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Gullible travels, or are Aussies more sceptical?

Graham Hand  |  13 Jan 2022Text size  Decrease  Increase  |  
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My summer reading included the joy of escapism fiction in a classic Frederick Forsyth thriller and a fascinating autobiography by playwright Neil Simon. Non-fiction included Robert Cialdini’s Influence: The Power of Persuasion. It is essential reading for anyone in sales or marketing, describing the psychological processes people go through when they decide to buy something, and how businesses exploit these behaviours.

Although it’s easy to see your own gullibility in the hundreds of examples, conned into buying stuff you don’t need or really want, in some sections, the human behaviour seems irrational. Of course, what I consider rational someone else will consider ridiculous, but the book left me wondering if the sales techniques are more likely to work in the United States (where all the testing and sampling was done) rather than Australia.

Has Australia become too 'American'?

Over the holiday season, two of our leading journalists analysed the troubling transition of Australian culture and markets into more of an American way of life.

Ross Gittins writing in a The Sydney Morning Herald article called ‘This isn’t America so please stop acting like a Yank’, said:

“If there’s one thing that annoyed me about 2021, it’s the way people have been aping all things American. Our financial markets copped a bad dose of it, the media got carried away, we looked to the Yanks – the smart ones and the crazies - to know what we should think and do about the coronavirus, and many on the ‘Right’ of politics took their lead from Trump’s Republicans.

One on one, I like the Americans I know. But put them together as a nation, and they seem to have lost the plot. We’ve long imagined the US to be the wellspring of everything new and better, but these days it seems to be racing headlong towards dystopia.”

It's an irony that Americans we know personally are easy to like, and many of the most amazing global companies founded by Americans, and yet:

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“They have loads of the super-smart, but even more of the really dumb.”

Then Geoff Kitney of The Australian Financial Review wrote:

“Pentecostalism is an American import, based on a strange mix of faith in two Gods – the Christian God and the God of Free Markets ... Capitalism and Christ! How does that work?

This might suit fundamentalist America but, I would have thought, would repel traditional hard-bitten, no-bullshit Australian scepticism.

But I might be wrong. Maybe the decades of brain-washing of too much US culture via commercial TV and Murdoch media has changed us.”

Gittins and Kitney are asking the same question that the Cialdini book prompted in my mind. Have we become so dominated by American culture, entertainment  and politics that Australia has changed, and to use Kitney’s words, we have lost our ‘traditional hard-bitten, no-bullshit scepticism”?

Testing some of Cialdini’s techniques

There is much to admire in the Cialdini book, and no doubt many of the techniques work on most of us. Here, I’m more interested in exploring a few examples of the sales techniques that made me cringe.

1. Similarity

Sales people can increase their popularity and success by claiming they have interests similar to our own. For example, car salesmen are trained to look for evidence of similarities while examining a customer’s trade-in.

“If there is camping gear in the trunk, the salespeople might mention, later on, how they love to get away from the city whenever they can; if there are golf balls on the back seat, they might remark they hope the rain will hold off until they can play the eighteen holes they’ve scheduled for the next day.”

It seems trivial but it gets results. One survey gained a greater response rate if the cover letter contained the name of a survey-taker similar to the survey recipient. For example, a letter to Robert Greer sent from, say, Bob Gregar. Adding a name resemblance doubled survey completions.

2. Making friends

Joe Girard was the most successful car salesman in the General Motors network for 12 consecutive years, averaging over five car and truck sales every working day, and receiving the title ‘Greatest Car Salesman’ in the Guinness Book of World Records. He employed a simple formula, focussed on two things: offer a fair price and be someone the customer likes to buy from. So what did Girard do? Each month, he sent each his 13,000 former customers a greeting card containing a printed message.

“The message printed on the face of the card never varied. It read ‘I like you.’ As Joe explained it, “There’s nothing else on the card, nothin’ but my name. I’m just telling ‘em that I like ‘em.”

Say what! These days, his ‘unsubscribe’ button would be the most important part of his message. What would you think if you received a card in the mail 12 times a year, every year, saying “I like you”? From a car salesman!

3. Commitment and consistency

If a salesperson can convince you to make a commitment, any commitment, they set the stage for an ill-considered and automatic consistency which makes you buy a product. Cialdini uses the example of charities making donation requests by telephone. The caller first asks, “Hello Mrs Targetperson, how are you doing today?” The question is not simply an opening line, it’s designed to draw out a public statement that you are doing well, such as "I'm good, thanks." This makes it more difficult for some people to knock back an appeal for those who are not doing well. Writes Cialdini:

“Residents of Dallas, Texas, were called on the phone and asked if they would agree to allow a representative of the Hunger Relief Committee to come to their homes to sell them cookies, the proceeds from which would be used to supply meals for the needy. When tried alone, that request (labelled the standard solicitation) produced only 18% agreement. However, if the caller initially asked, “How are you feeling this evening?” and waited for a reply before proceeding with the standard approach … 32% agreed to receive the cookie seller at their homes. True to the consistency principle, almost everyone (89%) who agreed to such a visit did in fact make a cookie purchase when contacted at home.”

Really? A cookie seller at home. My version of the Cialdini book is ‘new and expanded’ in 2021, not 1951. Aside from COVID, who would want a cookie seller in their home, and who wants their crap cookies? If it’s a good cause, just send a donation.

4. Low-balling

Low-balling is where an advantage is offered that induces a favourable purchase decision, but before the bargain is sealed, the advantage is removed. Cialdini says the technique is a staple procedure for many car dealers.

“Automobile dealers have come to understand the ability of a personal commitment to build its own support system of new justifications for the commitment.”

He gives the example of an inflated trade-in offer which the customer recognises as inflated and jumps at the deal. Later, before the deal is finalised, a manager enters and says the salesperson’s estimate is too high and reduces the trade-in offer. The customer realises the lower offer is fair and sometimes feels guilty about taking the higher estimate, and the deal proceeds.

“I once witnessed a woman provide an embarrassed apology to a salesman who had used this version of low-balling on her – this, while she was signing a new car contract giving him a hefty commission. He looked hurt but managed a forgiving smile.”

Talk about gullible. Really … apologise to him? Give me a break.

5. The desire for unity

People are inclined to say yes to someone they consider is 'one of them'. There are tribe-like categories such as race, ethnicity, nationality, family and affiliations. Members feel 'at one' with each other. Cialdini cites the example of the US$15 billion in frauds committed by Bernie Madoff which went undetected for decades. He had a long-term presence on Wall Street and 'allowed' investors into this inner circle and his fund. He was Jewish, and so were the majority of his victims. There was social proof and unity in investing with him.

Here's a tip for anyone selling what Cialdini calls 'retirement plans'. Online research showed that if participants are shown artificially-aged images of themselves, they are willing to commit more funds to their retirement. This was specific only to images of themselves, as it elevated the importance of looking after that person in future.

The book also makes the case for engaging with people by asking for 'advice' rather than 'feedback' or 'opinions'. In a survey, those asked for advice about a restaurant reported far more desire to eat there. Here are two great quotes:

Ben Franklin: "We all admire the wisdom of those who have come to us for advice."

Saul Bellow: "When we ask for advice, we are usually looking for an accomplice."

Are Australians less gullible?

Geoff Kitney talks about "traditional hard-bitten, no-bullshit Australian scepticism.” Would these techniques work here? We could write a book on cultural similarities and differences between Americans and Australians, and our top-rating television programmes are hardly highbrow: Nine’s Married at First Sight, Seven’s The Voice and Ten’s Masterchef Australia.

Cialdini's book is more about influence generally but let's confine this answer to financial markets. There are plenty of gullible candidates out there.

Last year, ASIC reported a doubling of financial scams in Australia. This includes imposter bond scams, and fake platforms using imitation social media pages, websites, phone lines and stock exchanges.

Mayfair 101 and IPO Wealth raised over $210 million from investors before ASIC stepped in

While Australia has not experienced the excesses of the GameStop and Robinhood manias that hit the US, we have our own versions of stock ‘pump and dump'. ASIC recently released a report which said:

“We have observed blatant attempts to pump share prices, using posts on social media to announce a target stock, a designated time to buy and a target price or percentage gain to be reached before dumping the shares. In some cases, posts on social media forums may mislead subscribers by suggesting the activity is legal.”

According to The Australian Financial Review, ASIC entered a chat room on the platform Telegram with a warning to participants who were using the forum to pump up share prices.

To prove the point, ASIC followed social media posts on Twitter, Facebook, Reddit and Twitter and particularly a group on Telegram called 'ASX Pump and Dump', and produced a list of 14 companies experiencing suspicious activity.

We're all human

Much in Cialdini's book is relevant to human behaviour generally, not specific to particular countries, and there is little to believe Australians would not be vulnerable to similar psychological sales processes. But I doubt we would welcome cookie (and we call them biscuits, anyway) sellers into our homes, although Tupperware did well here. Most Australians would like to believe we are not as gullible to some of the excesses and extremes, as we often say, "Only in America".

But probably, unfortunately, we're not that far apart. Thank goodness for cricket, which no American can understand, and Vegemite, which everyone else hates.

is the editorial director of Morningstar Australia.

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