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For Executives, Entrepreneurs, and other Digerati who need to know about SaaS and Web 2.0.

The Psychology of SaaS and Web 2.0 Persuasion (and Selling)

Posted by Bob Warfield on August 24, 2007

I recently came across Hummer Winblad VC Will Price’s excellent summary  of Robert Cialdini’s excellent book, Influence, the Psychology of Persuasion.  The basic thesis is that people rely on a relatively simple framework of cues and heuristics for decision making because we simply don’t have time to completely analyze every decision.  Understanding these decision-making heuristics is a powerful tool towards persuading people.  It’s an excellent foundation for marketers, sales people, and negotiators to have at their fingertips. 

The six guiding principles are:

1. Reciprocation:  If I do something for you, you are in my debt and must do something for me.

2. Commitment and Consistency:  Everyone wants to be perceived as having the integrity to deliver on their commitments, and as being consistent in their views.  We think badly of those who are inconsistent and don’t honor their commitments.

3. Social Proof:  When we don’t have time to reach a conclusion ourselves, we look at the conclusion others have reached, and we prefer looking to people we respect who are close to us in background.

4. Liking:  We are more likely to say yes to people we like.

5. Authority:  We feel compelled to follow the authority figures in our lives.

6. Scarcity:  Scarce items are perceived to be more valuable.  We are more motivated by fear of loss or fear we’ll be left out than by thought of gain.  We fear deadlines budgets and other artificial forms of scarcity.

Most good marketers, sales people, and negotiators will look at the list and consider that it’s a fine list but that they haven’t learned much new from it. 
My reaction on seeing the list was to try to cast it into a theory for how SaaS and Web 2.0 companies succeed.  I could feel a lot of my own thoughts on SaaS and Web 2.0 resonating with Cialdini’s 6 principles.  It shouldn’t be too surprising that they did.  After all, the heart of their challenge is to persuade people to adopt their services. 

Towards that end, here is my list of questions for you, ideas for responses, and examples for each of the 6 principles of persuasion:

Reciprocation

How do you place your customers in the position of needing to reciprocate?  First you have to give them something of value.

What have you given customers without their asking that has value to them?

This area is rich with ideas and examples.  Free trial offers and Web 2.0 services that live off advertising (often users perceive the service as a free gift) are the most common.  Here are some other possibilities:

- Gifts:  Give your best customers a gift of some kind.  One of my old employers had a special customer advocacy group that were like concierges for the customer’s experience with us.  It was brilliant, and the advocates made sure customers that were great references got gifts.

- Proof of Concept:  A willingness to invest your resources in a proof of concept that the customers sees as an expensive project if they had to do it leads to feelings of reciprocation.  In competitive situations, make sure you offer the POC first!

- Give to Get Negotiation:  Give up something right up front and then wait for the right moment to ask for reciprocation.

- Book:  Write a book that educates customers in a useful way about your space.  There is a long history of the success of this: Arbor and Cognos both did it in the BI world, Tom Siebel wrote a book in the early days of CRM, and there were others.  Services like LuLu make this so very easy.  Give the book as a gift and make sure it offers real content and therefore value.

- Palms Up Networking:  This is more for people than organizations.  It’s 5-time CEO Christina Comaford-Lynch’s approach to networking that got her into the White House, and a brilliant example of reciprocation in action.

- Give someone a home or a voice:  Isn’t this what Web 2.0 is all about?  MySpace and Facebook give people an online home.  Blogs give people a voice.  What can you give someone online that they will value more than what it costs you to provide it?

- Win-win:  How does your product or service help your customers to make money?  (???)

In closing on this principle, the ultimate reciprocation comes after you deliver a great product or service.  I used to come out of the Callidus User Group meetings charged for months because customers were so happy with the results they’d gotten with our software that it was infectious.  Those customers were eager to help Callidus succeed further.

Commitment and Consistency

What are the principles you want your business to be absolutely known by?

What are you doing to commit your entire organization to that consistency?

You can’t be surprised that when making fast decisions without full analysis people prefer choices that don’t waffle all over the place and change their minds.  It’s hard enough to make such decisions without trying to hit a moving target at the same time. 

Look at some of the great brands in the world and you’ll see their commitment and consistency:

- Starbucks:  Committed to a great coffee-centered experience.  Absolutely consistent: the Starbucks experience is the same wherever I go, even in Italy, Turkey, and Greece on a recent cruise.

- Apple:  We all know Apple to be uncompromisingly committed to what they call “insanely great products.”

- Ferrari or Porsche:  Each different, each entirely committed to their view of what it takes to sit at the pinnacle of automotive design.

The brands have hugely loyal fans because of their commitment and consistency to ideals their audiences love.  These companies have taken commitment and consistency almost too far in the minds of many business people, but their formula works.  And we all know of cases where companies lost their way relative to their original social contract and commitment to customers.  It didn’t go well for them, did it?

Don’t be afraid to talk passionately and often about your values: it’s part of the act of making the commitment.

Stay pretty high level on what you are committed to.  Customer Satisfaction should be number one, followed by Shareholder Value and Value for the people in your organization who make it all happen.  In my experience, that’s the order needed to build a great business and the rest will follow.

Before I go too far down this road, make sure you don’t allow consistency to be the “hobgoblin of little minds” either.  Screamer policies exist because policies down in the weeds should always be overridden by higher policies that commit organizations to customer satisfaction.  Even if it means a little bit of inconsistency in the minor rules, it means the major message is something people can always rely on.

Lastly, I read a study long ago about 6 sigmas and customer satisfaction at hotels that I’ll always remember.  Six Sigmas is the science of changing the process so mistakes are impossible.  You would think it is ideal for a luxury hotel, right?  One of the more famous ones tried Six Sigmas for a while and had to scrap it.  They found that customers who never encountered a problem were less satisfied than customers who occasionally encountered a small problem and then got to see the hotel go way out of their way to fix the problem.

This is part of demonstrating commitment.  Seth Godin calls it “follow through.”  Time and again I have watched customers decide in favor of a vendor they felt would stand behind them and put their success above all else, even if the customer felt the product in question didn’t have quite all the bells and whistles they wanted.  It was the commitment and consistency that won the customers over.

Social Proof

How will you build social proof for your desired market?

Who are the Key influencers that lead others to your product or service?

Social Proof can be a chicken and egg dilemma until you realize it is classic early adopter marketing.  Crowds move as herds, but there are always individuals that lead the herds.  Have you identified those individuals and given them the right cues so they can lead the herd your way?

In Malcolm Gladwell’s great book The Tipping Point , he identifies three kinds of people that are the key to the herd behavior:  Connectors, Mavens, and Salesmen.  Connectors have big social circles that can reach a large audience.  Mavens are the experts people know to turn to for advice.  Salesmen are the charismatic people who get the message out, often unconsciously.

Interestingly, these three types of people may not necessarily even be people in the Web 2.0 world.  Consider Facebook and their widget API.  If you create a widget for Facebook, you are using Facebook as a Connector (because it has a huge social network), a Maven (because it’s the authority in social networking right now), and a Salesman (because it’s “hip” to be on Facebook).  Don’t miss the opportunity to harness entire herds like this to help create your own herd.

Partners can fit into the same categories if you choose them correctly.  Invariably you will find partners acting as Mavens (who are the thought leaders in your space?), Connectors (which big VARs and SIs have virtually every Global 2000 player in the customer list?), and Salesmen (you did properly incent your partners to act on your behalf, didn’t you?).

Of course PR is the science of how to identify these types out in the press and analyst communities and get them interested in your cause.

This also explains why companies are so eager to turn their customers into “Brand Ambassadors”, but also why it is so hard.  In an ideal world, each and every one of your customers wants to tell everyone they know how great your product is.  It’s a lofty goal that’s very hard to achieve.  It merits it’s very own application of the 6 principles to properly persuade your customers to become your Brand Ambassadors.

Liking

Why will people like your company and the people they deal with?

Are you and your company likable?  Are you working to improve your likability?

Why are salespeople often such likable folks?  We say its because its essential to have social skills to be good at sales, but there’s more to it than that.  It has to do with the propensity to buy from someone you like, or to agree with someone you like, in which case you’ve bought their idea.

As a voice for your company, you should endeavor to be likable by those who would buy your products.  That doesn’t mean you have to be a total suck-up to your customers and influencers.  In fact, we all know suck-ups that aren’t very well liked at all.  Perhaps it’s better to look at it as being someone who is well respected, a more professional definition of likability.  Think of it as being a person or a company that others would want to emulate out of respect for what you’ve accomplished.  Folks like Howard Schultz at Starbucks or Sam Walton always come off as likable.  One of the best examples from the computer industry is probably John Chambers at Cisco.

Companies should cultivate likable images too.  Give back to your community through charity and you harness both the principle of reciprocation and likability.  It’s also good for the soul and genuinely helps others out.  Be humble and self-deprecating.  Be generous in recognizing the contribution of others.

We all know of Tyrant Kings and Captains of Industry who do not project much likability.  Yet they often have charisma of another sort—the charisma of power.  That still counts in a lot of ways, but it isn’t something that can be wielded until much later in a company’s evolution, and there is no substitute for true likability combined with power.  Just ask Bill Clinton!

Think back to my earlier example of the Customer Advocates.  One way of looking at their job was it was all about making sure every customer had a personal friend inside the company.  You could do a lot worse than to make sure that happens for your customers and organization!

The Web has changed some of the aspects of how this works, BTW.  Likability needs to be transmitted via the written word in many cases.  Yes, podcasts and videos are higher bandwidth, but you need to think about how to get your likability out over all the web media.  The individuals charged with getting the word out have to be content creators that are good at being likable.   One of the all-time great bloggers and brand ambassadors (at one time for Microsoft) is Robert Scoble.  Tim Ferris, commenting on the interview he had with Scoble had this to say:

   One thing impresses me about Robert more than all of his credentials: he smiles more than almost anyone I know.

It’s that likability thing again!

Take a look at personal blogs from folks like Facebook’s Mark Zuckerberg.  Heck, just look at his picture.  That fella is trying to be well liked!

Authority

How can you position your company as the authority?

Successfully positioning your company as the authority in your space has got to be one of the key steps to Nirvana.  If your name comes up in every discussion of the topic, congratulations!  You have succeeded.  If it doesn’t, you have a lot of work to do, but fear not, you can apply the 6 principles to this task as well.

How to become the authority using the 6 principles:

Reciprocity:  Give away valuable content in the area you want to be an authority.  Open Source is one of the ultimate examples and it put big names like Linus Torvalds on the map (say, he looks likable in his picture on Wikipedia too!). 

Commitment and Consistency:  Be totally focused on the area you want to be recognized as an authority for. 

Social Proof:  Get others talking about you as an authority.  This is an ideal role for VAR and SI partners as well as industry analysts.  Identify those people whose own special authority is deciding who others should listen to and win their hearts and minds.  Get the word out about these others who believe in you.

Liking:  Be a likable authority, not an insufferable authority!

Authority:  You are likely an authority on something already, right?  Get it out there so people can see you as an authority on something and look for the halo effect.  Also, write.  Nothing like seeing something in print to help establish authority.  Lastly, conduct yourself as an authority.  As Christine Comaford-Lynch’s interview puts it:

    If you try adopting supreme self-confidence, even for a day, you’ll be stunned by how the world responds. It treats you as if you deserve everything you ask for.

Scarcity:  More on this in a moment, but the real authorities are scarce because they are in demand.  I’m not suggesting you adopt the common tactic of being hard to reach, keeping people waiting, and late to every meeting, but get the scarcity message across.

Scarcity

How do you create the impression of scarcity when selling your offering?  Ah, now we understand why Web 2.0 companies have infinitely long beta tests that are by invitation-only.  It isn’t because they’re trying to be secretive, although it could be related to their ability to deliver their product.  More importantly, it builds the cache of scarcity.  Go try to buy a Ferrari (even if you don’t have the cash, it’s an interesting experience).  You will likely be told you have to put down a deposit and get on a waiting list.  Same for Harley Davidson.  Are you sure these guys really can’t build their cars and motorcycles fast enough to suit demand?  Hogwash!  They’re creating scarcity because it persuades.

There are dozens of ways you can create scarcity around your products and personal time.  If you are successful with the other 5 principles, you probably won’t have to make up the scarcity–it’ll be a fact of your day to day existence that you have a tiger by the tail and you dare not let go!

Newsflash:  Seth Godin writes a great post that is relevant to reciprocation:  What’s the most generous thing you could give to your best customer, best friend, or most important prospect.  Thought provoking!

Related Articles:

If you liked this post, also take a gander at my read on Web 2.0 Personality Types!

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6 Responses to “The Psychology of SaaS and Web 2.0 Persuasion (and Selling)”

  1. [...] collaborate, hence Robert Cialdini’s excellent book, Influence, the Psychology of Persuasion also informs us, as do the teachings of modern marketers and business strategists. [...]

  2. [...] believers already on the platform and committed to it that word gets out this is the place to be.  I’ve written about the web and tipping points before, and you can see its a powerful tool to help reduce the friction and ensure a lower critical mass [...]

  3. [...] understanding how different Learning Styles engage with the web and how one uses the Web to create Tipping Points and Close Sales.  It also means you can’t use just one approach to reach all audiences”. [...]

  4. [...] understanding how different Learning Styles engage with the web and how one uses the Web to create Tipping Points and Close Sales.  It also means you can’t use just one approach to reach all audiences”. [...]

  5. [...] make yourself an Influencer.  This is a theme I’ve written about before.  See for example my post, “The Psychology of SaaS and Web 2.0 Persuasion (and Selling).”  In it I argue that [...]

  6. [...] standpoint.  Forget about what you want from them, give them what they want from you.  Establish reciprocity, and the rest will follow as best it can.  Forcing the issue won’t necessarily help and it [...]

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