Seller beware - smart customers have changed the rules

Better-informed customers have changed the rules of the sales game, argues a new book on the role of persuasion

Picture / Supplied
Picture / Supplied

What do people really think of sales? To find out, I turned to an effective, and often underused, methodology: I asked them. As part of a survey, I posed the following question to respondents: When you think of "sales" or "selling," what's the first word that comes to mind?

The most common answer was money, and the ten most frequent responses included words like "pitch," "marketing," and "persuasion."

But when I combed through the list and removed the nouns, most of which were value-neutral synonyms for "selling," an interesting picture emerged.

What you see on the right is a word cloud. It's a graphic representation of the twenty-five adjectives and interjections people offered most frequently when prompted to think of "sales" or "selling," with the size of each word reflecting how many respondents used it. For instance, "pushy" was the most frequent adjective or interjection (and the fourth-most-mentioned word overall), thus its impressive size.

"Smarmy," "essential," and "important" are tinier because they were mentioned less often.

Adjectives and interjections can reveal people's attitudes, since they often contain an emotional component that nouns lack. And the emotions elicited by "sales" or "selling" carry an unmistakeable flavour. Of the twenty-five most offered words, only five have a positive valence ("necessary," "challenging," "fun," "essential," and "important"). The remainder are all negative. These negative words assemble into two camps. A few reflect people's discomfort with selling ("tough," "difficult," "hard," "painful"), but most reflect their distaste. Words like "pushy" and "aggressive" figure prominently, along with a batch of adjectives that suggest deception: "slimy," "smarmy," "sleazy," "dishonest," "manipulative," and "fake."

This word cloud, a linguistic MRI of our brains contemplating sales, captures a common view. Selling makes many of us uncomfortable and even a bit disgusted ("ick," "yuck," "ugh"), in part because we believe that its practice revolves around duplicity, dissembling, and double-dealing.

To probe people's impressions further, I asked a related question, one better suited to visual thinkers: When you think of "sales" or "selling," what's the first picture that comes to mind? (Respondents had to describe their picture in five or fewer words.) To my surprise, the responses - in overwhelming numbers - took a distinct form. They involved a man in a suit selling a car, generally a used one. Take a look at the resulting word cloud (next page) for the twenty-five most popular answers: The top five responses, by a wide margin, were: "car salesman," "suit," "used-car salesman," "man in a suit," and our old friend, "pushy." (The top ten also included both "car" and "used car" on their own.) The image that formed in respondents' minds was uniformly male. The word "man" even made the top twenty five. Very few people used the gender-neutral term "salesperson" and nobody answered "saleswoman." Many respondents emphasised the sociable aspects of sales - with "outgoing," "extrovert," and "talker" all making the top twenty five. Others settled on more metaphorical or literary images, including "shark" and "Willy Loman." And some people still couldn't resist offering adjectives: "slick," "sleazy," and "annoying."

It turns out that these two word clouds, taken together, can help us puncture one of the most pervasive myths about selling in all its forms. The beliefs embedded in that first image - that sales is distasteful because it's deceitful - aren't so much inherently wrong as they are woefully outdated. And the way to understand that is by pulling back the layers of that second image.

In 1967, George Akerlof, a first-year economics professor at the University of California, Berkeley, wrote a thirteen-page paper that used economic theory and a handful of equations to examine a corner of the commercial world where few economists had dared to tread: the used-car market. The first two academic journals where young Akerlof submitted his paper rejected it because they "did not publish papers on topics of such triviality." The third journal also turned down Akerlof's study, but on different grounds. Its reviewers didn't say his analysis was trivial; they said it was mistaken.

Finally, two years after he'd completed the paper, the Quarterly Journal of Economics accepted it and in 1970 published "The Market for 'Lemons': Quality Uncertainty and the Market Mechanism."

Akerlof's article went on to become one of the most cited economics papers of the last fifty years. In 2001, it earned him a Nobel Prize.

In the paper, Akerlof identified a weakness in traditional economic reasoning. Most analyses in economics began by assuming that the parties to any transaction were fully informed actors making rational decisions in their own self-interest. The burgeoning field of behavioral economics has since called into question the second part of that assumption - that we're all making rational decisions in our own self-interest. Akerlof took aim at the first part - that we're fully informed. And he enlisted the used-car market for what he called "a finger exercise to illustrate and develop" his ideas.

Cars for sale - he said, oversimplifying in the name of clarifying - fall into two categories: good and bad. Bad cars, what Americans call "lemons," are obviously less desirable and therefore ought to be cheaper. Trouble is, with used cars, only the seller knows whether the vehicle is a lemon or a peach. The two parties confront "an asymmetry in available information." One side is fully informed; the other is at least partially in the dark.

Asymmetrical information creates all sorts of headaches. If the seller knows much more about the product than the buyer, the buyer understandably gets suspicious. What's the seller concealing?

Am I being hoodwinked? If the car is so great, why is he getting rid of it? As a result, the buyer might be willing to pay only very little - or perhaps forgo purchasing the car altogether. But Akerlof theorised that the problems could ripple further. Suppose I've got a used car that I know is a peach, and I decide to sell it. Buyers still treat me the same way they treat any seller - as a presumptive lemon peddler. What's this guy Pink keeping secret? Is he bamboozling us? If the car is so peachy, why is he unloading it?

One consequence is that as the seller, I settle for a price lower than the auto is worth. The other is that I give up and don't even bother trying to sell my car. "Dishonest dealings tend to drive honest dealings out of the market," Akerlof wrote. "The presence of people who wish to pawn bad wares as good wares tends to drive out the legitimate business." And it's not just autos, he said. The same reasoning applies to insurance, credit, or one's own labour. When honest sellers opt out, the only ones who remain are the shysters and the charlatans - pushy guys in suits using sleazy tactics to stick you with a heap of junk. Ick.

Of course, individuals and institutions have devised ways to make Akerlof's commercial landscape less forbidding. Sellers offer warranties on their goods. Brand names provide some assurance of quality. Legislatures pass "lemon laws" to protect consumers. But most important, prospective purchasers are on notice. When sellers know more than buyers, buyers must beware. It's no accident that people in the Americas, Europe, and Asia today often know only two words of Latin. In a world of information asymmetry, the guiding principle is caveat emptor - buyer beware.

Akerlof's provocative thought piece recast how economists and others reckoned with individual transactions and entire markets.

So with this example as a model, let's try another intellectual finger exercise. Imagine a world not of information asymmetry, but of something closer to information parity, where buyers and sellers have roughly equal access to relevant information. What would happen then? Actually, stop imagining that world. You're living in it.

Go back to used cars. In the United States today, a prospective purchaser of, say, a used Nissan Maxima can arm herself with all manner of relevant information before even approaching a seller.

She can go online and find most of the places offering that particular car within a certain radius of her home, thereby giving her a wider set of choices. She can tap her social network or visit websites to discover each dealer's reputation and whether previous customers have been satisfied. For individual sellers, she can spend fifteen minutes on a search engine checking the person's bona fides.

She can visit online forums to see what current Maxima owners think of the car. She can check Kelley Blue Book, Edmunds, or to find out the price used Maximas are going for.

And once she sees a car she likes, she can take the auto's Vehicle Identification Number and, with a quick online search, find out whether it's been in accidents or had major repairs. She's not fully protected from unethical sellers, of course. But if she encounters any dirty dealing, or ends up dissatisfied, she can do more than simply gripe to a neighbour. She can tell a few hundred Facebook friends, all her Twitter followers, and the readers of her blog - some of whom may pass her story on to their own networks, undermining the seller's ability to deceive again. Now extend the realities of the market for used cars to the market for just about anything else.

Buyers today aren't "fully informed" in the idealised way that many economic models assume. But neither are they the hapless victims of asymmetrical information they once were. That's why that first word cloud isn't wrong. It's just out of date. The belief that sales is slimy, slick, and sleazy has less to do with the nature of the activity itself than with the long-reigning but fast-fading conditions in which selling has often taken place.

The balance has shifted. If you're a buyer and you've got just as much information as the seller, along with the means to talk back, you're no longer the only one who needs to be on notice. In a world of information parity, the new guiding principle is caveat venditor - seller beware.

The decline of information asymmetry hasn't ended all forms of lying, cheating, and other sleazebaggery. One glimpse of the latest financial shenanigans from Wall Street, the City, or Hong Kong confirms that unhappy fact. When the product is complicated - credit default swaps, anyone? - and the potential for lucre enormous, some people will strive to maintain information imbalances and others will opt for outright deception. That won't change. As long as flawed and fallible human beings walk the planet, caveat emptor remains useful guidance. I heed this principle. So should you. But the fact that some people will take the low road doesn't mean that lots of people will. When the seller no longer holds an information advantage and the buyer has the means and the opportunity to talk back, the low road is a perilous path.

The idea of caveat venditor extends well beyond car sales to refashion most encounters that involve moving others. Take travel. In the old days - that is, fifteen years ago - travel agents maintained an information monopoly that allowed the unscrupulous ones to overcharge and mistreat their customers. Not anymore. Today, a mom with a laptop has about the same access to airfares, hotel rates, and reviews as a professional.

Or consider selling yourself for a job. You can no longer control all the information about yourself, some of which you selectively include in your sales document, the resume. Today, a company might still look at that resume, but, as CNN notes, the company will also "browse your LinkedIn and Facebook profiles, read the gory details in your blog and hit Google to find out more about you - good and bad - in one sitting."

The new rules of caveat venditor also govern the booming educational and medical sector. Today, it's possible for a motivated secondary school student with internet access to know more about the causes of the Pelopponesian War or how to make a digital film than his teacher. Physicians, once viewed as imperial dispensers of specialised knowledge, now might see patients who've researched their ailment and arrive with a clutch of studies and a course of action. Today's educators and health care professionals can no longer depend on the quasi-reverence that information asymmetry often afforded them. When the balance tilts in the opposite direction, what they do and how they do it must change.

*This is an edited extract from To Sell is Human: The Surprising Truth About Persuading, Convincing and Influencing Others by Daniel H. Pink (Text Publishing, $40).

- NZ Herald

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