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Friday, April 03, 2009

Buying is irrational...like investing

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Tip: for marketing inspiration, read up on common traps in investment management psychology and behavioral finance. The same emotional wiring kicks in just about any time people buy stuff.

A quick example from both the Miller Heiman world of sales training and the Warren Buffett world of investment management:

Emotional capital.

Just like monetary capital, emotional capital is a finite resource. The more I expend, the more committed I am to my course of action. This can make an obviously bad deal difficult to unwind. It means that the further two (or more) parties go into a dealmaking process, the more either (or all) will be tempted to act against their own interests in order to reach a given outcome.

This is reportedly why Warren Buffett has played a lot of card games in the course of his career. He saves up emotional (and financial) capital for good deals by ignoring most deals as much as possible.

Savvy buyers and savvy sellers walk away as quickly as possible from deals, because they know that this conserves emotional capital. It helps hold down the error rate. We're only human, after all.


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Posted by InvisibleMarketing at 7:45 AM
Labels: behavioral finance, brand marketing, direct marketing

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