- April 12, 2016
- Posted by: adminplanthy
- Category: Pitch Deck
Dr. Robert Cialdini talks about 6 principles of persuasion in his famous book “Influence”. While the persuasion techniques are generic, let us look at how they can be applied in the context of entrepreneurs pitching to investors.
Principle #1: Reciprocation
Reciprocation recognizes that people feel indebted to those who do something for them or give them a gift. Unfortunately this does not apply in the context of start-up pitch.
Principle #2: Social Proof
When people are uncertain about a course of action, they look to those around them to guide their decisions. “Laugh tracks on comedy shows exist for this very reason,” Cialdini says. In the context of start-up pitch, this can be applied by:
- Showing Customer Traction
- Showing Awards and Media Coverage
- Showing Customer Testimonials / Success Stories
Principle #3: Commitment and Consistency
People do not like to back out of deals. We’re more likely to do something after we’ve agreed to it verbally or in writing, Cialdini says. People strive for consistency in their commitments. They also prefer to follow pre-existing attitudes, values and actions. Getting people to answer ‘yes’ makes them more powerfully committed to an action, Cialdini says. For instance, don’t tell people: “Please call if you have to cancel.” Asking “Will you please call if you have to cancel?” gets customers to say yes, and measurably increases their response rates. In the context of start-up pitch,
- Instead of asking for feedback, you may ask them “Do you think this is something that you can potentially fund?”
- Instead of asking for intermediate-feedback, you may ask them “Are you with me as far as the customer need and value proposition is concerned?”
Let them say “Yes”.
Principle #4: Liking
“People prefer to say ‘yes’ to those they know and like,” Cialdini says. People are also more likely to favour those who are physically attractive, similar to themselves, or who give them compliments. Implication for start-ups making a pitch would be to:
- Do a thorough background research on the investor, understand their education background, work experience, kind of companies that they have in their portfolio, their philosophy behind investment and any recent deals they made.
- At appropriate opportunity during the presentation, such points can be disclosed. For example if you share the same college or past employer, it can be pointed.
- You can also drive how this deal will nicely fit into their portfolio while talking about “Why Us”.
Principle #5: Authority
People respect authority. They want to follow the lead of real experts. Business titles, impressive clothing, and even driving an expensive, high-performing automobile are proven factors in lending credibility to any individual. Given the incredible influence of authority figures, it would be wise to incorporate testimonials from legitimate, recognized authorities to help persuade prospects to respond or make purchases. Implication on start-ups:
- Dress up appropriately for the occasion
- If your product or the potential of business opportunity has been validated by a celebrity figure or an expert of high authority, the same can be pointed out. It improves your credibility.
Principle #6: Scarcity
In fundamental economic theory, scarcity relates to supply and demand. Basically, the less there is of something, the more valuable it is. The more rare and uncommon a thing, the more people want it. Familiar examples are frenzies over the latest holiday toy or urban campers waiting overnight to pounce on the latest iPhone.
- As a start-up, it will be a little dangerous tactic to adopt in the initial stages. But at later stages of negotiation, you can talk about other funding options that you have. Remember in TVF pitchers, how the founders were trying to convey that “If we do not get into your portfolio, we will get into your “Anti-Portfolio”.
- As somebody said, you need to go to investors as kings not beggars. You need to show that even without funding you can survive and grow. If funded, the process will get accelerated.