Monday, October 24, 2016

The Devil You Know

Better the devil you know than the devil you don't'.

Irish Proverb

How often are you flummoxed by a prospect who decides to do nothing, or stick with an incumbent supplier it hates?

Princeton psychology professor Daniel Kahneman won a Nobel Prize in Economics for explaining why clients do this.

Kahneman’s research challenged conventional economic theory, proving people make irrational decisions all the time.

A key basis for those decisions is "risk aversion."

People are more motivated to avoid a loss than to acquire a gain. In fact, the perceived loss has twice the influence on the decision the equivalent gain has.

How do you counteract risk aversion?

In the way you explain the potential loss.

You need to do careful research to pinpoint the loss (generic claims never work, and cheesy fear-mongering backfires); and then show the prospect it will avoid that loss by choosing you.

Here are three things you should do:
  • Provide your prospect insight. A financial advisor had trouble selling doctors deferred compensation plans. It used a white paper, Healthcare Post-Obamacare, to get meetings with physician groups. The white paper was chock full of gloomy news and predictions of losses, many of which had little to do with deferred compensation plans; but the data motivated doctors to meet with the advisor and discuss the firm's products.

  • Prove over and over you produce results. The top Realtor in my home town mails homeowners postcards every week. Each one boasts of the rapid speed and ginormous sale price at which she just sold a home. If I fear getting a below-market price for my home, I might remain in it. Or I might just give her a call.

  • Make your case. Case studies that emphasize how you helped clients dodge disasters demonstrate you can do the same for them. Software provider Minitab proved this in a case study about Ford Motor Company's use of its product. Ford's launch of Fiesta was jeopardized when the automaker found ugly brush marks on every vehicle's carpet. Minitab helped Ford avert showroom nightmares by enabling it to evaluate the results of 34 test fixes in 12 days, and choose the right one.
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