Few things frustrate more than driving that shiny new sports car home from the car lot with a sinking feeling of knowing you didn’t get the best deal. If there is one mistake we make, it is not respecting the salesman ability to influence our decisions.
To the trained, these techniques are well known and used not just by shady car salesman but by business leaders as well. Unlike harsh techniques like yelling, these play on our natural human instincts. Instincts as basic as to fit in and be liked. Used effectively, they can cause us to make decisions that we might not otherwise make.
The book Influence: The Psychology of Persuasion outlines these techniques. It is important to learn not only how to recognize when we are being put under the magic spell but also to cast it.
In a world of constant competition we learn to compare. We compare our houses, academic grades, athletic ability, and professional success to others. These comparisons—although sometimes unfair—allow us to measure where we stand relative to others.
But while these comparisons help gauge our progress they can also work against us. What salesman and others know that we don’t is when comparing two different things presented one after another and the difference between the first is large we tend to perceive the second comparison as more different than it really is.
This weakness becomes more apparent with some examples. A study was done where college students were asked to rank average looking members of the opposite sex after looking through ads in some popular magazines. Their attractiveness was ranked lower by the ones who first looked through the magazine of models than by others who didn’t.
Placing a subjects two hands in buckets of water, one of which is hot and the other which is cold and then putting both hands into lukewarm water makes the lukewarm water feel cold by the warm hand and warm by the cold hand.
What both these examples make clear is the second comparison can be drastically affected by the first. But what is more frightening than these harmless studies is what can be accomplished in the hands of those with more sinister intentions. Retail stores, for example, are taught to show the most expensive item first and then move to less expensive items. This makes the later items seem cheaper than they may be. Some realtors keep overpriced run down homes—that they have no intention to sell—to show first thus making later average looking homes seem like glorious mansions.
Car dealerships understand that once you are committed to buying a car, little add on accessories that might otherwise seem very expensive on their own are now less so. After spending $15 grand on a car, what is $500 more for window tinting or that flashy racing spoiler.
Who doesn’t like a nice gift. But that innocent little gift comes with a steep price. Those who want the law of reciprocity to work for them understand that humans who receive something for nothing have a desire to repay the gift sometimes by giving more in return.
A simple experiment shows the power of reciprocity. In the experiment two individuals were part of a study about rating paintings, however, the study was not about paintings but the effects of reciprocity. One of the participates after a short break bought himself and the other participant a Coke and when the session was over asked a favor of the other. He was selling tickets for a raffle at 25 cents a piece and if he sold the most he would win a 50 dollar prize. The participants who received a Coke bought twice as many tickets as those that didn’t with some buying as many as seven. With Coke costing just 10 cents, the deal was well worth it.
While pushing Coke and raffle tickets shows that reciprocation works, a little known variant called rejection-than-retreat can be just as effective. It combines reciprocation with the contrast principle to produce a surprisingly potent rule.
Rejection-than-retreat starts by proposing an offer that will most likely be rejected and then immediately offering a smaller offer. The smaller offer is a concession that in some weird psychotic way we want to reciprocate. If the reciprocate rule doesn’t do us in, the contrast rule quickly will because the second offer is smaller than the first thus making it look much smaller that it really is.
Of all the ways the rejection-then-retreat rule is deployed none is more effective than the selling of extended warranties. If the salesman is any good the rule is played by offering you some overly expensive warranty plan that most reject off hand. After the rejection, a second more reasonable offer is made. The reciprocation and contrast rule are both in play making the offer hard to resist. Very high success rates of 70% or more have been achieved by using this tactic alone.
It is human nature that once we commit to a plan of action we are very likely to follow through. The principle multiplies in effectiveness if the commitment is made in writing or publicly.
During the Korean war many Americans found themselves prisoners or war in the communist China camps. The Chinese knew about the power of commitment and got the Americans to first admit little things like: America isn’t perfect. Then they were pushed to elaborate reasons why and asked to make a list and sign their name. The commitment starts little and expands until the Americans start to defend their commitment to others.
Tactics used by the Chinese are also used by companies to gain better customer loyalty. Many companies like Proctor and Gamble have product praising essay writing contests—which to the untrained eye looked cheesy—that have proven effective in increasing customer loyalty.
Yet of all the ways to get a commitment, none are more effective than the well known low ball technique. Auto sales are masters of this technique which starts with a low price. The customer than becomes committed to buying the car as time passes. When the deal is ready to close, however, some error is discovered that raises the price a couple hundred dollars. You have already made the decision to buy the car and it takes Herculean effort to walk away from the deal.
The universal law of human behavior is if lots of people are doing something it tends to be the right thing. Salesman often recount endless tails of happy customers who have purchased the same product you are considering buying. Restaurants have been known to limit seating so long lines form outside giving passer-byers the proof of its popularity. Online forums and communities are often seeded with topics to give the impression of importance.
Of all the laws presented above, the law of scarcity is perhaps the most effective. There is no greater draw then to be told you can’t have something.
The game is typically played by retailers by first noticing that a customer is interested in a particular item. Then the salesman—to increase interest in the item—informs them the item is a great item but unfortunately the last one was just sold. The scarcity of the item increases the desire to buy. Miraculously, upon seeing intensified interested from the customer further investigation reveals one is located in stock after all.
The best technique, however, I have heard for utilizing the law of scarcity effectively is from a guy trying to sell his used car. To make the item appear scarce, he double books appointments to show off the car. When the second person arrives on scene to find another looking over the car he is informed to wait his turn while the first person looks it over. The first person seeing the second, becomes more interested in the car. The car becomes a scarce resource and competition increases. Between the two of them they have no hope and quickly cave to the law of scarcity.