Limited Time Offer

You’re being manipulated.

Believe it or not, you’re being influenced to spend more than you really should.  Ever wonder why at the end of the month you just haven’t saved quite as much as you wanted?

Behavioral psychologists have been researching human behavior for decades now, and they seem to have a good handle on how to get people to spend.  The principles of influence and manipulation are very well understood.  

This same research eventually found its way into the hands of corporate marketing departments, where it’s used in the pursuit of profit (and our detriment).  

Damn those behavioral psychologists!

While it may not be entirely obvious, as a consumer you are constantly being manipulated to spend by some deviously good psychological tricks.  These “tricks” exploited by marketers are a bunch of well-researched quirks in human behavior, centered around influence.

One behavioral psychologist decided to take a different path with his knowledge.  Instead of taking his research and selling it to the highest-paying Fortune 500 company, he wrote a book.

This behavioral psychologist is Robert Cialdini,  and his book is Influence: The Psychology of Persuasion.  Ultimately the book ended up selling a ton of copies (over 3 million!),  so that career move might have turned out okay in the end.  



Influence by Robert Cialdini

I first read Influence: The Psychology of Persuasion nearly a decade ago when I was studying for my master’s degree.  The text was cited as one of the most important books about marketing ever written, and I believe it.

Many books are the “read and forget” type.  You read it once, and then promptly forget it a week later.

 Influence isn’t that kind of book.

Now, a decade later, I still think about the principles set down in this book — Tonight I was watering the lawn and thinking about Cialdini’s Influence.  I thought, “Well, shit!  If I still think about the stuff in that book it’ll probably make for a decent blog post.”  

And so the idea for this post was born.

While I never worked in a marketing department, this book had an enormous impact on my life.  Why?  Knowledge is power.

There is continuous blast of marketing messages coming your way 24/7, and if you’re not careful you’ll easily fall victim to these tricks.


The Principles of Influence

So what’s the big deal?  Why is the book any good?

In his 35 years of behavioral research, Cialdini and his researcher buddies were able to identify 6 principles of influence in human behavior.  Notice I said ‘influence’, not control.  That distinction is important, and we’ll get back to that a little later.

Instead of ‘marketing tricks’, Cialdini calls them “principles”.  Same difference if you ask me!

Ultimately the book’s hypothesis is believable because once identified, we can see these principles used everywhere.

So what exactly are the principles of influence?  Well, it’s best to just find a copy of Cialdini’s book, he does it justice far better than I ever could.  I highly recommend it.

That said, I will try to give you a very basic summary of the 6 principles:


1. Liking

If you’ve ever been invited to a Tupperware, Pampered Chef, Party Lite, or Thirty-One gifts party, you’ve been exposed to the Liking principle.  The Liking principle in essence, “People like those who like them”.  

We tend to purchase more when it’s someone we like.  

In the case of a Tupperware parties, the fact that we like the host (usually a friend), we’ll purchase more because of our relationship with the host.  Hence the overwhelming success of these ‘home party’ multi-level marketing schemes.

Sales people use this principle frequently.  I notice it especially when I go shopping for cars.  Generally the sales person will pepper you with compliments and point out the great things you have in common — the theory being you’re more likely to purchase from them.

It never works on me, but I can see them trying to build that relationship


2. Reciprocity

The principle of reciprocity is the human tendency to “repay in kind”.  Kindness will be repaid in kind, and generous behavior will be repaid with our own generosity.  

Humans don’t like being ‘in debt’ to people, and marketing uses this to great effect.  ‘Free’ gifts are the most common form of this principle in action.  Ever eat the free samples at Costco?  I know I do!  Through the principle of reciprocity, we’re likely to buy far more than we would without free samples.  Typically the goodwill generated from free gifts provides benefits that far outweigh the cost of the gifts.

Costco samples are a perfect example of reciprocity.
Costco samples are a perfect example of reciprocity.
3. Social Proof

Social proof is the human tendency to “follow the herd”.  We often take our cues on how to think, act, and purchase from the behavior of others.  It works best when the “others” are people of similar circumstances – our coworkers, friends, or neighbors.

Think buying that iPhone is completely your own decision based on factual evaluations of the technology and devoid of outside influence?  Highly unlikely!  It’s more likely that you made your purchase because the “social proof” said it was the right purchase.

iDevice chains
Think you did a proper technical evaluation before you purchased and signed that multi-year contract? Probably not. You probably relied on social proof for most of your decision making.

Most of us will never do a detailed study of the technical schematics, individual electrical component reliability, battery chemistry, construction precision, material strength, or overall longevity of a device like a smartphone.  It would be way too hard and take way too long.  Social proof is a shortcut, and one that doesn’t always lead to the best answer.

Marketers, like Apple, that make great use of social proofs are able to charge far more than those without the same social momentum.  Assuming similar technical specifications, you probably wouldn’t pay the same price for a Huawei phone.  That’s social proof.


4. Consistency

Cialdini’s consistency principle is our tendency to remain consistent to our stated goals or beliefs.  

If you’ve ever had to do a performance review at work with “goals”, you’ve probably encountered this principle.  Humans generally don’t respond well to pressure, but if a manager can get us to create our own performance goals we’re far more likely to follow through until review time.  

Marketers frequently make use of this principle by aligning their sales pitch with our internal beliefs.  You name an internal belief, and there’s a product matching it to capture your dollars:  fair trade, Non-GMO, free range, organic, lead free, acid free, low salt, “local”, low carb, high protein, gluten free, wild caught, hormone free, and on and on…

Consistent fish
It doesn’t matter what your internal beliefs are, someone is always trying to market towards them.  Food in particular seems to have a lot of these “belief” messages.
5. Authority

The authority principle refers to the behavior of deferring to experts.  Good or bad, when we lack the required expertise ourselves, we trust the experts to make our decisions.  

From mustached bloggers, to stock-market talking heads, experts are everywhere trying to recommend and sell you products.  Most of them are very well paid for these marketing efforts.

Authority can take other forms too — Ever hear the phrase “9 out of 10 doctors prefer [product name]”.  That’s a marketing team using the authority principle to lend credibility to their product.  There may in fact be 9 doctors that prefer the product, but that same marketing team never said they weren’t hand picked.  Heck, they never even specified what kind of doctors they might be.


6. Scarcity

The scarcity principle takes advantage of our human desire to fight over scarce resources.  As a product becomes “scarce” we want it more.  Marketing departments use the principle of scarcity to create a sense of urgency around buying.  Stop me if you’ve heard any of these phrases before:

“Limited Time Offer”

“Act now while supplies last.”

“I can only guarantee you this price today,”

“Only 2 left at this price.”

“One day sale only!”

You get the idea.  By exploiting human nature’s propensity for loss avoidance, we’re spurred to buy endless mountains of crap we don’t need.


The Power of Influence isn’t Control

Do yourself a favor and read Influence.  Cialdini’s spent more than 30 years researching human behavior, and compiling his book.  For anyone seeking financial independence, I think it’s paramount that we understand how human behavior is manipulated through these psychological principles.  

It’s an incredible tool to have in our financial toolkit, and I’m adding the book to my recommending reading list.  It deserves to be there.

Thanks to books like this, we’re not stuck under the control of corporate marketing-droids hell-bent on our financial manipulation.  Influence doesn’t have to mean control.  We still have the free will to make our own decisions and identify when behavioral psychology tricks are used against us.

The best way to avoid the marketing message of course, is to just turn it off.


[Image Credit: Flickr1, Flickr2, Flickr3]

16 thoughts on “Limited Time Offer

  • August 19, 2016 at 4:44 PM

    Good article! Best things I ever did money wise? I killed my cable. I put AdBlock Plus on my computer. I won’t go to stores just for entertainment. I throw away most mail coupons without so much as a glance. There has to be a reason why credit card companies send out billions of offers every year. Billions… imagine that?

    I think I’m nearly bullet proof, and don’t we all! But when it comes to bloggers I succumb to the “authority of experts” and that would include you. I figure, these guys wouldn’t steer me wrong… right?

    Can you identify a few products that “mustached bloggers” are likely well paid to market to me? When everyone’s favorite blogger(s) were recently reviewing a certain financial book (remember?) I got that queezy feeling that possibly those bloggers were cashing in on me more so than just giving their opinion freely and without compensation.

    • August 19, 2016 at 4:53 PM

      Well, I never claimed to be an expert, but thanks for the compliment. I just try to tell my story in a way that will be useful for my kids.

      Blogging doesn’t “pay” a whole lot, but many bloggers are well compensated. Personal Capital is a favorite recommendation among the personal finance community because of the high payout for signups. Several times I’ve had folks point me toward PC to generate some income from this blog, but I didn’t. My personal integrity is worth more to me than a few dollars.

      Remember: Most personal finance products are just that…products!

      So yeah, I don’t really make much from this blog. I do it for the prestige! 😉 We might get a few pennies from a day’s worth of ads or a few pennies if you buy one of my recommended books off Amazon, but nothing significant. Rest assured, I make less than $1/hour for the time I put into this blog.

  • August 19, 2016 at 5:07 PM

    Great book. Enjoyed the post too.

    If you would allow me to display my annoying English teacher/proofreader side for a moment, you have several typos where you write principal instead of principle 🙂

    • August 19, 2016 at 5:12 PM

      Gah! Fixed, thank you! Clearly I need to fire my proof-reader. That slacker thinks he should be making dinner for his kids right now.

  • August 19, 2016 at 5:29 PM

    This is really interesting stuff. Influence has been on my “To Read” list for a while now and I have yet to get around to it. I’ll have to bump it to the front of the line.


  • August 19, 2016 at 6:00 PM

    Love this! I am all about research-based books and I teach educational psychology so it is really interesting to compare! I think the scarcity examples you used are ones that so many people fall for! I think I definitely fall for the authority examples too… although I hope reading your post will help me see advertising for what it is worth!

  • August 19, 2016 at 10:39 PM

    Great post, as I am actually reading this book now and am about halfway through it. I am currently in a role that covers many disciplines including marketing and you can be sure I am incorporating some of the subtle techniques, applied to our business based on what I read!

    Another good book that deals with human mis-perception is Charlie Munger’s almanac which I highly recommend reading. In fact it was his recommended reading list that pointed me to Influence.

    Great blog post!


  • August 20, 2016 at 3:52 AM

    That sounds like a good read. I definitely fell for the free samples at a roadside stand on our CO trip.
    I do like to support my local community and buy from farmers directly at our farmers’ market. But there also was a great expose written in Florida about restaurants that were lying about fish and produce being local.

  • August 20, 2016 at 8:02 AM

    Great post. Of all these tricks I think scarcity is the one that I see get most people. Fear of loss is a powerful tool. Thanks for writing this post.

    • August 20, 2016 at 12:01 PM

      Yeah, scarcity is powerful. Turn it around to read “We are going to charge you more in the future just to threaten and bully you now.”

  • August 20, 2016 at 2:18 PM

    First of all, I must say that this is a great book review. Too many of these are usually quite boring, you made this one entertaining. Well done. I’ll actually add this book to my reading list.
    Another 2 books that I would recommend on the topic is the super famous “how to make friends and influence people”, it’s been super helpful especially at work, to not only interact with people but also understand when they are using these ‘charming’ techniques.
    The other book would be “Made to stick – why some ideas survive and others die” which is basically how to tell good stories that create emotions and get people engaged. Whether it’s a ‘limited offer’ or ‘the best thing you can do for your kids’, these stories are all told around the same framework.

  • August 22, 2016 at 7:01 AM

    The first step to avoid these pitfalls is to know about them. Very cool and very informative!

    I wonder what marketing traps we face in the FIRE community? I think that the Robo-advisers (Betterment etc.) are playing a pretty good marketing game: endorsements from some well-known bloggers (Liking/affinity, authority, Social Proof), get the first 6 months for free (reciprocity), but you have to sign up today (scarcity). All for a service that one can do for free in very little time.

  • August 22, 2016 at 10:31 AM

    I hate scarcity marketing. They are straight out lying. I was looking at some tickets to go to San Diego recently and the “only 3 tickets” left message really got me going. That kind of message pressure you to buy sooner. There were plenty of seats left on the flights, by the way.

    • August 22, 2016 at 6:39 PM

      I’ll wager there is some super fine print that says “At this price”. But I still totally agree. I hear we’d all be shocked if we knew the huge range of prices people pay on any given flight.

  • August 30, 2016 at 7:59 PM

    The scarcity principle happens all the time with what some PF bloggers are hacking to their email lists. I have 3 countdown emails from one blog in particular for a product I don’t want. I’ll be unsubscribing soon, because I don’t appreciate my inbox filling up with duplicate emails.


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