and destroys the moment.

Companies mess this up all the time with their loyalty programs by pretending that you and the company are friends. The second they hit you with a late fee and refuse to negotiate, the second they tell you that they have policies and can’t treat you differently than everyone else (i.e. walk-in customers who are not yet “friends”), they have laid bare the nature of the relationship and the perceived switch from social to market norms does serious damage to the relationship. If it has always been a market relationship, that presents no problem. But if you’ve been courted like a friend, like your relationship is personal, like you won’t be treated like everyone else, the abrupt reentry into the realm governed by market norms feels like a betrayal. You end up having stronger negative feelings toward the company than you do towards companies for whom they never had any warm fuzzy feelings. It’s like the difference between hailing a cab and, upon reaching the destination, being asked to pay the fare. No problem. But if you ask a friend for a ride to the airport and at the destination you’re asked to pay “just half” of the cab fare because “we’re friends”. It’s a stab in the back.

Ariely puts it thus:

If you’re a company… you can’t have it both ways. You can’t treat your customers like family one moment and then treat them impersonally — or even as a nuisance or a competitor — a moment later when this becomes more convenient or profitable.

Personally, I never become “friends” with companies, only with people [Update Campaign 2012: “Corporations are people, my friend”]. So no matter how much I respect a business, I don’t buy t-shirts with their logo and I don’t put their stickers on my car. So I’m disloyal, but I’m safe. But what about all those people who not only buy ice cream, but buy a Ben and Jerry’s t-shirt, that is they pay for the right to wear advertising? Of course, I can be bought cheap. If I don’t hate your company and there’s a free t-shirt in it…

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