Monday Morning Jumpstart with Dan Richards

10 minutes to drive your week

Topic for March 1, 2010: New research on the science of persuasion

Listen to the interview

Robert Cialdini, a psychologist who for many years was a professor of marketing at Arizona State University – has shed light on some common patterns that lead to effective persuasion.

He's identified six of what he calls "lessons of influence" when interacting with existing or prospective clients.

1. Reciprocity.

   The idea behind reciprocity is quite simple. People tend to return a favor. For example, if a colleague at work takes you out to lunch for your birthday, chances are when it's their birthday you'll take them out to lunch in return.

   Advisors who consistently go the extra mile above and beyond what clients expect, especially when there's no short term impact on revenue, build goodwill that can enhance loyalty or lead to spontaneous referrals.

2. Commitment and consistency.

   If people commit, orally or in writing, to an idea or goal, they are more likely to honor that commitment. Even if the original incentive or motivation is removed after they have already agreed, they will continue to honor the agreement. For example, in car sales, suddenly raising the price at the last moment works because the buyer has already decided to buy.

3. Social proof.

   People will do things that they see other people are doing. For example, in one experiment, one or more confederates would look up into the sky; bystanders would then look up into the sky to see what they were seeing. At one point this experiment aborted, as so many people were looking up that they stopped traffic.

   And of course, this phenomenon also leads to mini manias that lead to bubbles.

4. Deference to authority.

   People will tend to obey authority figures, even if they are asked to perform objectionable acts. Cialdini cites military incidents such as the My Lai massacre in Vietnam. Some of the incidents in Abu Gharib in Iraq are more recent examples.

   This also applies to the investment arena. Think of the impact on people when someone they respect like Warren Buffett writes an article in the New York Times or appears on CNBC. Advisors need to look for every opportunity they can to buttress their recommendations with articles and videos from credible sources. This is true of clients and it's even more true when it comes to prospective clients. This is not a reflection on advisors' own credibility – it's just the reality of the world we live in.

5. Likeability

   People are more easily persuaded by other people that they like. Cialdini cites the marketing of Tupperware – people were more likely to buy if they liked the person selling it to them.

6. Perceived scarcity

   The last strategy relates to something being seen as scarce. Perceived scarcity will generate demand. For example, saying offers are available for a "limited time only" encourages sales.