Even though you delivered a flawless sales pitch, you handled every objection with finesse, you are the most competitively priced option around, and the prospect has a clear need for your product or service, they might still say “no”.
It can be frustrating for entrepreneurs who are trying to make a sale when they encounter this kind of resistance. It’s simply not logical. All the signs point to a sale and yet the prospect doesn’t make that one final leap.
The reason could lie in something called “Prospect Theory”, a concept developed by Kahneman and Tversky in 1979. Prospect Theory describes how people respond to an anticipated outcome.
PROSPECT THEORY IN SALES
According to the Prospect Theory, your prospects may not be buying from you because the fear they have of losing something outweighs the positive feelings they have of gaining something. (Yeah, you might need to read that sentence again).
Let’s consider a theoretical example where a prospect has the opportunity to buy something from you for $100 and you show them how your offering can easily double that amount, earning them $100 quickly.
Conceptually, it sounds risk free. But Prospect Theory shows us that your prospect is thinking differently. The grid below shows the anticipated outcome of loss or gain on the horizontal line, as well as the prospect’s sense of value as a result of the outcome along the vertical line.
Now let’s imagine that you’ve pitched them and told them about your $100 product that will earn $100 for your prospect right away. In your prospect’s mind, there are two possible outcomes: They could gain that $100 (shown in green) or they could lose the $100 (shown in red).
One would expect that the prospect would be just as happy to gain $100 when your product pays for itself as they would be sad to lose the $100 if you turned out to be a scam artist selling them snake oil. But that’s not the case. It’s not an equal amount of joy and pain or good sense of value and bad sense of value.
Rather, Kahneman and Tversky showed that the following is the case: People fear a loss to a greater degree than they look forward to an equivalent gain. In our example: Your customer fears losing $100 far more than they look forward to gaining $100. In other words, your prospect may be fairly happy to gain $100 on the sale but he or she will be extremely upset to lose the $100.
By increasing their sense of positive value and by decreasing their sense of negative value, you are addressing their natural instinct to fear a loss.
And that can help lead to a sale.
WHAT DOES THIS MEAN FOR YOUR SALES EFFORTS?
In short, the gain needs to far outweigh the loss. You can’t just talk about earning money back or doubling. It needs to be greater. Think of the lottery: If people paid $10 for a ticket and had a chance to win $10 back, they probably wouldn’t play. But the “pain” of a $10 loss (or more, in many cases) is far outweighed by the tremendously large payout. So build a giant list of benefits. Sit down with your team and create as many benefits as you can. Make them highly detailed, multisensory, and meaningful to your prospect.
At the same time, look to reduce their fear. Build credibility. Show proof that your product works. Show testimonials and case studies of satisfied customers. Have a serious, attention-getting guarantee. Minimize their sense of loss.
NEXT TIME YOU’RE OUT SELLING
The next time you’re out selling, remember the Prospect Theory and use it to guide your sales pitch: Load your presentation up with as many benefits as you can think of and tip the scales in your favor by increasing your prospect’s positive sense of gain and decreasing their negative sense of loss.
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October 25, 2010
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