Hey, Scott from The Sales Mastermind here.
Today’s edition can be read in 4 minutes.
People hate to lose anything. It’s called “Loss Aversion”.
By reframing your pitch you will increase your close rate, speed up your sales cycle, and have a happier buyer.
(Or using loss aversion framing: without using the below you might close less, slower, and have fewer happy buyers)
Framing
A stock broker calls a millionaire client at 5 a.m.
Broker: “If you say yes, we can do a trade that will make you 20 thousand dollars by the end of the day”
Client: “You manage 20 million dollars for me, don’t call me at 5am talking about 20 thousand”
The same broker calls the same client at 5 a.m.:
Broker: “We just saw something. If you do nothing you’ll lose 20 thousand by the end of the day. Say yes and I can save that for you”
Client: “Of course, don’t lose my money”
It’s the same people, the same amount of money, the same 5 a.m. call. The framing means one is chastised, and the other is welcomed.
What is Loss Aversion
Loss Aversion was first coined by famed author, Daniel Kahneman, and his psychologist colleague, Amos Tversky, in 1979. When comparing losses to gains they declared:
Losses loom larger than gains.
And in 1992 they updated this with:
Psychologically, losses are up to TWICE as painful as gains are pleasurable.
In essence, Loss Aversion means all things being equal people would rather not lose.
Examples include the above stock broker.
Status Quo bias
Apathy, inertial, the status quo. Call it what you like; this is your biggest competitor in sales.
People would rather not risk “good enough” outcomes for potentially “great” ones.
It sounds something like this:
- If it ain’t broke, don’t fix it
- Better to have one in hand than two in the bush
- Leave well enough alone
- Don’t change a winning formula
Good vs Great
Jim Collins’ touched on Status Quo bias in his incredible book “Good to Great”.
Over 5 years, with the help of 21 research assistants, “Good to Great” outlines why companies significantly outperformed. While their peers significantly underperformed.
When talking about “Great” vs “Good” Collins says:
Good is the mortal enemy of great. If you think about it, it’s one of the main reasons why we have so few things that become truly great. We by and large do not have great schools. Why? Because we have good schools. We by and large do not have great government because we have good government, and it works pretty well. Most companies will never become great because most are really quite good.
Fix Your Framing
Almost every seller gets both of the above ideas wrong.
They lead with reasons why the buyer probably should change, and the potentially great future. Examples:
- 100% ROI
- Add 100,000 in revenue
- Generate 10 new leads next month
Whereas the best sellers lead with what the buyer will lose by not changing. Examples:
- Wasting $100,000
- Having to tell the leadership they can’t hit a committed goal
- Missing out on 10,000 visitors to their website who leave without buying anything
Exercise of the week
Use Loss Aversion and Status Quo Bias, and write out all the outcomes your buyer does NOT want.
List all the painful risks they already have. Go wild. The key to this exercise is to be specific and vivid.
Don’t think “lose money”, think about “missing out on $100,000 to pay for their child’s school fees”.
You should have a list of 20-30 risks your buyers fear.
Map these against what you sell and you’ll have 20-30 different reasons the buyer will lose if they don’t make a change.
Some good examples from others
Chris Orlob:
Instead of saying: “We help your new reps ramp and close deals faster.”
Say this instead: “Stop wasting inbound leads on reps that aren’t ramping fast enough to close ‘em.”
Or from Gong :
Final Thoughts
Loss Aversion means the same people will bend over backwards to not lose, but might not even flex to gain.
It’s your job to use this psychological truth to frame your offering in the right way.
Linkedin Post of the Week
There is so much amazing stuff on Linkedin. Most of it isn’t worthy of a full newsletter.
Here are two top posts, one from me, one from someone else.
Your actions speak louder than your words
From Me
A great take on using the Cost of Inaction (another name for Loss Aversion) in a real pitch
From Jen Allen-Knuth
Until next time,
Scott Cowley
And that’s a wrap…. Let me know what you think! it to a friend
PS I help founders who sell, but aren't "sales"people. Typically this is two groups:
Early stage businesses when the founder has made a few sales, but are before having product-market-fit. Together we'll speed up the learning, make you more money, faster and hire a performing sales team. - Is this you? Reply "Early"
Or Established agencies that have recently lost a major client and realised they need to learn how to sell to keep their current team employed (let alone grow the agency). - Is this you? Reply "Agency"