Flipping_A_CoinThere was an interesting Horizon program on BBC2 a couple of weeks ago with the title “How You Really Make Decisions?” This is a topic that has always fascinated me. I’ve read widely on the subject and sat in on several lectures, seminars and presentations on the topic as well. I have a personal interest in the subject about my own decision making – but also a specific interest in the topic when it comes to decisions about purchases. I mean, if we really can understand what is going on in someone’s head when they make an important business decision, or purchase a large piece of equipment, or decide on which business professional to work with, then that’s an incredible incite, isn’t it?

I think most people will relate to the internal dialogue (or battle) between the rational mind (logic) and the emotional mind (feelings) when making a decision. The weighing up of the pros and cons and then comparing those with our intuition and what ‘feels’ right. The other way of looking at this is covered in Daniel Kahneman’s wonderful book “Thinking fast and slow“. The book looks at the slow way of thinking (logical and deliberate) which is capable of analysing a problem and coming up with a rational answer. This part of our mind requires a great deal of energy, but it’s slow and can be very lazy – but it can solve very complex problems. The other system within your mind is far faster. It’s intuitive and automatic – incredibly powerful – but can be hidden.

The subject of intuition in decision making is covered in Becky Walsh’s book “You Do Know” and this book encourages the reader to use their intuition more in their decision making and to learn to listen to their inner voice.

So here are two extremes of the models that might be at work in decision making. Both interesting reads. The summary of these books and TV program is that we primarily make decisions with our emotions and intuition. We do what feels right to us. But we don’t always feel comfortable explaining how we reached a decision to others in that way.  So we explain the decision in terms of logical and rational reasons. We may even explain it to ourselves internally in the same way as well. We may say to others that our purchase of a specific car, say, was down to safety and fuel consumption (logic) but we preferred a specific model of car because of emotional reasons like image, style or status that may be aligned to a particular model.

Or we may say to an unsuccessful supplier that the reason we went for the competition was price (logic) but the decision really rested on the fact that we got on better with the competitive salesperson (emotions). Oh, and if you are going to be clicking over to Amazon later to order the books above (and why not?) you might as well add this interesting book on the subject as well, the excellent “The Decisive Moment – how the brain makes up its mind” by Jonah Lehrer.

I think my old boss summed this up pretty well. He always told me there were two reasons why someone did something: A good reason (logic) and the real reason (emotions). And that if you don’t understand the emotions and feelings of a potential client and ensure that you build empathy and trust with them (emotions), and relied solely on the benefits (logic) of your product or service, you were likely to lose the business.

An old Harvard Business Review tells us that – even in business – over 85% of the purchase decisions made my Fortune 500 companies were mainly emotional based.

Amazing eh? So next time you have the opportunity of talking / pitching / presenting to a potential customer – think less about the logic and benefits of working with you (although these are important, they may be used to justify the decision to others later) – and more about the emotional connection with the client and their situation.

So what are you going to decide to do now? 

 

 

customer loyaltyMy credit card & wallet have had a busy few week lately. Some of this expenditure was planned, but the majority of it wasn’t. Some of these recent interactions with suppliers have got me thinking about the price / cost of loyalty. Here’s some background context on just a couple of my transactions:

Broadband. I moved from BT Business Broadband to BT Residential Broadband. A few years ago I moved in the other direction as I was having some technical issues that – according to BT – would be easier to resolve as a business customer. They weren’t, and as the contract period has now ended, I decided to move back. Why? The price decreased from £25 / month to £16 / month. BT even have a special department to help you do this (BT Migrations). When I asked what differences there would be if I moved back, I got the answer “Nothing, the only difference will be the department that sends you the bill”.  Oh and as a ‘new’ customer to BT Residential Broadband the first 6 months are free.

It seems that BT are charging their regular customer more than their new customers. The regular, loyal, customers are subsidising their acquisitions of new customers.

Car Insurance. I changed car recently (and that’s another – very – long story) so had to get insurance for my new vehicle. I’ve been insured with one company for over 10 years (and with an equally as long ‘no claims bonus’) and it was always easier to stay with the devil you know, rather than look around. I know the folks in the office that handle my insurance as they are based in my local high street. But, in this instance, I decided to look around and happened to land on one of many price comparison web-sites. I was doing this more to make sure I was paying the market rate and would be happy to stay with my current supplier even if it was a few quid more. But, I was amazed that I could save over £250 / year my by moving supplier. I also moved up from 3rd party cover to fully comprehensive as well to another one.

It seems that my insurance company is offering special deals to new customers as well. Deals that are not available to me. Weird.

There are other examples here and I am sure you will have some of your own as well.

So is loyalty being penalised these days? I can only conclude that: yes it is. This is mainly true in commodity markets (phones, banks, insurance, utilities etc.) where it appears that the main differentiator is price. If price is the main motivator – it comes at a cost. The cost of penalising current customers for their loyalty. Something feels wrong to me about this. Surely, a business model is not sustainable if you penalise the loyal customer?

Businesses that offer a commodity product are teaching the market place to be disloyal, to shop-around and to be motivated by the ‘deals’ on offer to new / switching customers. Even the government is encouraging you to switch your energy supplier and that it should be as easy as switching banks.

Much as I appreciate the open market and competition I am not a fan of what it is teaching us as consumers or the negative effect it has on the value of loyalty. That’s because the price fixation spills over into other – non commodity – markets. Here the value of a unique service or a differentiated product is rarely appreciated and the discussion often seems to focus on ‘how much?” I see this in the sales training workshops that I run, which are attended by business professionals, wanting help in explaining, justifying and defending their price.

So what to do? In a market that encourages disloyalty how do you build a long term relationship with a new client? One answer, from ‘Red’ Adair in the oil industry immediately comes to mind:

“If you think working with a professional is costly, try working with an amateur.”

 

tlc pumpkin

 

Later this evening you may be get some little visitors who knock at your door and ask “Trick or Treat?”

And as you look into the eyes of those little innocent people who are desperately hoping to be given some chocolate or something equally as sugar laden, what will you be thinking?

 

Me, I’m thinking two things:

  1. From an early age we are teaching people about the alternative close. Do you want A or B? With the assumption that you have to go for one of the options.
  2. Likewise we are teaching folks very early on about getting business through fear. What’s the cost of getting it wrong? Of doing nothing? Of not saying yes right now? “Of not doing what I want you to do?”

Sorry if I am spoiling your Halloween by looking at this festival through the salesperson’s eyes. But if you allow me to, there are a couple of lessons for you.

The Alternative Close

Do you want the blue or the red one? Shall I drop by to meet you on Thursday morning or Friday afternoon? Gosh, how many times have we come across this old chestnut? Yet still the training books are full of this type of ‘alternative close’ stuff. Can I let you into a secret? The client has probably read the books as well. It’s old school. Stop it. If by chance someone does try the ‘alternative close’ on you (and they still do) my response is something along the lines or “Are those my only options?” That usually takes the wind out of their sales (get it?)

The Fear Close

Although the idea tonight will be for many to get a little scared and frightened in safety – many are still using fear to motivate a client into saying “yes”. It’s far more beneficial in business to motivate people by the gains in making a decision. Focus on the upside and benefits to the client. You should never resort to fear – even as a ‘last chance’.

So, two thoughts for this special day.

Now what is that noise outside my door…..?