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Signalling, or Why Salespeople Always Drive Expensive Cars

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LamborghiniDan Ariely is a behavioral economist, which is to say he mixes human behavior, psychology and economics together to give us a deeper insight into why we do the things we do. Each week, he does a Q&A column in the Wall Street Journal but I usually catch it on his blog. A little while back, Ariely fielded a great question that I think you guys would be interested in.

Dear Dan,

I don’t care about cars, never have. But I’m a sales executive, and people tell me I should own a nice car (BMW, Mercedes, etc.) to enhance my credibility to both my customers and sales team. I can afford either but would rather save the cash and buy a Honda. Does it matter?

—Cody


Dan’s answer discusses a concept known as signalling. Signalling is simple – it’s the idea that you are conveying information, hopefully positive information, to someone else indirectly, in this case using some sort of visual cue. Have you ever noticed at real estate agents drive really nice cars? Brokers typically drive really nice cars? They want to project the image of success, which is supported by the fact that they generate enough income to support the ownership of a nice car.

It’s not always about money though. How many people own a Prius because they think they’re saving the Earth by consuming less gas and how many people own it so everyone else thinks they’re saving the Earth by consuming less gas? Think about blogs – how many put badges and award banners on their sites to convey credibility? How many folks share social media stats like Facebook fans and Twitter followers? We call those signals signs of “social proof” – that is to say because other people find us credibility, Joe Internet Surfer should find us credible too (we are, I promise!).

Signalling is extremely important in business because first impressions are always very important. It’s why we wear suits to interviews, even if it’s not a job where we’d wear a suit every day. In this particular case, the question of signalling collides with everything we know about personal finance. It’s not that buying a nice car is inherently bad, it’s only bad for Cody because he doesn’t care about cars. It’s like me going out and buying a ten thousand dollar watch when I don’t even wear watches! (I do on occasion but not daily)

My advice to Cody would be to buy a nice car but not one that’s overly lavish for his needs. You don’t always have to convey success through your mode of transportation but it might make sense to avoid conveying the wrong message. Cody could instead use those funds on something he cares more about such as buying a nicer suit or watch, that he’d wear every day. Maybe it’s nicer shoes that convey success but are also extremely comfortable and molded to his feet. There are plenty of ways to signal and while the car is certainly a big one, how many times do you meet someone and they never see your car?

(Credit: Tai Gray)

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19 Responses to “Signalling, or Why Salespeople Always Drive Expensive Cars”

  1. It depends on whether customers are likely to see his car, too. If they aren’t, the sales force can deal!

  2. Michael says:

    Our attorney drives a nice, late model pickup truck. To me, that’s a signal of a guy who’s doing just fine but isn’t throwing his money away.

  3. A ‘conspicuous consumption’ purchase signals to me that the buyer doesn’t know how to handle money and is perhaps more focused on appearance than substance. Not to say it doesn’t have an affect–I’d probably think twice about hiring an attorney who drove a rusted out wreck!

  4. I think you gave some great advice for Cody. Often times you see individuals like this drive certain types of cars to give a certain impression. At the end of the day though, I am going to look less at the “success” of the person I am dealing with and more at their character and service.

  5. Donna says:

    Great article. Have to admit I was stung a bit because I am impressed by signals but I do not signal. Funny that I would have thought that I was not one who could be moved that way. Yet I have been, for years. Oh what subliminal message we don’t know we hear and grab a hold of.

    Thanks for the insight.

  6. DMoney says:

    I think there’s plenty of options of cars that convey similar signalling cues yet still fit within a “honda” price range.

    But overall, I’m flabbergasted at how prevalent, and necessary, signalling really is. it really can change peoples’ demeanor drastically.

  7. Eastie Sailor says:

    Nice article. I think it is important to convey a sign of being successfull without going overboard and making it look like you are overreaching. It does depend on what you do for a living. A broker friend of mine says that he usually drives his clients around and has to have at least a certain type of car, or they wont respect him. Not sure if it is true, but he does well for himself and I think he may have a point. If not in sales, having a clean later model car is probably good enough for the rest of us.

  8. N. Bliker says:

    I once had a partner who insisted that he was so important that he had to drive a Mercedes and park it in 2 spaces diagonally in front of our office so that no-one would damage it. Turns out, his perception of success, instead emanated a concept of “insensitive jerk” to observers.
    Drive a nice adequate car, but don’t flaunt it, IMHO. Humility counts for something.

  9. Karl says:

    More over consumption nonsense. How about doing a good job at what you do , act with integrity and dress, drive and live modestly so you have money to invest and to spend on what is really important: education, health (including food), helping others, etc.

  10. Andrew says:

    Signaling doesn’t work if its too obvious. I used a broker to look for an apartment and met him at the building. After meeting him, he asked me to walk with him to his car a block away to get some papers and I see he drives a Porsche Cayenne. Really? Couldn’t he have been prepared and had the papers with him rather blatantly making me come with him to check out his car. And this was for a rental…I wasn’t even buying a house!

  11. freeby50 says:

    It would be nice if people didn’t make conclusions about your success level based on the kind of car you drive, but the fact is that people do. So yes sales people generally should drive nicer cars suitable to their jobs to make the right kind of impression.

  12. huskervball says:

    I think it is important for a real estate person to have a better than average car. It is something potential buyers see and judge.

    A decent businesslike mode of dress is important. A nice watch also sends out a good vibe.

    We really are very simple, aren’t we?

  13. Robert says:

    I am most impressed when I see a professional driving something nice that is obviously paid for… My accountant drives a 2001 BMW 750 that he bought off Ebay for less than $15k..It looks like a million bucks and every time I see it I am glad I have someone so shrewd helping me with my money.

  14. admiral58 says:

    Don’t buy a Honda, go with a Volvo or something

  15. Shafi says:

    All my working life, I worked in developing. On some products we would spend like more than a year. The salesman guy would make 5 times more money on the product we designed and developed and I thought I was making good money.

  16. Anonymous says:

    In California, you are what you drive. In the Northeast, it’s a mixed bag. I drive a Ford.

  17. I think it depends on his values as well. He shouldn’t have to give up something he enjoys to make a few extra dollars but it all comes down to what he is really looking for. Like Robert, I am more impressed with someone who has something nice that is paid for than someone who has something fancy to simply show off a bit.

  18. jimmy says:

    Don’t buy brand new. Off-lease or a low-mileage 5-year old car should do nicely.

  19. Fat Clemenza says:

    Since you mentioned Prius, I thought I’d mention that Prius owners are not “saving the Earth” by consuming less gas since it’s not CO2 that causes climate to change; it’s the relatively irregular heat of the Sun that does.

    Put another way, climate kooks believe that adding one reagent – CO2 – to a chemical system – the atmosphere – both warms AND cools (“climate change”) that system. Idiotic.

    The “signaling” that Prius drivers DO accomplish is that they are gullible liberals who prefer ugly, slow, unsafe cars.


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