Thursday, February 26, 2009

Influence: The Psychology of Persuasion by Robert B. Cialdini

I would like to share book that I read recently. We can exactly know how these weapons were effectively used by RE companies & brokers so far.

This book is psychological research on factors that influenced us to say ‘yes’ or ‘no’ at various events /situations that normally occur in everyone’s life but we really would not see the outcome or results of our response when we committed. Robert B. Cialdini is professor of psychology at Arizona State University. This book is his life time research on people’s behaviors and he took various roles during his research as door to door salesman, marketing guy and PR agent etc.

Author talks about the ‘weapons of influence’ that normally enterprises and other people use for their gain over the society which means the normal public. Prof. Cialdini found six common traits of people that influence an individual to make any decision.

Reciprocation – Based on the widespread human culture and evolution, the rule requires that one has to try to repay what another person has provided by means of any service/gain. Not repaying is considered as rude or uncivilized in our society. Free food samples at malls and stores.

Commitment and Consistency – It is easier to resist at the beginning than at the end – Da Vinci. It is always our desire to move with the society, colleagues, friends or relatives on making decisions or on deciding lifestyle. We all like to get approvals from the above mentioned social set up. I know many people who signed on the dotted line for the word of a marketing guy ‘just sign we will take care of it, don’t worry’ for their investments, mortgages just because others did so; dared to ask questions.

Social Proof - This is about how a person likes the society to view his actions; this comes of out his skepticism about other people’s reaction. When he is not sure about the action he would tend to follow the predecessor. This is an easy experiment for us who live in India. Next time you come across a beggar at a temple, train or bus stop; people normally look for a predecessor. Try for once the role of predecessor and see the results.

Liking – People tend to say ‘yes’ to individual they know and like well. There are three main factors for this behavior. Physical Beauty – This halo effect makes people to yes. Similarity – We like people like us by appearance or behavior etc. Increased Familiarity – Repeated contact or information about a thing. (Advertisements, stock recos.) Why are we spending so much time and money on some of the bakwaas movies of Bachans, Khans and Rajinikanth though we know already? (No offense meant)

Authority – This is very simple to understand. We will do whatever our boss says with “I will take care of it, don’t worry’. Individual will not stand up and say ‘no’ even if he knows something is wrong. You might have read a lot in newspapers these days about 'Satyam'

Scarcity – Another simple one to quote an example under current scenario. You might be seeing lot of advertisements from real estate developers, car companies and banks with a limited time offer “Only for next three days” or “Pre Launch Discount – Very few flats”. Cool that’s it.

I read and watched Cialdini talking about this; I can go on writing about this book. I have listed only main 6 items and there many examples & other weapons detailed in the book. Get a copy if you want to overcome or positively use these 'weapons of influence'

Thanks Vik for giving the oppurtunity.


Adi said...
This comment has been removed by the author.
Adi said...

What has this post to do with real estate bubble or its burst? Unless this is advertisement for the book.

Kannan said...

This is not a promo for the book.Even I though this book will be just like regular 'You can win' kind of self motivation book but its a great book.This book is being continuously recommended Cherlie Munger; who referred this many times when he gave lecture on mental models.We normally use very few tools to evaluate an option to say yes or no.But this book equips us with many more tools and techniques.

shailesh said...

I would add one more for Indians.

Peer Pressure: Though it is universal, but in some respect Indians do tend to give it higher importance. You can just look at amount of tuition classes kids today have to go, just for the sake of their parents satisfaction. When I look at Parent (esp Indian parents in US), I cringe at their obsession with kids education. No wonder Indian kids in US are cracking spelling bees.

Anonymous said...

Interesting article that I found on today's midday edition


For developer Vivek Abrol, the SBI's announcement of home loans at eight per cent per annum is a 'positive development'. "Home buyers who were delaying their purchase because of high home loan interest rates, will now find the reduced interest rate attractive," he says. "However, going by media reports of HDFC's Deepak Parekh having termed it a 'gimmick', I advise buyers to first read the fine print," he smiles.
Developer Vijay Wadhwa, who recently launched his '20-80' scheme for home buyers, terms the SBI’s move of eight per cent interest rate on home loans as 'God-sent'. "The reduced home loan interest rates are classic examples of 'feel good' ideas to drive positive sentiment," he says.
From a real estate consultant's perspective, the fine print is very clear for Vinod Thakkar, CEO of Square Feet. "SBI made it clear that the reduced rate is applicable only for the first year, after which it will revert to the normal floating rates and it has not specified what the revised rate would be," he points out. "People should keep in mind that it is a 'honeymoon' that will last only for a year. On a 20-year home loan, no one knows what the interest rate will be a year down the line, with 19 years still left to go," he warns.
Dinesh Chaddha of realty consultancy, Homes Today, says the eight per cent home loan scheme is perfect for investors who want to grow their money in a market where the sentiment is subdued. "I have advised my customers to go in for projects that should be ready for possession in the next nine to 15
If they sell-off
at that stage, on a home loan at an interest rate of eight per cent for 12 months, they would certainly get excellent returns," he says. On a home loan above Rs 20 lakh, the average rate is around 12 per cent and SBI's offer of eight per cent translates into a saving of around Rs 4,000 per lakh, over a 12-month period.
The only dampener, Chaddha points out, is HDFC's move to increase pre-payment charges. "There is the possibility of existing customers of home finance institutions (HFIs), like HDFC,
and moving to
HFIs who offer a
lower rate of interest," says Girish Gohil of realty consultancy, Dream Homes. "As of now, it seems that the banks which are offering this scheme are trying to get existing home loan customers of HFIs like HDFC to move to them," he adds.
At a recent real estate exhibition, Gohil says he came across a few customers who told him that the banks offering the eight per cent schemes were suggesting that the same rate could be continued, even after a year. "This is nowhere mentioned in any communication by SBI," he cautions. "Such suggestions are definitely a cause for concern," he adds. "Read the fine print," he emphasises. NEWS BYTES
The government has come up with the third fiscal stimulus package and the general reaction seems to be that the reduction of service tax by two per cent will definitely help improve market sentiments, though the monetary benefit to end users will be minimal. Sanjay Dutt, CEO (business), Jones Lang LaSalle Meghraj said the reduction of excise on steel and cement should be positive for developers with projects that have just been launched or are in the earliest stages of construction. However, projects that are already in advanced development stages will not gain much, since raw material inventories for such projects would already have been sourced at earlier prices, he said. "Considering the current market sentiments and the high need for demand-generation, JLLM believes that most developers will follow DLF's cue in passing on the benefits of these new provisions to the end users," he concluded.

Kannan said...

It is Charlie Munger - Buffet's partner in Berkshire.

Anonymous said...

Salaries at IT MNCs melting

Infosys: Minimum pay hikes this year

More layoffs at TCS UK?

Dosen't look like techies in India are going to buy overpriced apts or houses this year. Market will keep falling for a while. I see price slides increasing in 6 months and further beyond that.


dhoom said...

"agar yeh gadha gadhadhari hai to tum bhi dhanushdhari ho"


Jaane bhi do yaaraon

dhoom said...

First Information Report (FIR) from Kochi, Kerala.

The city is just like any other city in India. No public dumpsters around, people use vacant plots as dumpsters. People say IT is coming big time but except for some companies in the CSEZ I did not see any brandname IT companies offices in Cochin city area. I am reporting on a sale in Palarivottom area, the 3 bhk apt. went for 33 lakhs but the rent on the same was 7000 RS. It seems all the hoardings in the city are booked by real estate companies.

I have not got an opportunity to talk to any real estate professional so cannot report on the current ground conditions.

Anonymous said...

Are these the signs of recession in India? Technically no, but practically yes. Govt. & academician have the technical criteria to define the recession. But if you will look around & compare the market with last couple of years, you can very well make a call.

“The income-tax department is expected to fall short of its targeted collections from tax deduction at source (TDS) by 10% in 2008-09. Against a target of Rs 47,000 crore, TDS collections are expected to be around Rs 42,000 crore.”
Considering the tax rate at 25%, there is a drop of 20,000 Cr in income.

Rise in unemployment
“The Labour Ministry has estimated about a half a million jobs were lost in the December quarter in small businesses, which account for more than 60% of economic activity.”
Slash in salaries
“India’s largest software exporter Tata Consultancy Services (TCS) said yesterday that it planned to review the variable component of employees’ salaries every quarter in an attempt to cut costs.
The variable component is as high as 50 per cent of the total pay packet of Infosys’ senior executives. However, in the case of the junior- and middle-level personnel, this component is around 20 per cent of gross salary. The variable pay is linked to revenue growth and operating margin of the company.”

Currency devaluation

“With the third quarter GDP growth estimated at 5.3 per cent, portfolio investors are expected to further liquidate their holdings in Indian equities and this puts pressure on the rupee.”

NOTE: All the above news is based on 2008 data.

What’s ahead?
2009 will be more ugly than 2008, as world is heading towards the peak of recession.
So guys let it fall then only pick up minimum 50% price cut is guarantee.


Anonymous said...

DLF faces buyer activism

Bring down prices or else….’

Anonymous said...

55 Million Indians Pushed below Poverty Line