Saturday, January 23, 2010

If You Can't Convince Them, Confuse Them . . .

The following is a common sales tactic that I've heard described many, many times:

Your target customer hasn't bought your rational or your emotional arguments. What's the next step? Tie together information that looks like it benefits your customer. The information seems to make sense, but actually doesn't add up. Hope that the target doesn't catch the flaws in logic. Confuse them into buying.

In the world of detestable sales tricks, this is the one that I hate most. I hate it because it is so easy to prevent in theory. All the target has to say is: "I don't understand, and I won't buy until I do understand."

In reality, the tactic is difficult to counter. We hate to admit that we don't understand. And since people usually are not intentionally trying to deceive us, we take their word when we don't quite get it. Usually, misunderstandings are small, and the issues that arise are not substantial.

The problem is when entire industries are built based on the premise that people can be confused into buying.

The mutual fund industry is an example. Classes of seventh graders choosing stocks will perform as well as 99.9% of experienced active money managers.* If you ever meet somebody with a PhD in Finance or Economics, they will confirm that fact. These managers should go out of business, but they don't because not enough people will refuse to buy what they don't understand.

It takes real guts to admit ignorance when the whole world seems to understand ("seems" is the key word in that sentence). When the stakes are small, feigning knowledge is not a problem. When the stakes are high, it's a dangerous path to travel.

*The research states that you are almost always better off with a low-fee index fund.