Influence: Psychology of Persuasion
How Startups and Investors Influence Consumers
What is the book Influence and why does it matter?
Part of my book shelf includes some great books on business. These books have influenced the way that I do business, the way I look at companies and the process of whether or not I decide to invest in those companies. One of those books is called Influence: The Psychology of Persuasion.
Robert Cialdini, who wrote this several years ago, essentially looked at businesses and looked at the way that consumers can be influenced by companies to purchase or create a level of trust in which they'll come back to continue to buy. In other words, we make companies more successful by influencing the consumers to make buying decisions.
The six things you need to know about the book, and these are slightly re-arranged but important for what I believe are the proper business steps. Number one is reciprocation. There's an example of Costco and the idea of being that when you go into Costco, or another massive brand store, that they’re constantly giving. They’re spending money on you, like giving taste-testers free samples. By giving free samples you feel like you have to give back by buying from them. It's a level of reciprocation where reciprocity exists where you get something, then you feel like you need to do something in return, i.e buy something. I think an important lesson, especially for people in business where you are constantly saying hey buy my product, is to give away free samples of your work because people are more likely to buy your product than if you did nothing.
Companies become successful by influencing consumers to make buying decisions.
The second thing is commitment and consistency. There was a social scientist Anthony Greenwald who approached voters on election day in 1987 and he asked the people whether they would vote or not and 100% of those people in that sample said they'd vote. Then on election day about 86.5%, 86% or so of those who were asked actually went to the polls. They were asked whether they would vote or not, whereas 61% of those who were not asked went to vote. The sample might me skewed - there could be some issues with the samples, or there might be more analysis that needs to take place - but the bottom line is this people don't like to back out of deals.
The third thing is social proof. By social proof, we mean people like to do what other people do. Buying decisions are made as a result of somebody who also refers you to the same product. There's an example of a hotel chain that is trying to save money on laundry. They decided to put a simple question next to their towels: "Would you like to recycle, will you join us? We'd like to recycle, will you please join us?" Something to that effect; that's paraphrased. The hotel saved hundred of thousands of dollars in the long run with that simple question because it implies: "Hey we're doing it, join in!" It's a little bit of a bandwagon effect that has an important impact in terms of conformity and social proof.
The fourth thing is authority. People do follow authorities right? We look to others above us. We look to those who are leaders in a different a way. We look to legitimate and recognize authorities to help persuade us. That sometimes comes from celebrity endorsements. It comes from having a higher authority, somebody who is a respected figure in the industry who might endorse your product or your service. Now celebrity endorsements are arguably not that great but the point is if you can get a thought leader in the space. For example, I'm asked frequently to comment on startups and venture capital and how to invest so I'm often the one who people look to to say hey, can you give me advice on the following startup. Whatever it might be, if there's an authoritative level of expertise that people look for to make, then they can be influenced by that.
Buying decisions are made as a result of somebody who also refers you to the same product.
Liking is the fifth point, which is you buy from those that you like. It's really hard to say no to somebody you like. Oftentimes sales teams and marketing teams are just trying to build a level of rapport that's at the point where you just feel bad saying no. Keep that in mind as you're influencing some of your own decisions or some of your own consumers to buy your product.
Scarcity is number six. If you create an aura that there's limited supply, you have an increased chance that someone will buy it. Now that's not a guarantee since people can read through the BS. It's a fundamental economic theory that scarcity relates to supply and demand.
Back in 1985, Coca Cola made their infamous switch from traditional formula to this new Coke and during that process people realized that the original Coke was soon going to be limited. There was a huge backlash against this new Coke because they the old Coke they were used to was drying up. There's not any Coca Cola out there that's original so people were very much upset. Just as a disclosure, Coca Cola did not create this controversy to create a higher demand, but it does demonstrate the power it has over consumers when they realize there's little supply left for their demands.
That's a level of scarcity and it caused a frenzy. Here's the bottom line. If you're a marketer, you don't necessarily have to change the formula or the product, but you do need to imply that there's a level of scarcity.
Overall I rank this book a four out of five stars. If you like books like this, our top best-selling books on consumer psychology, startups, investing all in one, you should check out our best-selling book. It's called Kings Over Aces by me, Ross Blankenship, founder of Angel Kings and investor in America's top companies.