Meredith Willson’s The Music Man is perhaps the great American musical. It tells the story of con man and “every time a bullseye salesman” Harold Hill, who poses as a boys’ band organizer and conductor to sell band instruments and uniforms “where people are as green as the money.” Once he has the money, he forgets about organizing the band and teaching music and skips town with the cash. “Professor” Hill, played with such aplomb by Robert Preston in both the Broadway production and in the movie, is so persuasive that it’s downright scary. As the expression goes, he could sell ice cubes to Eskimos.
However, in the investment business, proper disclosure requires that strategies and products be communicated fairly. Since investment management is highly complex and very difficult — there are no “sure things” — nuance and careful analysis is imperative.
But it doesn’t sell.
All of us in the financial services business know people like Harold Hill. They are often very successful financially. They are not so often successful in doing right by their clients. However, good persuasive skills are not antithetical to good money management.
Let’s examine a bit of what makes the persuasive masters so extremely good at what they do. A persuasive master keeps it simple, is strong in his presentation, uses surprise to her advantage, and makes his clients and prospects feel special. Doing each of these things is no guaranty that you won’t lose business to a Harold Hill, but it will surely help.
It’s an old cliché but it’s true: if it’s easy to follow it’s easy to swallow. Simpler is better. Sharper is better. Shorter is better.
Abraham Lincoln’s Gettysburg Address is one of the great examples of oratory in human history. Yet it was Edward Everett who was the featured speaker before the crowd of 15,000 at the dedication of the Soldiers’ National Cemetery in Gettysburg, Pennsylvania, on the afternoon of Thursday, November 19, 1863. He delivered a two-hour oration of 13,607 words before Lincoln’s few moments of dedicatory remarks that consisted of a mere 266 words. Everett was deeply impressed by the concise speech and later wrote to Lincoln, noting that “I should be glad if I could flatter myself that I came as near to the central idea of the occasion, in two hours, as you did in two minutes.” Indeed, Senator Charles Sumner was correct to call Lincoln’s speech a “monumental act.” Lincoln was clearly in error to claim that “the world will little note, nor long remember what we say here.” The master persuaders keep it simple.
Nike has been very successful for a long time with the slogan Just Do It. It’s simple and clear. It’s also strong and confident. Nike doesn’t say, “Think About It.”
Research by Hilke Plassmann, among others, demonstrates that people associate confidence with competence. The research involved wine and the Stanford wine tasting group. Plassmann and her colleagues discovered that the expert wine tasters, when tasting the very same wine, systematically reported superior taste for wine that came out of a $90 bottle as opposed to wine that came from a $10 bottle. The price tag seemed to have a real physiological influence on the taster’s taste experience.
My wife is a teacher and had a related experience tutoring children in the summer. Early on she charged only a nominal sum, because she wanted to be fair to the children’s parents and to encourage them to keep their children engaged in learning over the summer. She was particularly circumspect with respect to parents for whom paying wasn’t always easy. However, she soon realized that her work was being significantly undervalued. The children weren’t well prepared, weren’t getting adequate support from home, and the parents often cancelled. But when she raised her prices significantly, things got much better in all of these areas.
We can conclude that strength — confident, assertive sales skills based upon products and services that are believed in utterly—is crucial to sales success. Thus any attempt to influence without conviction is bound to fail.
Defying expectations is crucial to effective persuasion. It is a fairly common practice among servers in restaurants is to give their customers an unexpected gift in the form of candy when delivering the check. Two experiments were conducted by a group of researchers led by David Strohmitz to evaluate the impact of this gesture on the tip percentages received by servers. The first experiment found that customers who received a small piece of chocolate along with the check tipped 3.3% more than customers who received no candy. Surprise helped. The unexpected gift resulted in the customer acting with reciprocity and increasing the tip amount. The second experiment found that tips varied with the amount of the candy given to the diners. More candy—a bigger surprise—meant bigger tips to the tune of a 14.1% increase. But the manner in which the candy was offered mattered too. When the waiter left a piece of candy with the check, started to walk away, and then turned around and left an additional piece, tips increased 23%. Surprise coupled with making the customer feel “extra special” made a huge difference.
The best persuaders are able to convey to their audience that they care and have their best interests at heart. In Blink: The Power of Thinking Without Thinking, Malcolm Gladwell notes that a doctor’s risk of being sued for malpractice has very little to do with how many mistakes he makes. Interestingly, there are highly skilled doctors who get sued a lot and doctors who make lots of mistakes and never get sued. On the other hand, the overwhelming numbers of people who suffer an injury due to the negligence of a doctor never file a malpractice suit at all. Simply put, patients don’t file lawsuits because they’ve been harmed by shoddy medical care. Patients file lawsuits because of the way they have been treated on a very personal level. When a patient has a major problem, the doctor has to take the time to explain what happened, and to answer the patient’s questions. The doctors who don’t are the ones who get sued.
Gladwell also describes how medical researcher Wendy Levinson recorded hundreds of conversations between a group of physicians and their patients. Roughly half of the doctors had never been sued while the other half had been sued at least twice. Levinson found that just on the basis of those conversations, she could find clear differences between the two groups. Those who had never been sued spent more than three minutes longer with each patient than those who had been sued did (18.3 minutes versus 15 minutes). They were more likely to make “orienting” comments, such as “First I’ll examine you, and then we will talk the problem over” or “I will leave time for your questions.” Doing so helps patients get a sense of what the visit is supposed to accomplish and when they ought to ask questions. They were more likely to engage in active listening, saying such things as “Go on, tell me more about that,” and they were far more likely to laugh and be funny during the visit. Interestingly, there was no difference in the amount or quality of information they gave their patients; they didn’t provide more details about medication or the patient’s condition. The difference was entirely in how they talked to their patients.
In fact, psychologist Nalini Ambady used Levinson’s tapes and had judges rate the doctors’ speech tone for such qualities as warmth, hostility, dominance, and anxiousness. She found that by using only those ratings, she could predict which doctors got sued and which ones didn’t. The judges knew nothing about the skill level of the doctors. They didn’t know how experienced they were, what kind of training they had, or what kind of procedures they intended to do. They didn’t even know what the doctors were saying to their patients. All they were using for their prediction was their analysis of the tone of voice. In fact, it was even more basic than that: if the surgeon’s voice was judged to sound dominant, the surgeon tended to be in the sued group. If the voice sounded less dominant and more concerned, the surgeon tended to be in the not-sued group. That’s partly why, for financial advisors, regular client contact and regular reviews — especially when the news isn’t good — are so important.
The doctors who were successful conveyed their concern to their patients. Their patients weren’t talked down to or dealt with abruptly. They were handled with great care. They were made to feel special.
This final, simple example is an excellent portrait of how powerful the concept of caring and attention can be to customer satisfaction. Wharton marketing professor Xavier Drèze and Joseph C. Nunes, of the University of Southern California’s Marshall School of Business, handed out loyalty cards at a car wash requiring eight visits for a free wash. Some of the cards simply had eight blank circles to be X’ed out, while others had ten circles with the first two circles already filled in – this appeared to be an added bonus, even though both sets of cards required the same eight visits for the free car wash. Drèze and Nunes learned that customers who got the card with the “head start” were much more likely to participate in the program and earned the free car wash sooner. Getting a perceived special benefit led to more sales.
So treating people well helps to protect experts from being sued, but it also means doing more business.
Balancing these objectives with full and fair disclosure isn’t always easy. As I have pointed out before, people crave certainty, even if the investment universe doesn’t offer it. But since some in our business will promise certain (or near-certain) success, those of us who insist upon substantive disclosure and nuanced analysis are at a competitive disadvantage. Even data-driven explanations for why another’s rose-colored promises aren’t likely to hold up seem insufficient, especially in these difficult times. Moreover, once the decision is made — even in favor of one who is clearly and demonstrably wrong — it is really hard to get “another bite of the apple.”
Notwithstanding these difficulties, I encourage you to resist the temptation to make promises you can’t keep. The success you achieve might not be as quick or as monetarily enriching. But it will be more lasting and more fulfilling. As they sing in The Music Man, there’s “no sin in sincere.”