Starting a business

I just finished reading a great book last week called “Influence: The Psychology of Persuasion“, written by social psychologist, Robert Cialdini.  As Amazon puts it, it is “arguably the best book ever” on the subject of persuasion and in understanding the psychological foundations of marketing.  Here is a quick summary of the some of the principles discussed in the book.

1.  Contrast: When we see two things one right after the other, if the second is fairly different than the first, we well see it as being more different than it really is.  For example, salespeople are often advised to sell a more expensive item first (e.g. a $500 suit) and then suggest less expensive accessories (e.g. a $40 tie).  With the expensive suit still in their head, they are likely to see the tie as a negligible amount.

2.  Reciprocity.  When you do someone a favor (whether in the form of a gift, giving a helping hand, etc.), the other party feels obligated to return the favor.  The best example used in the book came from the discussion of the ‘Hare Krishna’ group, a religious group founded in the 60s.  One of their notorious fund raising techniques was to wait in airports and give out ‘free’ flowers to passersby.  There was no charge for the gift, but if they wished, they could leave a small donation.  Almost everyone who received the flower felt obligated to make a donation, even though most of them initially declined the gift.  What’s even funnier, once out of sight, most threw away their flowers, which were later recovered by a member of the group so the whole process could be repeated.  Another more recent example comes to mind:  Google.  Besides revolutionizing online search, it has introduced in the last few years, tonnes of great, free, applications:  Gmail (with pop3 access), Google Maps, Google Earth, Google Analytics, Google Sites, and Google Docs, just to name a few.  What’s their return on investment?  I’d say the biggest one has to do with branding.  When we think of Google, intuitively, we associate qualities like creativity and innovation.  We see a company that is bold and visionary.  Although a very rare thing to say, in Google, many of us also see a large corporation we can trust.

3.  Commitment and Consistency. Once we commit ourselves to something, it can affect our self-image, resulting in a desire to be consistent with what we’ve already done.  For example, a person who takes part of a survey on environmental safety will be more likely to accept a request later on to allow an obtrusive ‘green’ sign on their front lawn (compared to those never took the survey).  It is consistent with their newly established self-image as a ‘green citizen’.  An additional factor that increases commitment is effort. The more effort we expend in achieving something, the higher our commitment levels.

4.  Social Proof: When facing a complex decision, we have a tendency to look to our peers for guidance.  A powerful and tragic example of this principle occurred during 9/11 when many individuals, despite being close to the bottom floor, decided to turn back and take the stairs to the roof because they were told by others that helicopters would fly them to safety.  Of course, the choppers never came and they all perished.  Another example is the use of ‘canned laughter’.  Research shows that, following a punch line, audience members laugh more with canned laughter than without it.  This is especially true for jokes that are in fact, not funny.  Because we hear others laughing, we feel inclined to do the same.

5.  Liking: In most cases, we will agree to the requests of people we know and like.  Advertisers will often use testimonials from ‘ordinary’ people to increase compliance among viewers.  In this situation, they are trying to make use of the association principle.  If the viewer can relate to the person in the commercial, they are more likely to consider buying the product.  Conversely, they might hire a famous actor or athlete to sell something as simple as deodorant or shampoo.  Again, this makes use of the ‘liking’ principle.  Our respect and adoration for the celebrity creates an inner desire to possess the product being endorsed.

6.  Authority: We are all conditioned from a very early age to believe that obedience to proper authority (e.g. employers, judges, government leaders) is a good thing.  This desire to appease remains intact in adulthood.  The Milgram study in 1965 measured the willingness of participants to obey an authority figure, even when the order conflicted with their personal conscience.  Participants were told to apply electric shocks to a ‘learner’ (an actor) if he answered a question incorrectly.  The power of the shocks was gradually increased with every wrong answer.  Surprisingly, close to two thirds of the participants were willing to apply all of the 30 shocks (the last one being a fictitious 450 volts), even when the ‘learner’ was begging for the experiment to stop.  The study highlighted the willingness of adults to go to any lengths when commanded by an authority figure.

7.  Scarcity:  The more scarce or rare a thing is, the higher the value people associate to it.  Mention a ‘limited time offer’ on a flyer and people will flock to the store in question.  It’s all about competing for the pursuit of limited resources.  As stated in the book, “not only do we want the same item more when it is scarce, we want it most when we are in competition for it.”

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