Eight years ago, I made a mistake.
It was a night like any other in autumnal Nottingham: dark, cold, rainy, and ever so slightly noisy. And where was I, you might ask? Was I somewhere warm, dry and, preferably, indoors?
No, I wasn’t. I was walking around a busy fairground, regretting my choices.
Like any other student at that time of year, I’d taken the entire contents of my bank account (about £4.65, if I recall) and gone with my friends to visit the legendary Goose Fair, famed for its exciting rides and incredibly fair carnival games.
Having watched my friends waste their money throwing balls at various hoops, I decided to invest my hard-earned maintenance loan in something more tangible. Specifically, in something more edible.
Between the stalls of freshly fried doughnuts and candy floss, something strange caught my eye:
“World Famous Hamdogs”
I was intrigued, a hamburger/hotdog hybrid surely seemed too good to be true for a hungry student? So, I approached the stall, handed over my money, and received what I can only describe as disappointment in a polystyrene tray.
A dry, lukewarm burger sat slanted on a soggy bun, cold onions draped across it and a fairly caramelised (burnt) hotdog placed lazily at the side, garnished with a trickle of watery ketchup.
As I stood there, hamdog in hand, drizzle soaking my clothes and my wallet £4.50 lighter, I felt defeated. I’d been sold a lemon, and not of the citrus variety.
Lemons, plums, and automobiles
The actual origin of the term “lemon” to describe a highly flawed product is fairly hazy, but it was famously used by Nobel prize-winning economist George Akerlof in his 1970 article ‘The Market for “Lemons”: Quality Uncertainty and the Market Mechanism’.
In this article, Akerlof focuses on the market for used cars and the problems buyers and sellers face with asymmetric information.
In Akerlof’s example, faulty used cars are coined “lemons”, whereas premium used cars are referred to as “plums”.
The basic problem is that the sellers of used cars have more information than the buyers. Sellers know if a car is faulty, whereas buyers don’t.
As a result, buyers in the market are not willing to pay more than the average price for a used car. This way, they’re not heavily overpaying if the car is a lemon, but they’re getting a great deal if the car is a plum.
From the outside looking in, this is a smart move from the buyer. They get a degree of financial protection from buying a lemon, and they might get a bargain plum if they’re lucky. Clever, right?
Sadly, not exactly.
This situation causes a huge headache for those selling plums. Their products are high-quality, but buyers don’t know that for sure, and they’re not willing to buy them at the seller’s premium asking price if there’s a risk of being left with a lemon.
Slowly but surely, high-quality sellers leave the market, either unwilling or unable to sell their premium products for a lower price than they’re worth. Before you know it, the market is left without a plum in sight. It’s lemons as far as the eye can see.
Sellers lose, buyers lose. It’s a sour note to end on.
When life gives you lemons…
For financial advisers, this problem has some important lessons.
Ordinarily, potential clients searching for your services are doing so because they need your expertise. Their knowledge of the financial sector may be limited, and they need a trustworthy professional to ensure their money is working in the best way towards their goals and aspirations.
But don’t take my word for it! In a recent survey we conducted for a client of The Yardstick Agency, 98 respondents were asked to identify the factors they considered to be most important in their relationship with their adviser.
Here are the top-scoring options:
- Providing a “safe pair of hands”
- Support and assistance in meeting financial/life goals
- Gaining peace of mind/reassurance
- The advisers’ knowledge and experience.
From this, it’s quite clear to see that potential clients aren’t looking for a bargain when searching for a financial adviser – especially since the option stating “Value for money” as an important factor in the survey was the least chosen of all, with a staggering zero selections.
They’re looking for high-quality, dependable experts. No ifs, no buts.
However, like the markets for used cars or fairground burgers, potential clients are firmly in the dark about the best options available to them at a surface level.
They don’t know if you’ll offer a safe pair of hands, or if you have the knowledge and experience to handle their investments in the most suitable way possible. You could tell them you have these attributes, but does that really prove anything?
So, how do they choose? Who do they trust?
How do they ensure they don’t end up with the hamdog equivalent of financial advice?
Thankfully, there’s a light at the end of this lemon-littered tunnel, and its name is social proof.
Social proof is, quite simply, a silver bullet for taking down the asymmetric information werewolf. In essence, it’s evidence that other people have purchased and found value in the services you offer.
To put it another way, it’s showing, not telling.
For a financial adviser, some examples of social proof would be:
- Online reviews
- Client testimonials
- Awards & accreditations
A Chartered firm, for instance, with a healthy number of recent positive reviews and a selection of client testimonial videos on its website, will likely appear more trustworthy to a potential client than one who does not have these crucial pieces of social proof.
But why is this so important?
Potential clients are more vigilant than ever when choosing their products and services. According to BrightLocal, 98% of consumers read online reviews to learn about local businesses, and 76% do this regularly.
Similarly, 81% of consumers say that online reviews are either important or very important when deciding on which company they want to use.
With the right social proof in place, you can make it clear to clients that your services are not a lemon, and that they’re certainly not a hamdog.
So, if there’s a lesson to take from my disappointing burger, it’s this. When life gives you lemons, look for reviews. Your potential clients will certainly be doing this, so remember that high-quality social proof is worth its weight in gold when trying to attract new business and stand out from the crowd.
And don’t spend £4.50 on a hamdog, I promise it’s not worth it.
We’re here to help
If you don’t know where to get started with gathering social proof, we’re here to help. We can:
- Help you choose the right review platforms for your business
- Run a kick-off project to boost the number of reviews you have
- Teach you how to write great replies to the reviews you receive
- Improve your processes, helping you keep reviews topped up
- Help you promote the reviews you’ve gathered.
If you’d like us to help, email email@example.com or call 0115 8965 300 and we’ll set up a meeting.