Arjan:First of all thanks to Jamie Coleman, the organizer of this great Festival for inviting. We are already looking forward to attending next year.So, this MauritsKaptein, I am Arjan Haring, we are the founders of PersuasionAPI. PersuasionAPI is based on the Persuasion Profiling work done by MauritsKaptein and Dean Eckles at Stanford. Maurits has developed a learning algorithm that optimizes persuasion strategies on an individual level. Maurits and Dean where featured in Wired for their work on persuasion profiling.High tech stuff. State of the art statistics. Stuff that we are not talking about today. This talk will be about the most important ingredient of our API, the science of persuasion.Last thing, is that this is the first time we do an “Evil Edition”. More about that later.
[Arjan]In the science of persuasion, you have to know your so called “persuadees”, or your buyers. Here are some buyers: These are the Johnsons. They are American, they love America. They have little kid. And he also likes America. So, just a normal, or average American family wouldn’t you say.So considering this is the evil edition. What product do we wish to sell? What industry is the root of all evil? Anyone?
[Arjan]The Financial Industry it is!In this case we will try to sell a new mortgage for the Johnsons!New house is way too expensiveBut cost of living is low-The mortgage is financed from the expected profit that they will make. -And oh yeah… it comes with the very very small risk of loosing your house or even worse if the market crashes-But, that almostnever happens! (Twice…)On a side note, we could have used any product. Good, bad or ugly. I assume y’all sell great products. Enriching people lives everyday. Awesome.I am so happy for you. And your customers.
[Arjan]Well, the Johnsons bought the mortgage. And, the house market did crash.. So, the thing that would never happen did happen – the interest rose, there was no deposit anymore and the Johnsons were screwed…
[Arjan]Big time. And I have a confession to make. 10 years ago I also bought a high risk financial product. I thought I would save 10.000 euros in 5 years time that I could use to go on a trip around the world once I finished my studies. And I thought I was investing in a safe product. There was no trip around the world. And in stead of saving 10.000 euros, I ended up paying 10.000 to get rid of it.I am still puzzled, how I could be tricked to buy something like that.
[Arjan]Well, first of all, this banker guy did not just tell them about the mortgage. He wore a fancy suit, drove a big banking car, had company logo’s everywhere, that had a fancy HQ’s. And all this “looking like an authority” has a very large impact on people. So large, that they might even be willing to kill others if an authority tells them to….
[Arjan]In July 1961 (just three months after the start of the trial of GermanNaziwar criminalAdolf Eichmann in Jerusalem, Befehl is Befehl) Stanley Milgram setup an experiment in which a participant (the Teacher) allegedly had to test another participant (the Learner). The learner had had time to memorize a list of words and the teacher had to test the learner. When a faulty answer was given, the teacher could give an electroshock to the learner to “punish” him for not memorizing the list correctly. The teacher could not see the learner – he was in a different room – but could hear the learner vividly. Every time the learner made a mistake the teacher could crank up the power.Now, the Experimenter – mister Milgram himself – wearing a lab coat and looking as scientific as possible was encouraging the teacher to crank up the dials. They started with a 10 volt shock, next a 20 volt, and increasing and increasing…So, how far did people go? 450 volts was the maximum, and could actually kill someone. Do you think anyone went that far? Yes? Show off hands of people that think as much as 10% went up to the maximum, 20%? 30%?Well 65% of people went up to 450 volts (after hearing screaming and pain from the learner). As long as the experimenter looked serious and authoritive he was able to convince a large majority of people from the street to go as far as kill somebody for not memorizing a word.Without a white jacket and the other cues of scientific authority the compliance rate quickly goes down. Its authority cues that make us do pretty weird things.
[Maurits]What?!? It cant be that just authority – the fancy suit – made for that mortgage to sell. The mortgage was too rotten!I figure its something else. A clever trick by our salesman. He just walked in and when he gave the Johnsons the mortgage contract – which at that time they did not want to buy – he told them that the offer was only available that week. They had to decide by Monday!
[Maurits]In 1994 Verhallen andRobben showed us experimentally the power of “scarcity” – special offers, almost out of stock, etc. etc. You have to act now.Verhallen and Robben asked a number of people to evaluate a set of books they had selected for them. Books were randomly assigned to different conditions to control for book preferences, and for a number of books where said to be limited available. The others where described as abundantly available.Now, what do we see: People want the limited available books! If they are asked to choose between the two piles they will always go for books from the limited available pile.They even think the books are more costly if they are limited available – this even though books where just randomly assigned to being limited available.The use of scarcity was selling the mortgage to the Johnsons!
[Arjan]I cant believe that’s all. I mean, how many Marc’s are there? Or, would the sales guy actually lie about his name? Did he also not like baseball? That is weird!Anyway, there was more. You need a lot to sell crap, and the mortgage certainly was crap.So one thing that happened is that Marc got a free magazine by mail. He got a small gift. Actually, when, our salesguy – apparently also Marc – entered his house he got the second copy of the magazine. For free!Getting something for free, upfront, is also a persuasion strategy. Research shows people tend to pay back favors.
[Arjan]In 1990 Jeannine James and Richard Bolstein showed the importance of reciprocity when trying to get people to comply for questionnaires:If you send someone a letter and ask them to participate in a questionnaire and you offer them 1 dollar AFTER they complete the questionnaire response rates are low. However, if you include 1 dollar into the letter up front, response rates are super high. Its reciprocity. You give me something, I will give you something.The coolest example is given by the Hare Krisna in the US. They try to collect money by selling flowers, but no one ever buys their flowers, So, the resorted to GIVING AWAY their flowers – and asking for money afterwards. Now, this is far more successful.And the coolest thing – if you do this on a airport, most people do not take their flowers with them, but just throw them away. So, you can just collect them in the garbage can and give them away again! It’s the power of reciprocity!
[Maurits]I do not think the Johnsons are that stupid!. But what might be playing was something else.The whole street they were in, everyone seemed to be moving. Everyone got a bigger house. During birthday parties everybody talked about how they were getting this new mortgage that was just amazing.
[Maurits]In 1968 John Darley and Bib Latane demonstrated some of the most detrimental effects of us following the herd. Coined the Bystander effect it is used to explain how, when people for example get assaulted on the street, they largely do not get any help from onlookers, or not so innocent bystanders..Darley and Latane put people in a situation in which they were confronted with an emergency situation by someone else. In one of the studies the experimenter, after showing the participants the room in which they were supposed to fill out a questionnaire clearly fell down and screamed she had hurt her ankle. The participant could not see the experimenter but clearly hear this happening.Now, the funny thing: If the participant was alone, about 70% of them got up immediately to help the sorry experimenter (only to find out it was part of the experiment). However, when there where more –fake- participants, that did not help, helping dropped to 10%. We look at others to see what we should do. To see what choices we should make. We can use the bystander effect everywhere.
[Arjan]Yeah, that definitely helps. This “we do as others do” stuff is even more extreme though…Asch already in the 1950’s did this amazingly cool experiment. He showed people the two cards here on the slide and asked, which line is as long as the line on the left: A, B, or C.Well since most people are not morons, almost everyone chooses B (well, in his experiment with 35 people Asch identified one moron, the guy choose A..)However, when we set the experiment up differently so that you can see and hear the answers of nine others before you are asked to give your answer, and if all of the other say, without hesitations, line number A, things change. Suddenly Asch had lots of morons: about 75% of his participants choose A if others had chosen A before them. We just say what other people say. We are
[Maurits]So, the science of persuasion is not about what the goal or end of the request is, but about the means. As long as we know enough ways from social science that can be used to influence people, we can even sell the most crappy mortgage..
[Maurits]But there is more. How about the life insurance everybody bought with their mortgage. In the Netherlands there was a big riot: the life insurances that are coupled to mortgages are way to expensive compared to market price life insurances.
[Maurits]This can be easily explained. The 100$ a month actually is expensive, but does not look expensive compared to the 1700$ people are paying anyway.In 1981 Kahneman and Tversky showed the following. If you offer people a calculator for 125$ and then tell them the calculator is on sale for 120$ in another shop – 20 minutes drive from here. Then, about 29% of the people is willing to drive 20 minutes to gain 5 dollars.However, if the original price is of the calculator is 15$, and its for sale for 10, then suddenly as staggering 68% of people are willing to drive 20 minutes to save $5 dollars.The contrast, 10 to 15 or 120 to 125 makes all the difference.
[Arjan]Yeah, and we do not even have to contrast our numbers, we can just say that things are cheap – that makes people buy them more! If we create a so called frame, and people believe the framing that its cheap, they are more likely to buy it.Our mortgage guy probable said the life insurance was pretty cheap!
[Arjan]There is this super cool study in 1991 by David and Knowles. They were selling postcards and had three versions of their pitch when they went door to door:Would you like to buy a postcard, its 3 dollars. About 40% of people ended up buying the postcard...Would you like to buy a postcard, its 3 dollars, that’s a bargain! Now, about 50% buys the card. A staggering 20% increase!Even cooler however is their 3rd version:3. Would you like to buy a postcard, its 300 dollar cent, that’s 3 dollars, that’s a bargain!. 80% of people ended up buying a postcard!If people are confused – for example by a lot of financial jargon – they are more inclined to believe a frame and act on it!
[Arjan]So there you have it… The Johnsons, not that happy anymore because the got kicked of their house.Their where persuade to buy a crappy product, that ruined their lives.
[Maurits]…The fact that the end goal is important, is only in YOURown head, not in that of the buyer!