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септември 12, 2011

Decision making and MLM

Recently I was about to attend a presentation by Zepter about their Steam vacuum system.

I decided not to attend and instead take the decision in favour or not or the purchase on my own time and by my own means. What I mean by that is the known fact of decision fatigue: this is, when you are tired of comparing options at the end you just give up and you make no rational decision. Which is exactly what the sales representatives want. Of course this post is not to blame them, as anyone has to make their living and does it by its means. However, knowing about the facts on how we make decisions is very important.

I need to clarify that I do use and I do like Zepter products, I have used several and I am very happy with my purchases, I am using the company just as an example here because of their direct marketing strategy which is working partially by pressing the potential buyer into a purchase, part of the methods used derive from decision taking fatigue.

More about the studies can be found here.

How is this performed for Zepter presentations. First of all you are seated for at least one hour, during this time probably someone is cooking something which will be given to taste at the end of the presentation. During this time you are constantly bombarded with "facts" (I put those in commas because the real name of those is "claims", not facts, for example Zepter claim that during cooking all vitamins are preserved in the food which cannot be physically not chemically true, unless during cooking the food is transferred in a parallel universe where the vitamins are not destroyed by the high temperature, for this to be fact there should be some real measurement done by certified laboratory and the data from the tests as well as how the tests were performed should be available to the buyer, this is never the case! Even if it was the case, how many potential buyers would have the possibility to check on th laboratory credentials in this one hour time frame?)

As the products are described one after another and sometimes marvellous qualities and functions are imagined and described with great confidence you start to think that Zepter is selling everything that you need, and mostly what they sell is what you need indeed. As mentioned in the disclaimer above I do use their products, still I am not in agreement with their methods of selling it! At the end you are presented with the astronomically high prices and you have to make the decision. You are now really hungry,  (see reference link) and you have to choose from so many wonderful things! Now is the time when the consultant/manager/whatever uses its powers over you - to push you into a contract. They know what you came for (usually you are invited by a friend or colleague and they know why you are there) and subtly guide you into purchasing it. The beauty of it is that a day later you know you have spent too much money on something you might not really need, buy you are completely sure you have made the right decision. As to quote from the NYT magazine: "By the end, you could have talked me into anything".

Notice that not "decision" fatigue  is the reason you buy, but the slight guidance from the person who sells you the stuff. Also notice that the less money (i.e. less options you have on purchasing everything you liked on a presentation) the easier is to be pushed into making a certain purchase. This is a well known also, rarely people with lots of money attend those parties, unless they are "in the game". If you have the option to purchase anything you could hardly be rushed into purchasing anything. This comes from the fact that we are constantly bombarded with money decisions and we just do not want more of those. Each time you have to think of money it is a decision making. To purchase this or that!? But the money is not the only object, when you do not have enough to make mistakes (i.e. buy the one you randomly choose at the moment, then decide if you like it or not and possibly purchase another one with similar capabilities/qualities).

If you want to go to a presentation on a MLM - go. Here everything you want to hear, take notes and then go home. And forget about it. After a month re-open the notes taken and check all claims (you could start online - it is cheap and easy). Then compare products! Always compare products. Then check your needs. Often you are lead to believe you need all functions/capabilities of a product - usually you do not! Why would you need 2 vacuum cleaners?! Also be aware of the "additional purchase" - if you are offered to buy an item for 1000EU but if you decide to take a second item with face value of 300EU the whole purchase will be 1100EU. This is an easy way to sell things that are actually much cheaper - for the example with the vacuum cleaned you get an ironing board/ladder. Which is priced at 320EURO!! Excuse me! No thanks, I just want the freaking vacuum machine.

Let me tell you a trick in the marketing. Lets say I am seller 1 and I have an item priced at 100$. Exactly the same item is priced at 95$ at seller 2's shop. Now, you can come to me and say: hey, seller 2 sells it for 95$. I will tell - well, okay tell you what, you could pay 100$ here but you get a second item for free, which otherwise would be 15$. So for 100$ you actually get items for 110$!!

And here is the trick. The item actually costs me and seller 2 60$. If you buy it from seller 2 he gets less but I get nothing. So i am offering a second item, which is often with even bigger earning points: lets say 5$ and I put face value of 15$ on it. In the final calculation I have made bigger profit than seller 2 anyway and you get a completely useless second item (a simple example would be a new PC as item 1  and item 2 would be "stereo speakers" - with awful sound quality which is hard to sell anyway).

Lesson number 1: never, ever make the purchase on place. take your notes at home and check out the competitive products. Compare everything you can think of. Then if you doubt about a certain aspect of the product contact the sales person again. And demand for concrete details, not some vague answer like "Ooh, don't worry, it never happens with our products".

Lesson number 2: always refuse the additional products, no matter the "saving" you get. If they are so eager to sell you the expensive item try to negotiate lower price on it instead of taking the "free item".

Lesson number 3: Do not get involved! If you happen to make the purchase anyway and you happen to like the product do not fanatically start to buy anything the company has to offer! And do NOT recommend it blindly. Instead advise the people seeking recommendation to repeat the same process you just read about. For their case this might not be the right purchase.

Lesson number 4: do not over-think it. If you think about a purchase for longer than 3 months you probably can go without it anyway. Also, consider future possibilities. Simple example in those MLMs is introduction of a new product (same example - Zepter vacuum) - price at introduction - 1500Euro. Price after a month 1950Euro. This is a SIGNIFICANT price difference! If you can wait for 3 or more months for a product you can go without it for a while longer and wait for a better deal on it. And no, the new, better model is not from other space. Think how would you have felt if you bought the old model and a month after that there is a new one! Much better. Nah...

So this is it. I hope you think twice next time on those presentation parties. I still do not understand why they call them parties. No one seem to have fun there...

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