Insight & Outlook Getting To Yes: Small Changes That May Spark Big Results Author Noah J. Goldstein offers insight on five key principles of persuasion Advisors who are looking to convert more prospects and grow their  businesses may want to take a lesson on the power of persuasion from  Noah J. Goldstein, Ph.D.   Goldstein, an Associate Professor of Management and Organization at  UCLA Anderson School of Management, is also the co‐author of Yes! 50  Scientifically Proven Ways to Be Persuasive. At a recent Fidelity Inside  Track presentation in Boston, Goldstein enumerated principles of  persuasion that may sound intuitive but, he noted, are rarely applied in  client or prospect conversations, pitch meetings, or business  negotiations.  “People typically feel guilty about saying no. By going to a smaller request, which is easier to say yes to, you can alleviate this feeling of guilt.” Have You Herd? —Noah J. Goldstein During his presentation, Goldstein discussed the concept of “social  proof” and “the herd mentality.” He explained that when people are in a  state of uncertainty and are not sure what to do, they look to the  behaviors of others—especially “similar others”—for guidance on what  to do.  As an example, Goldstein cited a study he conducted that showed that,  when asked by a hotel to reuse their bath towels at least once during  their stay, 75% of guests did just that. Curious to pinpoint how the hotel  achieved such a high compliance rate, Goldstein collaborated with a  local hotel chain to experiment with different room signs that  encouraged customers to reuse their bath towels.  The first sign, Goldstein explained, bore a “typical environmental  message” that stressed saving water, saving the environment, and  reusing towels. Other signs used variations, but one sign produced a  further 20% increase in towel reuse.   That sign read: “In a study conducted in Fall 2003, 75% of the guests  participated in our new resource savings program by using their towels  more than once. You can join your fellow guests in the program to help  save the environment by reusing your towels during your stay.”  As Goldstein explained, people often tend to follow “the herd,” but  being invited to follow a “similar herd” produced even better results. For  example, when another sign stated, “75% of people who stayed in this  room reused their towels,” the 20% bump in compliance rose to 33%.      .   Goldstein suggested that financial advisors can apply  this principle in their own work. For example, letting  prospects know your firm’s assets under management  may be viewed as a sign that other investors find you  trustworthy.   You might also consider posting a variety of case  studies on your website to show how you help  different types of clients. Goldstein suggested that a  prospect who is under age 40 with no kids would be  looking to see that you serve others in a similar  situation. “By having a diverse assortment of client  information on your firm’s website, that’s going to  indicate, “OK, it’s safe to invest with you,” says  Goldstein.  Reach and Retreat When pursuing appointments with prospects, you  may encounter resistance from busy professionals. By  maintaining a fallback position, however, you may be  able to achieve your goals.  For example, while some prospects may decline a  request for an hour of their time, following up with a  request for 15 minutes is more likely to get someone to  say yes, Goldstein said.   The difference between a big request and a smaller or  “retreat” request, says Goldstein, is that it creates a  perceptual contrast that makes the asker seem  reasonable and accommodating, someone to whom  you’re more likely to say “yes.”   “People typically feel guilty about saying no,”  explained Goldstein. “By going to a smaller request,  which is easier to say yes to, you can alleviate this  feeling of guilt.”  it’s safe to invest with you.”—Noah J. Goldstein.” “Suddenly, with only one or two accounts, moving the  assets to you doesn’t seem nearly as onerous as  compared to moving a greater percentage of their  portfolio,” said Goldstein. “The fact is that it’s very  hard for someone to say “no” to you twice in a row.”  Say Yes to Authority The “authority principle” also comes into play when  people are uncertain about how to behave in certain  situations. This is when they look for honest,  knowledgeable people to help them make a decision,  said Goldstein.   As an example, Goldstein cited physical therapists,  who often have difficulty getting patients to perform  their exercises at home. This is an example of what he  calls “non‐compliance.” Advisors often face the same  challenge: clients who don’t follow their advice.  In his presentation, Goldstein explained how a simple  tweak to one physical therapist’s office environment— posting staff diplomas and awards in the waiting  room—reduced patient non‐compliance by 30%  within six months. The projection of authority and  expertise engendered more trust, said Goldstein,  which in turn induced patients to actually perform  their physical therapy exercises.  Goldstein suggested that advisors can apply the same  strategies by strategically communicating and  reinforcing their expertise and authority. This could  include posting diplomas, certifications, and press  clippings in a meeting room.   Advisors can put this concept into practice when  discussing a request to consolidate assets with a client.  While some clients may resist holding all of their  assets with one firm, Goldstein suggests first asking  the client to move all or a large percentage of their  portfolio to your firm. If they resist, you can follow up  by suggesting they transfer just a portion of their  portfolio.   In addition, the next time you’re meeting with a  prospective new client, Goldstein suggested having  staff members introduce each other, highlighting each  person’s expertise and achievements. This allows team  members to communicate their expertise without  sounding boastful.  “By having a diverse assortment of client information on your firm’s website, that’s going to indicate, “OK, The Trust Factor   Another key component of the authority principle is  trustworthiness, said Goldstein. He suggested that one  2    .   non‐intuitive way to build trust is to admit a  weakness, but then turn that weakness into a strength.  One famous example of this approach occurred when  Ronald Reagan was debating Walter Mondale in 1984.  Some people had questioned whether Reagan was too  old to serve a second presidential term.   Reagan turned a perceived weakness into a strength  when he quipped, “I want you to know I will not  make age an issue of this campaign. I am not going to  exploit for political purposes my opponent’s youth  and inexperience.”  If you work for a small advisory firm that is going up  against larger competitors, Goldstein suggested that  you acknowledge that fact right away. He also  suggested that you could position this as a strength by  stressing your ability to offer service that is more  personalized and more nimble than what a larger  organization can provide.   Another example of this approach may occur when  you’re dealing with a prospect who is contemplating  investing with another firm because he or she prefers a  more conservative investment approach than what  you’re recommending. Goldstein suggested that you  could build trust by offering to recommend other  firms that invest conservatively. But first, you would  explain your rationale and why you believe a  conservative approach is not right for the prospective  client.   Consistency Counts Getting prospects and clients to honor their  commitments is a challenge many advisors face. For  example, a client may offer to make a referral but not  actually follow through.  Goldstein believes that “people are most likely to act  consistent with their commitments when those  commitments are made publicly and actively.” As an  example, he cited a restaurant owner who was trying  to reduce the number of no‐shows—people who made  dinner reservations but failed to cancel them.  To remedy the situation, the person taking phone  reservations tweaked her sign‐off line from “Call us if  your plans change” to “Will you please call us if your  plans change?”       “Gifts and favors are most powerful when they are both personalized and unexpected.”—Noah J. Goldstein Changing from a declarative sentence to a question  reduced the no‐show rate from 30% to 10%, according  to Goldstein. He suggested that compliance improves  dramatically when people are asked to make a specific  public affirmation.  Advisors can put this theory into practice when a  client promises to make a referral. Goldstein suggested  that, instead of just saying “thank you,” you could  add, “great, when do you think you could do that?”  By asking a simple question, you are subtly  compelling your client to make a public commitment  that they are more likely to honor.   Goldstein suggested using this same tactic when  setting deadlines with employees or colleagues. For  example, rather than telling a colleague to get you  something by the end of the week, you could instead  say, “will you get this to me by Friday at 3:30?”  “You’re going to see compliance improve  dramatically,” said Goldstein.  The Principle of Reciprocity When it comes to giving gifts or doing favors for  people, Goldstein believes strongly in what he calls  the “principle of reciprocity.” “If you do favors or you  give gifts to people, they’re going to want to return the  favor,” said Goldstein.   As an example, he cited an experiment that was  conducted at a restaurant in New York State. To see if  they could increase tip amounts, the restaurant’s  owners tinkered with different ways of distributing  after‐dinner mints to customers. Rather than simply  leaving a bowl of mints by the door, servers delivered  mints to customers with their check, one mint per  customer. This change increased tips by 3.3%.  Next, the restaurant experimented by giving two  mints to each customer, and tips increased by 14.1%.  In a final twist, servers changed the way they  delivered the two mints to customers. They would  deliver one mint for each customer at the table, take  two steps away, and then say something to the effect  3  .   of “eh, for you guys, here’s another mint each.” Even  though customers were still receiving only two mints  each, the way in which they were getting those two  mints, caused tips to increase by a whopping 23%.    Advisors can put the principle of reciprocity into  practice when giving gifts to clients, suggested  Goldstein. “Gifts and favors are most powerful when  they are both personalized and unexpected,” he said.  Therefore, instead of giving clients the same old gifts  during the holidays, Goldstein suggested that advisors  might get better results by giving highly personalized  gifts at random times of the year.     “Gifts that are unexpected, those are going to be the  ones they remember, “said Goldstein. “They’re not  going to remember the ones that they’re getting over  Christmas, because you know what, everyone else is  sending them gifts at that time as well.”    By focusing more closely on these tactics of  persuasion, Goldstein believes that advisors can  achieve better results with prospects and clients.  “Small changes to the way people persuade others can  pay big dividends,” he said.      4                              .   200 SEAPORT BOULEVARD Z281 BOSTON, MA 02210 For Investment Professional use only. 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