Behaviour Change

PROPAGANDA FOR CHANGE is a project created by the students of Behaviour Change (ps359) and Professor Thomas Hills @thomhills at the Psychology Department of the University of Warwick. This work was supported by funding from Warwick's Institute for Advanced Teaching and Learning.

Monday, February 17, 2014

Portfolio Management: a local market on a global scale

Let me paint you a picture:

You're in a fancy glass office. A high-flying portfolio manager comes to you (a salesman), asking you to get clients to invest in a new fund. You take this portfolio and you meet with your biggest (richest) clients, who come from all over the world. How can you make these clients invest? You can try reciprocity, or you could even try commitment. But then you realise the fund is closed ended; you can then employ the tactic of scarcity as you’ve restricted the number of shares that can be sold.  The shares in the funds become rare; thus, creating the idea that they are of good quality. Simple. Your clients' investments will come flooding in.

Or not.

You see, the extent to which scarcity will be effective in getting the clients’ money may differ depending on where they are from. Lower context cultures such as our own, the USA and Germany are all influenced by advertisements using explicit messages to change people’s attitudes (for example, using presentations and demonstrations). This is in sharp contrast to higher context cultures (i.e. France), where advertising works through indirect messages based on context, aka getting emotional responses from consumers (which can be done by attributing human characters to products). Scarcity aligns itself more with a factual and data driven process of influence; therefore it could be expected that this closed ended technique will lead to you obtaining more American, British and German investors than French.  

Jung and Cincinnati (2004) studied this hypothesis by getting French (N=145) and American (N=189) participants to take part in a study whereby their purchase intent would be measured. After some participants were told that they were buying a bottle of wine that was “nearly out of stock”, and others were told that “there were plenty left downstairs”, they were asked to rate their intent to buy this bottle of wine. The overall results showed that firstly, scarcity does work: more people would buy the wine if it were to appear less available.

But when broken into cultures, the results show that the American people (lower context culture) were more affected by scarcity than the French; they really wanted to get their hands on some rare wine.

So, you may need to stop doing what you’re doing and try something else; you don’t want to limit yourself to half a market! The French people just aren’t convinced - so maybe go back to reciprocity. The Brits and the American’s on the other hand, well they’re a sucker for anything rare apparently.

This finding could potentially be worth bearing in mind when it comes to playing ‘hard-to-get” with that French girl you like… 

  • Jung, M. J., & Kellaris, J. J. (2004). Cross-national Differences in Proneness to Scarcity Effects: The Moderating Roles of Familiarity, Uncertainty Avoidance, and Need for Cognitive Closure, Psychology and Marketing, 21, 739-753.

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