August 26, 2009
I recently received an advert for an investment fund in which, as the amateur social psychologist that I am, I noticed illustrated a couple of psychological principles. The are both covered in the email title:
Last chance to invest in a firm favourite
They are covered again in more detail in this paragraph:
The x y z Fund only launched six months ago, but has already attracted considerable interest. To keep it small and flexible the number of units has been capped at 200 million. Last week they had reached two-thirds of that total and interest is intensifying. In the last two days alone they sold over 6 million units, so it is likely to close very soon.
The first principle is Social Proof. This fund is “a firm favorite” and “has already attracted considerable interest” and already “sold over 6 million units”. In other words, other people think it’s a very good idea to invest in this fund, so you should to. Many of the top researchers in the field of influence (social psychology, behavioral economics, etc) worked with the Obama campaign, Their last minute get-out-the-vote message was “A Record Turnout Is Expected”. People are more likely to vote if they think other people will vote. The most beautiful part of social proof is that it is undetected – most people will deny that this is the case.
No-one know which fund to invest in, because most of them under-perform the index, and if the stock market really is a random walk, then there is no sane way to invest. It is in exactly that type of ambiguous situation where people look to other people to decide how to react.
We want what we may not be able to have in the future, that’s the Scarcity Principle. This is the “Last chance” to invest in this fund because it is “likely to close very soon”. Fear of losing out on something can be an extremely powerful motivator, and you see it every day when stores have end-of-line or closing-down sales, or when something is offer in ‘limited quantity’.
Invest with your calculator, not your heart
That email is an emotional appeal, not a rational one. Selling a new fund during a recession must be difficult, and there’s no reason to think this one is selling well. The language doesn’t promise anything concrete, so it doesn’t lie. It just influences. And that is good copy writing.
The seminal book on this topic is Robert Cialdini’s “Influence”, which I highly recommend. It’s a New York Times best seller, and Fortune Magazine lists Influence in their “75 Smartest Business Books.” You see what I did there? :-)