(Guest post by Boneflour)
Part 1 Summary:
- Decisions are made by comparing trade-offs.
- Certain types of trade-offs, or “hands”, are more appealing to humans. Avoiding immediate, certain, large pain (costs) usually comes first.
- Some people have psychological preferences for different “hands”.
Example: High time preference = immediate small benefit beats large, long term cost because I WANT IT NOW.
- Marketing (minor melon magic?)* can change the trade-off of a decision by changing the perceived conditions. Example: Turning a cost into a “benefit”, uncertain into “certain”, immediate to “long-term”.
- This explains the origin of the Money Back Guarantee (MBG), the “Free Bonus”, and why everyone wants you to apply for credit.
Old Man Beardy finally got a decent scratch-off ticket, and is thinking about buying a desk at IKEA.
Without a MBG you have a pretty meh trade: A certain, immediate, moderate cost (buying the desk) versus an uncertain, long term, moderate benefit (Will it fit in the office? Will it match? Do I want to burn 500 bucks on what could be a fancy paperweight?)
In other words, pain now, and maybe pleasure later. It’s going to take a pretty amazing desk to make Old Man Beardy risk 500 bucks for it.
With an MBG, the trade changes. Now it’s an “uncertain”, immediate, moderate cost versus a “certain”, long term, moderate benefit. After all, if he doesn’t like it, he gets his money back… meaning he might not even have to pay that 500 bucks! That desk is looking better…
If Old Man Beardy gets a line of credit, it changes the trade even more. He doesn’t have to pay up front, and it’s multiple smaller payments instead of one big one. Now it’s an “uncertain” “long term”, “small” cost versus a “certain”, long term, moderate benefit. Hot dog! That’s like getting a whole desk for 50 bucks! And he doesn’t even have to pay that much if he don’t like the desk! This is now a great trade, easy win for the desk.
But hold on a second.
What happens if IKEA throws in a Zippo lighter, just for taking the desk home? And hey, if he has to return the desk… He can still keep the lighter.
This is now the best of all possible trades. A “small” “long term” “uncertain” cost (can always take it back, right?) versus a small immediate benefit (lighter) AND a “certain”, long term, moderate benefit (desk).
Old Man Beardy says…
And take my money!
Never mind that he’s probably going to pay even more money because of interest. From his point of view, he’s paying next to nothing… and getting a shiny free lighter… for the privilege of taking a new desk home.
And even if the desk doesn’t work out, he’s got a fancy new way to light his Pall Malls. Old Man Beardy is happy, IKEA is happy, and MasterCard is happy. Everyone wins. Well, except Old Man Beardy’s wallet.
The same principles and methods can be applied whenever/wherever you want someone to make a decision.
Say you need people to join your basketball game at the YMCA. You tell a buddy:
“You should come to our basketball game. We were short the other day and had to leave early. If you come we should be able to play a full game. Come on, do it for friendship!”
This is a great deal for you, but might not be for the buddy:
The trade is giving up an afternoon for a pick-up game that might not even happen. Small, certain, immediate cost for the risk of a small, uncertain, immediate cost = Why waste an afternoon for a disappointing game that sounds like it’ll end early anyway? = “Naw man, maybe some other time.”
A better way is to phrase it in a way that shows a benefit to the other person, and to throw in something extra to make it worthwhile.
“Man, basketball is a lotta fun. Everybody wanted to keep going when we left last time. Mikey and Fred are already coming, so we’ll have a full court tonight. I’m buying milkshakes after the game too, it’s a special occasion. Wanna come?”
This trade is giving up an afternoon for a fun night out and milkshakes. Small, certain, immediate cost for a small, “certain”, immediate, “benefit” (fun game) PLUS a small, certain, immediate benefit (milkshake!). “Sounds like a good time. I’m in.”
The key is to think about how the other person sees things, and then adjust your offer to favor your side of the trade. Note that in the basketball scenario, both offers were factual. It’s just changing the description so that the other person sees what’s in it for them.
“You should watch this movie so I can talk about it with you” is different from “you should watch this movie because it’s got Vin Diesel in it and he’s your favorite actor”.
Basically, you want to:
Figure out how the other person sees the trade. What are you asking them to give up? What do they see themselves getting in return? For example: Thug Mug, the mugger, is looking to threaten someone for money. If you don’t want to get mugged, you have to change the trade in favor of not getting mugged.
Identify what parts of the trade you can change. Thug Mug is looking for an easy mark (low cost) and a juicy wallet (high benefit). How do you change those factors in your favor?
Change the trade to tip the scales in your favor. Carrying a weapon or looking dangerous raises the perceived cost to him. Looking broke and mean lowers the perceived benefit to him. You can avoid muggings without a fight just by looking “not worth the trouble”.
So now you know why the MBG is in most every businessman’s arsenal. You know a couple of ways of using this stuff in your own life. Use this power only for good.
I’m Boneflour, and I approve this message.**
**Ed: Me too.
Thanks to Boneflour for making sense of targeted marketing in a concise format and giving me four pages of effortposting and two days off from posting for free. Damn fine work.