The cover of Robert Cialdini’s book Influence: The Psychology of Persuasion is adorned with a quote that says "For marketers, this book is among the most important books written in the last ten years." That’s probably true, but it’s a little troubling that there is no quote that says "For consumers, this book is among the most important books written in the last then years." In many ways, Cialdini is writing for consumers, not marketers. Each chapter discusses a "weapon of influence", the way it is used against us and finish with a subsection called "How to Say No" (to this particular "weapon of influence"). I think every reader will recognize each weapon, will feel that you already know that is used against you, and will eventually think of a situation where, even with that knowledge, you got sucked in.

Read how we get sucked into reciprocal relationships unknowingly » »

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 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, the ski school requires the student to pay full freight, but the instructor has no expectation of being invited to the student’s party.

In most of our lives, it’s clear which realm were in. However, in Predictably Irrational, which I’ve mentioned before, Dan Ariely shows the danger of mixing these two realms, because if you do, market norms typically win, though by themselves social norms can have a bigger effect. For example, when they pay people to do tasks, the people who are paid tend to perform more work in a given amount of time as their pay increases. But those who do the work as volunteers actually do more work than any of the paid subjects (see pages 70-75). People love to help other people and in the social realm we work for the good feeling that we get from doing something for someone. This is so powerful, in fact, that research shows that giving to others makes us happier than does buying something for ourselves.

You mess 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, it fits within the context of social norms until the price is explicitly mentioned. But then, no matter what the price, it fits within market norms.

Companies mess this up all the time by trying to ingratiate themselves, pretend you have a relationship, you and the company are friends. But the second they hit you with a late fee and refuse to budge, the second they tell you that they have policies and can’t treat you differently than everyone else, they have violated the social norm and entered the realm of market norm. 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 and when companies act this way, they should be prepared to have accounts closed and to see virulent blog posts and horrid word of mouth publicity.

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. 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…

We as humans tend to key on contrast and judge value by the relationship of one thing to another. If we can find a comparable, we always do. The way Starbucks got us to buy $4 cups of coffee (er, you, anyway, since I have never bought a coffee a Starbucks, but I have bought a double chocolate cream frappucino) was to make the experience difficult to compare to Dunkin Donuts. Euro-style tables, funny names, funky music, soft lighting, all contributed to an ambiance sufficiently different to make the comparison difficult. Tough economic times, have made people more willing to see coffee as coffee and refuse to pay for the experience (that and, of course, the fact that the Starbucks experience has become mundane itself, just like Dunkin’ Donuts).

We all know that from personal experience, but I have been seeing it a lot more clearly since reading Dan Ariely’s fun book Predictably Irrational: The Hidden Forces That Shape Our Decisions and the interesting, though a bit more stodgy Robert Cialdini book Influence: The Psychology of Persuasion. So here’s where it gets interesting. Savvy marketers know that we judge value by contrast and relationship. So the Economist offers subscriptions for the following rates (or did when Ariely did his study):

1. $59 for the online-only subscription.
2. $125 for the print-only subscription.
3. $125 for the print and online subscription combined.

What’s going on there? Why even bother to offer option 2? Simple. It isn’t clear which is the better deal between $59 for the online subscription or $125 for the print subscription, but there’s no question which is the better deal between the print-only and the print and online option. Because of that and because those two are obviously comparable — different offers at the same cost — we key in on those two options. When Ariely showed the offer to MBA students at MIT, only 16% went for the online-only subscription, none went for the print-only option and a whopping 84% signed on for the combo. The deal was too good to pass up. But, and this is where it gets really really interesting, what if you eliminate the print-only subscription? After all, not a single person wants it anyway, so it’s not really an important part of the offer, right? Well when he offered only two choices, the online version and the combo (options 1 and 3 in other words) to MBA students, with no “decoy” offer, 68% opted for the internet-only option. So in other words, by focusing the comparison on the $125 option, they shifted from a measly 32% willing to pony up $125 to a whopping 84%. That’s the power of contrast! We are just not wired as humans to think in absolutes, which is usually a good shortcut as historically, evolutionarily (and in most life-threatening situations) we have very few choices and choosing quickly has advantages. In the modern marketplace, though, it’s a different story.

Cialdini has all sorts of examples where the contrast principle is used to influence our decisions. Brunswick pool tables instructed salesmen to start by showing the most expensive pool tables “just to see what the high-end features are” and then bring people down the price ladder. Result: a big increase in the amount people were willing to spend because the mid-range tables now seemed cheap. Some clothing retailer figured out that if a man comes in to buy a suit, always sell the suit first and the accessories second. After making the big purchase, what’s another $20 for a tie? But if they choose the tie first, they’ll go for the $10 tie instead.

This is also why discounts, coupons, MSRPs on cars that nobody pays, and “$97 value, yours for only $27″ work even if nobody in the history of humanity would consider paying $97 for the piece of junk that really isn’t even worth $27. Even though in our rational mind we know with certitude that the list prices are absurd and nobody pays them, they anchor us on high prices and we compare the sales price to the high price put in our mind because we are wired to compare. This is so subtle and so powerful that if you simply ask people what the last two digits of their social security number are, this will actually influence how much they are willing to pay for something later. Those with higher numbers are actually willing to pay more because the higher number is still stuck in their mind and that provides the mental anchor at that moment. In the absence of a meaningful comparison, they are simply comparing the last two numbers they have heard and that makes a price seem reasonable or unreasonable depending on what has become set as their anchor.

So as a consumer, you need to really think about what comparisons you make implicitly, without thinking about it. And as a merchant, of course, you need to think about what comparisons your customer is making.

You’ve no doubt heard of single-issue voters. People who vote for a candidate purely based on issues like abortion, capital punishment, gun control and so on. But what about single-issue customers? That is, customers who won’t patronize your business because it’s so unfriendly to smokers, vegetarians, or whatever. How many of those groups can you afford to alienate? Maybe not as many as you think.

How businesses should really count vegetarians (and other single-issue customers) » »