So I spent the last week in Turkey on holiday. I was travelling with family, so we went on a guided tour. It was fun – I could switch off my brain, enjoy the sights and the meals, and leave the logistics to the tour guide.
However, one downside of being on a guided tour: They usually bring you to 1-2 shops where they
pressure encourage you to make a purchase: A factory outlet, an olive oil wholesaler, or in our case, a leather jacket shop.
Personally, I didn’t find it a waste of time at all. In fact, the sales tactics they used to try to sell us stuff fascinated the heck outta me.
It struck me how similar they were to Scammy Financial Gurus (SFGs) –sleazy salesmen in suits who pressure you into buying a risky investment course.
Having been duped by these guys before, it’s my civic duty to inform you about the tactics they use – so that you can avoid the same mistakes I made.
So allow me to walk you my Turkish leather store experience and talk about these devious (but brilliant) sales strategies:
Step 1: Offer something for free
The moment we stepped into the store, we were offered a refreshing glass of Turkish tea. This isn’t a demonstration of generous hospitality – it’s a tactic meant to target our psychological tendencies of reciprocity.
In accepting that tea, we subconsciously felt like we owed them a favor, increasing the odds that we’ll repay it with a purchase.
The gift itself doesn’t have to be expensive – a small gift is enough to trigger that feeling of reciprocity. Dennis Regan’s famous 1971 study showed how people were likely to spend more money purchasing raffle tickets when offered a soft drink.
This is why SFGs usually supply their courses with free food, free coffee, and free goodie bags. This is why your financial planner buys you a drink when she meets you. It’s not generosity – it’s psychology.
Step 2: Show the benefits
Next, we were ushered into a room with (I kid you not) a RUNWAY, where they commenced a full-blown fashion show with three good-looking models. One model took off his jacket, reversed it, and wore it again – demonstrating their latest collection of reversible jackets.
The host (note, not “emcee”, but “host”) proudly proclaimed that they were the suppliers to big brands such as Gucci, Burberry, etc.
The host could have simply explained the jackets’ features: Reversible, good-quality lambskin, etc. But it was far more effective to SHOW us the benefits: How it looked, how quickly you can reverse it, etc.
Similarly, an SFG won’t bother spending much time describing his investing strategy. I’ve attended investment “talks” where instead of learning about strategies, the entire hour was filled with pictures of condos, Ferraris, and testimonials of people going “Wow! I made USD 2,000 in just one day!!”
Step 3: Give a free trial
In the middle of the fashion show, the models did something pretty genius – they grabbed 2 volunteers from the audience and put a jacket on each of them.
The act of putting a jacket on a person makes it “theirs”, and makes it a lot harder to let the jacket go. Why? Because that would mean “losing” the jacket, and people hate to lose stuff. This is a psychological trait known as loss aversion.
This is why SFGs give “free” talks on investing strategy. It’s a way to create an artificial sense of “loss” when you’re contemplating walking away from the sale.
Step 4: Address the objections head-on
After the fashion show, the host took the mic and said, “Now, I know a lot of you are thinking that the jackets will be hard to maintain in Singapore. Actually, your jackets can last for 20 years if you maintain it. It’s really simple. Here’s what you have to do….”
It was a smart move. She knew that the #1 objection of people owning a leather jacket in Singapore is the maintainability (because of our weather), and she addressed that objection head-on.
In fact, research from psychologist Fiona Lee indicates that consumers were more likely to trust businesses that admit their flaws.
So SFGs will try to gain your trust by saying stuff like, “Will you lose money? Yes – There will be some trades where you will lose money. Remember: There is no sure-win in trading!” (But they also fail to point out that the probability of success is like 0.1%)
Step 5: Demonstrate social proof
Social proof works. We are more likely to buy when other people are buying, because it validates our assumptions.
When I attended talks by SFGs in the past, I was often perplexed by the number of people who rushed to buy their products after the talk ended. That is, until I realized that many of these “customers” were actors hired by the SFG to demonstrate social proof.
Step 6: Anchor to a high price
“This would normally cost you 5,000 EURs, but when you buy it from us, we’ll give it to you at the wholesale price – 50% off. And what’s more, since you’re buying at our outlet, we’ll throw in another 10% off.”
There are 2 psychological tactics at work here: anchoring and contrast.
First, the salesperson anchors our perception of value to the high price. Then, by “discounting” it heavily off that initial price, she makes the discounted price look cheap in comparison.
Similarly, SFGs will say things like, “Look at all these features and products – adding them all up, they’re worth $9,827!! (exact figures make claims more believable). But you can get it today for the unbelievable price of only $3,888!”
Step 7: Make it urgent
This creates an artificial scarcity for their jackets – a time-bound offer that will expire if we don’t take action right here, right now.
Remember what you learnt back in Economics 101: Decrease the supply, raise the price. Scarcity makes the product less available, and thus more valuable.
SFGs do the same thing. They make their offers time-bound, and then throw in kickers like “the first 100 people to buy will get my Ultimate Cheat Sheet On Secret FX Strategies!”
Why do they do this? Because they know that once you step out of that door, the odds of you buying drop dramatically. So they employ these tactics to get you to take action today, to appeal to the little kid inside us that goes, “I WANT IT NAOOOO!!”.
Is This Ethical?
I talked about SFGs and Turkish leather shop as examples, but the truth is, everyone – from corporates to professionals to Internet startups – uses them. Heck, I’ve used them myself.
But wait, shouldn’t it be unethical to influence people to make purchase decisions?
Well, it depends.
- Is advertising unethical?
- Are free samples at the supermarket unethical?
- Was the morning party rave sponsored by Zespri unethical?
The truth is, sales tactics are only unethical when they influence you to buy something that you shouldn’t buy.
I didn’t buy anything from the leather shop because I didn’t need a leather jacket. But to someone else who needed/wanted a jacket, those sales tactics worked for the greater good.
And therein lies the difference between our leather shop and the SFG: The leather retailer is selling something useful. The SFG is trying to screw you over.
So let’s not get caught up in the ethics of these sales tactics. Instead, just be aware that they exist. Who knows, they may come in useful in your career, when you encounter an SFG, or when you next walk into a Turkish leather shop.