March 9, 2021
Learn how human motivation impacts sales and how you can leverage it with our guest Darryl Salerno of Second Quadrant Solutions.
Our episode guest is Darryl Salerno, president and CEO of Second Quadrant Solutions. He works with professional service companies to boost their market efficiency, competitiveness, processes, and management training programs.
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Five things you’ll learn from this episode:
How to use human motivation to boost sales, increase margins, and improve employee satisfaction
What a decoy is and how it works
The psychology of pricing and buying
What anchoring is and how it works
The difference between a social norm and a market norm
“Human decision-making is not always rational, but it can be predicted.” — @darrylsalerno
“When you’re talking about pricing, generally, people will not choose the highest priced item. They will also not choose the lowest priced item. They’ll usually pick the middle choice.” — @darrylsalerno
“How a person responds to a difficult situation can diffuse the situation.” — @darrylsalerno
“The ability to give people two choices is very powerful.” — @darrylsalerno
“Nothing has any value except what people are willing to pay for it.” — @darrylsalerno
If you enjoyed this episode, would you please share it with others and leave us a review?
About Darryl Salerno:
Darryl Salerno has held the title of CEO, COO, CFO, and CAO at four top 10 public relations agencies. Currently, he is the president and CEO of Second Quadrant Solutions, an organization that specializes in working with professional service firms to improve their business performance, profitability, and systems. He is also a member of Mensa and a stand-up comedian.
Darryl’s contact info and resources:
Company website: secondquadrant.com
Influence: The Psychology of Persuasion by Robert B. Cialdini
On Top of PR is sponsored by ReviewMaxer, the platform for monitoring, improving, and promoting online customer reviews.
About your host Jason Mudd
On Top of PR host, Jason Mudd, is a trusted adviser and dynamic strategist for some of America’s most admired brands and fastest-growing companies. Since 1994, he’s worked with American Airlines, Budweiser, Dave & Buster’s, H&R Block, Hilton, HP, Miller Lite, New York Life, Pizza Hut, Southern Comfort, and Verizon. He founded Axia Public Relations in July 2002. Forbes named Axia as one of America’s Best PR Agencies for 2021.
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- Welcome to On Top of PR. So thrilled to have you on this episode with us. We are talking to my friend Darryl Salerno about human motivation. We're going to talk about the psychology of pricing and buying and how to use human motivation to improve sales, increase margins, improve employee satisfaction and leadership techniques for using human motivation to your advantage and to the advantage of those you're trying to serve. This is a very fascinating conversation. We're going to go through a lot of studies and insights that will help you better price and better leverage human motivation for your company. I'm really excited about this episode and I'm glad you're here. Here we go.
- [Narrator] Welcome to On Top of PR with Jason Mudd presented by Reviewmaxer.
- Hello and welcome to On Top of PR, I'm your host Jason Mudd. I'm joined by Darryl Salerno. Darryl welcome to the show, we are so glad you're here.
- Thank you so much, Jason. I'm glad to be here. Thanks for inviting me.
- I'm glad to be here too and I'm just gonna throw this over to you to kind of give us a quick introduction of who you are, what you do and then we'll talk about our topic today but first I'm just gonna tee it up to say that I've known Daryl for many years now, time flies quickly and we have had the pleasure of being involved in the public relations society of America together and which Darryl does an annual keynote presentation to one of their conferences. Very smart individual, somebody you'll laugh with, you'll cry with, and you'll learn from which is a great formula, I think, for a friendship and somebody that you really enjoy getting to know. So Darryl help our audience get to know you a little bit better by telling a little bit more about yourself.
- Okay. Yeah, thanks Jason. Listen, I'm a long time public relations agency executive. I've been a chief executive officer, chief operating officer, chief financial officer and chief administrative officer at top 10 and top 20 agencies through my career and have had hundreds of people that I've managed over the years which is what brought me towards what we're going to talk about later today. I also do stand up comedy on the side which is, I miss right now with what's going on in the world but hopefully we can enjoy ourselves as we go through this session.
- Absolutely, yes. So today we're talking about human motivation which certainly plays a critical role in almost anything you're doing, whether it's dating and courting, developing friendships, doing stand-up comedy, participating in the art and science of public relations. But humans always have motivation behind everything they do, even if they're doing nothing. So Darryll, let's talk about human motivation and I'll just preface and warm this up to say that I saw this presentation that you made, and I immediately knew this is something, one, I want to learn more about and two, I want to share it with our audience here on, On Top of PR. So Darryl, tell us more, how did you get started in human motivation?
- Well, as I mentioned earlier, I've always managed a great number of people and I've always been very interested in human behavior and observation of it. And I became fascinated with the subject and I started to pick up some books because I have a science orientation and I started to pick up some books that related to studies that have been done in the area of human motivation, things like Predictably Irrational by Dan Arielli and Persuasion by Robert Cialdini, as well as a number of others. There's a couple of them, actually one that says, Don't believe everything you think which is, I actually have a shirt that says that as well. And a number of other books in that area which we'll share with at the end of this session. But what struck me is that how people make decisions you would think would be based upon logic and based upon rationality and yet many times it's not. So those books cover a lot of different areas as Jason was mentioning before, in terms of all different aspects of life. But I thought in the limited time that we have, we'd focus primarily in marketplace. Talk about things related to sales and talk about things that relate to your employees and things along those lines.
- Perfect, excellent. So Darryl, when it comes to human motivation, first of all we'll definitely put the links to these books you referenced in the episode notes for the convenience of the audience here. Where should someone start thinking or what should be their initial learnings or what were your initial learnings when it comes to human motivation?
- Well, look, I think that what the key learnings I think, you'll get them through reading different studies et cetera, but the key learnings are that human decision-making is not always rational but it can be predicted. And I think that's the most fascinating thing that even though it seems like it's illogical, what, how, how human beings react, you can certainly see how, understand and predict how they'll react and you can understand and study things that subtly influence and affect the way people make decisions about buying and about other things. And obviously, ultimately, what it means from a marketing standpoint is that there are ways that you can influence people's buying behavior by understanding these dynamics better than we might otherwise do it. So I'm going to cover a few different areas. I want to cover when it comes to things that influence buying decisions, I'm going to cover things like how does a decoy work and what do you do when you put comparisons of products next to one another? And how does that influence people? I also want to talk a little bit about the concept of free and how incredibly powerful that concept is. We'll also go into things like anchoring in words as well as a numbers and finally, a little bit on the difference between a social norm and a market norm and how that especially important when it comes to dealing with your employee base.
- Well, it sounds like we've got a lot to cover in a short amount of time and all topics that I think are very valuable to our audience. So let's swing right into it.
- Okay, cool. Well, I want, the first thing I said before is about decoy. So I'm going to tell you about a few studies that were done. They ran a study. This is in one of Ariely's books, Dan Ariely's books. They ran a study asking people, would you buy your favorite magazine.com where you get a one-year subscription to the magazine for $59? Or do you want to spend a hundred and twenty-five dollars and get the print version as well as the viral, the-
- [Jason] Online edition, yeah.
- [Darryl] Online edition, thank you. And that was $125, or just the print magazine for 20, $125. And the interesting thing is when they had that decoy in there, okay? 16% spent less money. They bought the $59 version, 84% bought the online version as well as the print version for $125. And obviously nobody took the print version for only 125 but when they removed the decoy more than two thirds bought the internet only one which instead of the, and 32% took both. So it changed the whole dynamic in terms of buying decision in, because there was no longer something that would influence them, that seemed to be an outlier, if you will. There are, when you're talking about pricing, generally speaking, people will not choose the highest priced item. They will also not choose, generally speaking, choose the lowest priced item. They'll usually pick the middle choice or middle choices. There is a man by the name of Greg Rapp who actually has made a career as a menu engineer and-
- [Jason] What a job.
- [Darryl] Yeah, he created the concept and that's what he does for a living. He actually helps restaurants sell more product and at higher margins. And one of the ways that they do that is by making sure that there are a number of very high priced items on the menu that people won't buy necessarily but they will buy things that are slightly less expensive. If you ever look at a, in a good restaurant at the wine list, they do the same thing where they might have, the, most of the bottles might be 15 or $20, right? And then they'll have a couple of bottles that are 60 or $70. And then they'll have a few that are $130. And what happens is if without the $130 version, people buy the 15 and $20 bottles and with the $130 version, people buy the $60 bottles because they don't want to buy the low end and they don't want, they won't buy the high end.
- That makes sense?
- It does, yeah.
- So those are some of the interesting studies. There's tons of them in these books. And that's why I recommend, if you are interested in it, I strongly recommend taking a look and reading through it. Any thoughts or questions about that, Jason before I move on to the next area?
- No, just overall, my fascination in this area continues to grow and one thing we do is we always recommend three options to our clients. And I know there's a psychology involved in that. And sometimes I lose sight of that. We lose sight of that versus just thinking, let's give the client three different options and I'm sure there's some psychology behind the decisions that they make when purchasing.
- Right. I've done it many times, myself. I've often offered three or four options and I've never had anybody buy the top or bottom end. They buy one of the two middle ones or the center one almost all the time so it's interesting. The idea of zero seems to be worthless. When you think about zero, it really means nothing. But the question is in marketing, what does it mean? So there's a couple of studies that they did that were very interesting. At the counter where people will, buying their product, they had Lindt chocolates selling at 15 cents a piece and Hershey's Kisses selling at a penny a piece, all right? They were, one person was only allowed to buy one of either one them. And when that was the case, 73%, almost three-quarters of it chose the truffle, of 15-cent one. Then they came back and they had the same thing. They lowered the price of both of them by a penny. So the Linn truffle was now 14 cents and the Kiss was free. And in that case, almost 70% chose the Kiss. The dollar amount is exactly the same, but the idea of free versus not free is really, really, really powerful. They did another one also using Hershey's Kisses. They had, they gave a person three Kisses. They said you could trade one for a small Snickers or two for a large Snickers. A hundred percent of the people traded the two for the large Snickers bar. Then they gave another group three Kisses, and they said, you can have a small Snickers free, or you can get a large for one Kiss. 70% took the free small Snickers bar. It's absolutely amazing. Rather... They would give up twice as much, in one case than they would in the other. And it, and the number of people that did it swung amazingly. Amazon did another study which I thought was fascinating. They said, you could spend 20, you could get a $20 gift card for $7 or a $10 gift card for nothing. And the vast majority took the $10 gift card for nothing even though it was worth less that the difference was worth less. He's got an interesting quote. He said, The difference between 2 cents and one cent is small but the difference between 1 cent and zero is huge. So whenever I see someone that says, half off, it's less powerful, I think than saying, if you buy one you get one free. Okay?
- And the concept is exactly the same. As a matter of fact, it's better because if you give half off, if something's a hundred dollars and you give half off, okay, so they spend $50. But if you say buy one, get one free, they're going to spend a hundred dollars to get it and get the second one free and they're more likely to do that regularly.
- Or that I added something to my cart last week because if I spent 17 more dollars, I'd get free shipping. And I ended up putting in a $50 piece of clothing instead of just paying the $17 piece of shipping. Fortunately, I loved the product that came even more than what I originally ordered but I was just trying to save the $17, $15 on shipping because I wanted that free shipping, darn it.
- Yeah, right. Listen, I, it's funny that I can't remember the exact numbers but Amazon did another one where when they started signing up, if you went past a certain number of books, you got free shipping and it dramatically increased their sales, but in one country, I think it was France, they, for the same thing, they gave a very small charge for that, for those, that last book. For the, I'm sorry for the shipping costs, it was less than a dollar I believe and they didn't get any increase in sales. When they took away that charge, sales zoomed. It's absolutely amazing that, how that concept works from the, from that standpoint and how people think about it. It's illogical but that's the way people think about it.
- Right. So what's the insight there? What should our audience do if they're, they have products or services that they're marketing to consumers or to other businesses? What's kind of some of the immediate takeaways.
- Well, I mean, as I said before, I think, you are much better off with giving something free if they buy something else, than you are marking both of them down by any amount of money, et cetera. The idea that you can get something for nothing is rather, rather rather strong, to be honest with you. Even, listen, even the way we do work. If you look at like law firms, many of them will do pro bono work but very few of them will discount their rates. There's a difference in terms of how people interpret that value, et cetera.
- Yeah. Darryl, we're going to take a quick break and then come right back with more. Thank you.
- [Narrator] You're listening to On Top of PR with your host, Jason Mudd. Jason is a trusted advisor to some of America's most admired and fastest growing brands. He is the managing partner at Axia Public Relations, a PR agency that guides news, social and web strategies for national companies. And now back to the show.
- Welcome back to On Top of PR, I'm your host, Jason Mudd. I'm with, we're with Darryl Salerno right now. We're talking about human motivation. This is a great conversation. And we're about to jump right back into it, talking about anchoring. But before we do that, I want to say thank you to Reviewmaxer for their sponsorship of On Top of PR. Without them the show would not be possible. If you are looking to monitor, improve and promote your online reviews that are so critical to human motivation, I hope that you will check them out. It's, reviewmaxer.com is the website. And if you opt to sign up, please make sure you, they know that you heard about them through their sponsorship of On Top of PR. And speaking of let's get back to On Top of PR with Darryl Salerno, talking about human motivation and Darryl, we're ready to talk about anchoring. First of all, what is anchoring and why is it important and how does it work? Well, it's, anchoring is a very interesting concept for those of you who have ever taken a negotiating course, et cetera. You're going to hear a lot about this but these are studies that reinforce that. What anchoring really says is that once a person has a certain concept in their mind, they tend towards that concept, whether it's a number, a word, et cetera. Most of the time we think about it from a number standpoint. So let me give you an example of one of the studies that was done. They had people, the subjects of the study come in and write the last two digits of their social security number at the top of the page, just as an identifier, then they presented five different products to them. And then they said next to each item, write those two numbers, okay? Which is whatever those last two numbers of their social security numbers were. And then they'd ask them would you be willing to pay that amount? They also asked them what's the most you'd be willing to pay? The interesting thing is, now remember, these, are social security numbers, they have nothing to do with the value of the products or anything else. The top 20% of the social security numbers, the numbers that were in the top 20% paid between 200 and 350% more than the bottom 20% numbers. They were anchored literally to their own two digit social security number. Same thing with the last two digits of a telephone number. So the idea that your last two digits, one person's is 87 and another one is 12 would in any way influence how much you'd be willing pay for a product. It, you can tell that even when that is unrelated, it affects people's buying decisions. Imagine when it's related to the actual price of the product, et cetera. The other thing I think is even more fascinating, is anchoring with language. They did some very clever studies with this. They, in the first part of this one study, they had people create sentences and use words like aggressive, rude, annoying, intrude and they had the another group use words like honor, considerate, polite, and sensitive. Then they sent those people into the next room to get instructions. They had a person who is running that room, working with who appeared to be a clueless participant. The first group waited about five and a half minutes before interrupting. The second group waited almost 10 minutes, more than nine minutes with, before they interrupted. In other words, just the fact that they had been writing sentences, using words that were either aggressive or considerate almost doubled the amount of time they were willing to wait before interrupting this person getting their instructions, et cetera.
- So that's kind of an endorsement for meditation and mindfulness and journaling and things like that, right?
- Yeah. It's also, it also works in terms of, and there were many studies about this, I didn't have time to go through all of them with you but they've also done studies where how a person responds to a difficult situation can diffuse the situation. That simple smile or thank you, or I'm sorry, et cetera immediately can diffuse the situation and make it far less volatile. I think the two studies that really were most interesting to me, there was one where they did a sentence scramble and they had people use words like, include words like Florida, bingo, ancient, et cetera. And these were NYU students that took this. They left the room walking at a speed considerably slower than the control group, which did not use those words. Literally these are 17, 18, 19 year old kids who debilitated slightly just by using those kinds of expressions.
- [Jason] Wow, that's powerful.
- Yeah, It was. My most fascinating one to me was the stereotype of Asians is that they are good in math. The stereotype of women is that they are not good at math. So they did a study with several groups of Asian women. In one, they asked them questions before their math test about gender issues. Things related to femininity and things like that. In the second one, they asked questions about race related things in terms of where they came from, their country, et cetera. And as you might expect, the second group that were asked about their cultural aspects performed far better than the group that was directed towards gender issues. These are the same kind of women, and just what was ever in their head would literally influence how well they performed in an area. And it was unrelated to how good they were in other situations.
- Sure thing. That, there are so many ways, so many applications to consider with this information, whether it, in my mind, whether it's parenting, whether it's managing, supervising, leading, marketing, communicating, et cetera. So, yeah. Incredible.
- Oh, well, appreciate that. One of the related to something like this, my mother gave me one of the best pieces of advice I've ever gotten when my first daughter was born and she said, "Yeah always give her two choices." And I said, Well, what do you mean? She said," You say to her, Merrill, do you want to go to bed? Or do you want a cookie and then go to bed?" Because either, either choice is acceptable to you but the ability to give people two choices is very powerful. You do that all the time and you should do that all the time and the, from the business standpoint with employees and things like that which is rather than demand, offer them two options, offer them something this or that, either one of which will accomplish what it is you're trying to get.
- Right, right. Yeah, or like your mom said, maybe it's, do you want to go to bed at 9:00 or 9:10, right?
- Yes. It's absolutely up to you but if you're going to choose 9:10 then I need you to have already brushed your teeth and put yourself in bed, versus at nine, I'll help you brush your teeth, right?
- Exactly right, yeah.
- You're still getting the same result.
- Aha, that's right. Yeah, do you want to go to bed now, or do you want to go to bed in 15 minutes or something?
- Yeah, yeah.
- The last thing I wanted to talk about, this really relates strongly to employee situations because I've been in a situation that they're going to describe a couple of times and it was very disturbing. It has to do with social norms versus market norms. What's the relationship you have with a key stakeholder in your life? And one of the examples that he gives early on he says, "if you went to your in-law's house for Thanksgiving dinner and you came in and you said, Thanks for having me over, here's a hundred dollars, they'd be terribly offended.
- You could of course bring over a hundred-dollar-bottle of wine and give it to them because that's a social norm and the other's a market norm. So the question becomes, how do you study something like that? Well, they had one that actually was not a study. It actually was just doing the research on an example. There was a daycare center and parents were frequently very late picking their kids up and they felt guilty about it. They apologized et cetera but it was still a burden on the staff. So the daycare center decided, you know what? This is unacceptable. So they then instituted a $5 fine. Every time you were late you had to pay $5 because you were late. What that did was it moved the social norm and people with an apology to a market norm. What happened was the problem became much worse because people were like, well for $5, okay, I'll keep doing what I'm doing, and picking up late. Then they removed the fine and the problem got even worse again, because once you move from a social norm to a market norm, you almost never get it back that easily because you've changed the dynamic. So the question I always ask when I'm talking to groups related to their employees is if you can foster the kind of environment where it feels like a social norm, that doesn't mean you're not paying them money, et cetera, but that you are paying more attention to the sense of community and loyalty, et cetera, to the group, you will wind up in situations where they will work much harder, more, much longer, put in hours day and night. They'll do a lot more for you. Once you get to the point where it's only about money, it becomes just about money. So, once you break that social norm, you've broken it and it, and you can't really get it back. And I was at one company for quite a number of years that it did go from one to the other and it was a problem for them.
- Goodness. So this has been great. I love what we've talked about here. And it, it's so powerful and I think that, what I heard you say earlier that was very intriguing to me is if you have, if you think of it like levers, right? If you have these levers between the margins you want to make and the sales you want to make, you really have the opportunity not only in your pricing to, I don't want to say manipulate those, but modify those to a way that reaches what you're trying to accomplish. But at the same time you can really draw attention subconsciously maybe to the products you really want people to think about and consider buying. So, there's so many applications. Our audience is going to be both B to B and B to C minded folks, but whether you're in a retail environment, an online environment, a personal in-person, or somebody buying a service versus a product from you, I just sense there's so many ways that you could actually really think through this for each of your product lines. For where you, if one of your 2021 or 2022 sales objectives is to grow sales in this division or with this product or launch this new product, you look at your portfolio profit, products and how you're presenting them, whether it's through a menu, whether it's through a website, whether it's through in-person presentations or even trade shows I would imagine. It's not only, when you think of product placement, for example, it's just not where and how you place the products physically but it's also where and how you price them to draw more attention in there as well. So it, I think there's a, probably a way somebody could spend a lot of time coming up with these strategies for the company, and then help them with the marketing and communications of that price and that value and that, for that human motivation.
- Alright, listen, I couldn't agree with you more. I think that the, what's very, what you always have to remember is nothing has any value except what people are willing to pay for it. So how you package, what it, whatever it is you're selling will indicate whether or not you're going to generate sales or not. We had an instance that one of my agencies worked on where the artichoke crop was badly damaged and rather than being big and green, they were kind of, they got hit with frost and they became, they were brown and smaller. They thought they were going to lose it all and instead they, we created the concept of winter kissed artichokes, and they sold out like crazy because some people thought they were better and different, et cetera. And there's tons of those kinds of examples. Yeah, where you can literally charge more. There's another story in it. I can't remember what it is in terms of pearls that are a different color and they would not sell. And there are very clever ways that they made people believe that they were much more valuable than the standard pearls that you see on everyday basis. I haven't memorized all the studies that were in these books, but I urge you to read them because for your own businesses, I think you will find definite connections to how this could help you with, in your marketplace or with your employees or any stakeholders that you've got.
- Darryl, this has been fascinating as always. Thank you for sharing and like I mentioned earlier, much of this we'll share also in our episode notes, so that people have links to the books and the resources and the materials that you've talked about. Darryl, if someone, if, how can you be helpful to our audience and how should they think of you?
- Well, listen, I do a lot of different things. I do a great deal of executive coaching with senior and mid-level employees especially as it relates to how they manage their staff and their people, et cetera. I do obviously a lot of things on the financial end as well. And I do an awful lot of training sessions, presentations on things like networking, negotiating skills, supervisory skills and things along those lines. So if you ever had any need in those areas, I am happy to give anybody that wants it a free hour of consultation on any subject that they want to talk about. And I promise you we'll have a few laughs along the way because it's a lot easier to do that one on one. And so that's, that, I'm an open book when it comes to that and I'm happy to help anybody achieve whatever it is they're trying to accomplish. So feel free.
- No doubt. Darryl is definitely a giver and adds value to every conversation that he's part of and I'm grateful for our friendship over the years and grateful that you've spent this time with us today sharing your insights with our audience, Darryl.
- My pleasure, thank you for having me, Jason.
- Thank you for being here and thank you for tuning in to this episode of On Top of PR. We're really glad you're here and I hope you're glad too. If you found this episode meaningful, please take a moment to subscribe to our podcast whether it's on YouTube or Apple podcasts or Google podcast or Spotify. Well however you listen, we would appreciate your support and certainly feel free to share this episode with a trusted colleague who you think would benefit from it. That's all for now. So thank you very much to Darryl Salerno for being on and thank you for your participation in this episode. Be well, everybody.
- [Narrator] This has been On Top of PR with Jason Mudd presented by Reviewmaxer.