Influence Triggers

The Lollapalooza effect was coined by investor Charlie Munger - it describes when multiple cognitive biases team up to create a big impact on how you make decisions. 

Example: “The typical web3 token pump”

1. A new RWA project started to gain awareness because BlackRock started investing in the space. (authority bias)
2. This excitement spreads, and people start buying the token, driving its price higher and higher. 
3. Now, some bigger whales might start buying the token simply because everyone else is buying it; not because they've carefully researched the company. (Social proof bias)
4. Some influencers who bought early start shilling their bags (Authority / Social proof bias)
5. As the token keeps going up, retail investors might jump in because they don't want to miss out on the gains. (FOMO bias)
6. Meanwhile, most retail investors ignore warning signs that the token is getting too high relative to the project's actual value. (Commitment, consistency and confirmation bias)
7. Eventually, the bubble bursts and the token price comes crashing down as people realize that the company might not be worth as much as they thought. 

This is an example of the Lollapalooza effect - where all these different psychological cognitive biases combine to create a big impact on a market and token price.

Everyone is motivated to do something if they can gain from it, right. Money, recognition, a good feeling. But everyone is also motivated to do something or avoid doing it if there are punishments. Like cancer, bankruptcy or embarrassment.

BUSINESS USE CASE: Mechanism and tokenomics design, Airdrops and slashing etc

When you give something (an item or a favor), the other person naturally feels indebted to you – especially if the gift is unexpected.

But people don’t like feeling indebted. So we’re hard-wired to balance the scales again as soon as possible. Eager to regain balance, you instinctively give something back. This helps you feel better about yourself and the situation

BUSINESS USE CASE: Free samples, free trials, bonuses etc

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. 

BUSINESS USE CASE EXAMPLE: Limiting supply, “only 100 will be sold”

People will do things that they see other people are doing.

When people are uncertain about a course of action, they tend to look to those around them to guide their decisions and actions. They especially want to know what everyone else is doing – especially their peers.

BUSINESS USE CASE: Testimonials from satisfied customers show your target audience that people who are similar to them have enjoyed your product or service. They’ll be more likely to become customers themselves. 

We are hardwired since birth to listen to authority figures like parents, teachers, police etc..

When people are uncertain, they look outside themselves for information to guide their decisions. 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.

BUSINESS USE CASE EXAMPLE: The team has highly reputable people, Testimonials and endorsements from reputable figures and influencers

We tend to use anchors or reference points to make decisions and evaluations, and sometimes these lead us astray.

BUSINESS USE CASE: When we go into a store and see a product for $100 which has been marked down from $1000 we immediately get excited? Instead of asking ourselves if we value this product at $100 for what we need in our life, we inflate its value simply because it has been anchored at $1000.

Once people reach a conclusion, they aren’t likely to change their minds, even when new information shows their initial belief is likely wrong and clinging to that belief costs real money, new research shows.

BUSINESS USE CASE EXAMPLE: If a target user has shown a “keystone” habit that fits your customer profile you can use it to create affinity - EG. “I see you voted for “X” - well we are the number one growing token gated community for “X” - if you want to get “xyz” benefits you should join us”

We hate uncertainty. If we are unsure about a decision, we quickly remove any doubt by making a hasty decision so that we can be certain again.

BUSINESS USE CASE: Provide clear communication and next steps at each stage of your conversion funnel

Curiosity is one of the most powerful triggers to drive human action. We hate cliffhangers and unfinished threads - we always want to know how the story ends. And that’s why every episode of Game of Thrones ends with you pulling your hair out. You just can’t wait to see what happens next.

BUSINESS USE CASE: After a subscriber signs up to your email list - have a prompt saying they will receive a surprise gift in the next 3 days so they should make sure they regularly check their emails

It’s the Golden Rule — Treat others like you would like to be treated. You accept that life isn’t fair. Yet, you tolerate a little unfairness if it means greater fairness for all. The example Charlie Munger uses is letting in other drivers on the freeway knowing they will reciprocate in the future.

BUSINESS USE CASE: "Here’s all this free value in my YouTube video that would normally cost $1000 - Instead of charging you all I ask is that you share it with 5 other friends."

Envy and jealousy come from the need to get access to scarce resources. This happens when the object of desire is seen in possession of someone else.

“It is not greed that drives the world, but envy”– Warren Buffet

BUSINESS USE CASE: “For too long “xyz” NFT holders have experienced “Y” benefit - why not you? ….”

We all think we’re above average. We’re smarter, more attractive, more persuasive than we really are. This is where overconfidence comes from. Charlie Munger says the greatest type of pride should be taking pride in being trustworthy to avoid developing an ego.

BUSINESS USE CASE: In a sales call where you want to stop the other person from negotiating - “You’re too smart to fall for useless bonuses that add no value - Most people fall for this but not you, I won't insult your intelligence - here is the price…”

This is loss aversion. People are driven to avoid losing something rather than gaining something. It’s like the classic case about the baby and their unused toy - they may have not used the toy for months BUT as soon as you try to take it away they will cause a tantrum BUT whenever you try to get them to play with it as a reward - they will rarely be incentivised by it. 

BUSINESS USE CASE: 

Wealth managers for entrepreneurs who have sold their company - “Protect the net worth and assets you have worked so hard to create” 

Web3 anti-phishing software - “You just made your first 100x - don’t lose it to phishing links - protect yourself now” 

We would rather have new information than old information. The same information with the tagline 2024 has a higher perceived value than the exact same information if it is tagged 2023.

BUSINESS USE CASE: If you are new on the block you have a good chance of beating the legendary players if you take the “what’s working now” angle

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.

BUSINESS USE CASE EXAMPLE: Ensure your marketing is congruent in your messaging. Get your market to make small micro-actions throughout your content marketing - EG. Get them to share a blog, get them to opt in, get them to reply to an email - creating consistent forms of engagement makes them more likely to give you the BIG YES when you eventually ask for the sale.

People are much more likely to be influenced and persuaded by those that they LIKE and can IDENTIFY with.

BUSINESS USE CASE: The most important point is “Identity” - ensure that the influencers and testimonials you use in your marketing represent people that your target market can see themselves in.