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ChangingMinds Blog! > Blog Archive > 24-Apr-09

 


Friday 24-April-09

Creating commitment

I came across an example a year or so ago of how a company creates commitment from its clients. This was a property investment company and was described to me by some friends. The company is legitimate and my friends were doing quite well, owning and profiting from a number of properties around the world. In other words this is not about a scam, although scammers could have quite easily used this method.

The bottom line idea was relatively simple. Get an interest-only mortgage for a property with a minimum investment of your own money. Rent it out either for living or holidays. Get a management company to do all the renting, cleaning, maintenance, etc. And ensure your income on the property covers your costs. Then wait for the property value to rise.

The company first sent out leaflets about the benefits of property investment, showing the profits that have been made and in prior years there had been very significant growth. They offered a free two-hour seminar 'in your area', at which they warned of the dangers of going it alone and then blew your socks off with the potential gains and the reduced risk they could create for you, including group purchase discounts and insider knowledge about growth areas.

The next step was a two-day course that gave you the inner secrets and helped in getting you into the property investment game. A very interesting fact about this is that it cost ?2500. For two days of training this is remarkably expensive, yet this was an important part of their success. First of all, it 'sorts the men from the boys', qualifying out those who do not have the money to invest.

Once a person has paid this rather large sum, a sunk-cost effect takes hold and they are more inclined to invest further rather than accept the pain of accepting a perceived loss of ?2500. It also creates a sense of membership, of having joined a club. There is much less likely to be the cynicism of the two-hour seminar at the two-day training -- the mood is now one of excitement and anticipation. In comparison with the profits to be made, attendees now have the expectation that ?2500 is peanuts.

What I also found interesting was that my friends dropped strongly into persuasive language when discussing the subject. They would clearly have loved us to join them in the venture, as much to legitimize their actions as to share their good fortune with us. I was more cautious (and justifiably so, it seems!). Blind enthusiasm and persuasive methods makes me pause rather than leap forward.

The company involved has now shrunk to a fraction of its former size and is mostly involved in property maintenance. My friends have also hunkered down.


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