I'll Have What He's Having

You may have noticed from the theme of the last few Two Minute Tuesday articles, but I’ve been having a blast exploring cognitive biases and how they can impact collection practices. If we recognize them, we can harness them to work in our favor. If we’re blind to them, we’re sure to perform poorly. 

I’ll change things up a bit next week to keep things fresh, but I want your feedback! Are these looks into psychological/negotiation principles interesting? Are they a bit too far down the “nerd Nate” rabbit hole? 

Use the survey below to let me know. Or just reply to this email to let me know if there’s anything you want me to focus on. I read every reply email!

Anyway, without further ado …

One of the most effective yet underutilized tools in negotiation—especially in collections—is the use of third-party references. This technique, often cited in sales and psychology, shifts the focus from what you think is the right solution to what others in similar situations have successfully done.

Instead of saying, “This is a good solution for you,” it’s much more effective to say, “Many people facing similar challenges have found this to be a good solution.”

Why Third-Party References Work

People are naturally resistant to being told what to do, especially in difficult financial situations. Their guard is up and emotions are running high. 

However, they are more open to suggestions if they believe that you have helped others successfully navigate similar circumstances. This taps into social proof - a psychological principle where people look to others when making decisions.

In collections, the way we frame our conversations can make all the difference. Compare these two approaches:

Less Effective: “You should set up a payment plan. It’s the best option.”

More Effective: “I’ve worked with many people in your situation, and they’ve found that setting up a small initial payment helped them regain control of their finances.”

The second approach makes the consumer feel like they’re not alone and that a solution has already worked for others.

How to Use Third-Party References Effectively

Frame the Solution as Common Practice

• “Many people in similar situations start with a small down payment and flexible arrangements.”

Use ‘Feel, Felt, Found’
This classic technique reassures consumers by acknowledging their feelings and presenting a proven path forward:

• “I completely understand how you feel. Others have felt the same way. What they found was that committing to a small first payment made it easier to move forward.”

Provide Social Proof Without Personal Details

• Avoid mentioning specific names (e.g., “Jim Smith did this”) and instead refer to broader experiences (e.g., “Many of my customers have benefited from this approach”).

Putting this into practice

Next time you’re speaking with a consumer, instead of instructing them to take action, shift your approach:

Before: “You should pay at least $50 today to get something started.”
After: “Most consumers in similar situations start with $50 payments to stay on track.”

Notice the difference? The second statement removes pressure and makes the consumer feel like they are making a smart, common choice rather than being told what to do.

Conclusion

Using third-party references in collections helps build trust, reduce resistance, and increase payment commitments. By framing solutions as successful choices made by others, you naturally guide the consumer toward taking action—without triggering defensiveness.

Give it a try on your next call and see how the conversation shifts!