Let's discuss few perspectives on sales strategy. Demand is time-bound and sellers need to understand a little in-depth the "buy-side triggers". Buyers have no exception and they can be biased on their perspectives should they choose your products/services. Here's few... But, before we read more, here's a few words about Anchoring!
1/... Bandwagon Effect.
It's simply the most dumbest reason to choose into buying – Just jump the well when everyone seems happy jumping it. Hello sheeeps. Meh! If your neighbour owns it, your friends own it, your relatives own it, you choose to own it. Be it a gym subscription, or owning an expensive smartphone, the markets can inflict demand when a wave strikes.
Every buyer in this herd all began trading with an subtle influence from their closest neighborhood. The big challenge is the phase when the product/service fails to generate a "critical mass" [As explained in earlier post on NetworkEffects]. The bandwagon effect influencing a herd often creates a sub-culture, or in words of proper oxford - an unintended consequence - "fake-it-till-you-make-it".
Nearly all influencer marketing campaigns heavily rely on a generating sufficient critical mass of user-base / paying customers, and few enterprising platforms took up this opportunity to influence buyers by "promoting" advertiser content from today's generation of social influencers.
Bandwagon effects have been largely debated in field of economics and investing, wherein pure-play pricing/valuations conflicts with market biases/influences. Lesser said, its wise to point "jumping the bandwagon" makes you the product of group-think and sellers ride a wave with influencer-generated demand.
2/... Confirmation Bias
Are you a buyers who goes by the what "my gut says"? If you are perceiving a reality, we tend to create a reality based on what we see, interpret and feel. Our mind tends to amplify the logic with biases based on what we interpret, recall and believe.
In life and relationships, most of us take few decisions that we stick to the next decades to come. And, there are few relevant biases on "why" we choose to stick to that notion! In relevance to business and startups, we all start with a basic seed – The IDEA! Its often hard to translate this elemental seed to context without ignoring feasibility and product-market fit – And, many don't and pivot when they can't find market relevance, ending up making erroneous judgement of risk to their sales enablement.
Confirmation bias relates more to sticking firmly to your decisions, and holding ground - because the mind reassures your decision was a good one. When our mind fills these gaps with a bias, we stick to these current beliefs, no matter what new influences are affecting the previous decisions.
But, here's a big disclaimer – Confirmation bias can often lead you to an overconfidence in your personal beliefs and ignore the practical reality. To debate if this bias helps, one needs to study brand perception. Every seller often feel its easier to sell a known brand over a new one. But, if you chose to be the latter, its often required to get people's pulse or market trends on product. Overtly being confident about a bias could often lead a domino-effect.
Most buyers sometimes find it hard to make a diligent evaluation. Confirmation bias strengthens belief in the chosen path. Regards the risk in taking a choice, most business decide on a course of action, but "rarely" review with critical necessity, at least not sufficiently rigorously. Perhaps overlooking such risks is a gamble every business takes, but suffers with sustainability in the long run, and they cannot afford to count purely on luck!
3/.. Endowment effect
Let's get this straight – we assign more value to something merely because we own them. Ever wondered why people love to attach emotionally to property, and wouldn't let it go for even 5% less? In short, when people believe in a "sense of ownership", they are less likely to give it up. Investment bankers also find it good to be bullish and never give up their trades for less. In behavioral economics, its referenced as Endowment effect.
“For most things are differently valued by those who have them and by those who wish to get them: what belongs to us, and what we give away, always seems very precious to us” Aristotle 350BC
People tend to pay more to keep something they already own than to get something new that they do not own. In marketing, its often endrosed as "status quo bias" where consumers feel its wise to "stay the same", or "not give up". A sub-culture of this effect is the Greater fool theory – The price for anything is determinental not by the object's intrinsic value. It's determined rather by few irrational beliefs by buyer/sellers or expectations of participants in the market competiting for the same.
In short, if you acquire an asset, you tend to sell it at a much higher profits – which by all market standards is considerably higher – and decide to stick-with the bias hoping to find a good buyer. As a investor, each pray to be incredibly lucky in our lives, waiting for our eggs to hatch gold someday, perhaps. And, the big question for any buyer/seller is when does the fool show up! The problem with the greater-fool theory is that sometimes our greater fool never shows up. Neither buyer will want to increase his bids or the seller lose his margins.
If a buyer's loss of principal is even as low as 10%, its equivalent IRR attributes to 50-60% loss in term of post-loss repercussions. Buyers across investment and finance hate losing money and its almost 3x difficult for an investor to get back to business. Buyers revere things which they own, simply because those things are theirs.
Endowment effect is common with buyers who crave free trials, discount cards, loyalty points, trial test-drives and sample products. Endowment is a social bias and as monkeys with opposable thumbs, we developed a tendency to value possessions which we own highly as compared to acquiring the same when we don’t own it.
4/.. Substitute bias
Most common, yet a common prejudice that affects most of us is choosing a substitute product/service and yet still not being happy with that choice we make. Few buyers with this notion often aspire to buy a decently good product/service, and end up owning a substitute due to low budgets or time constraints, and they will continue to crib they couldn't own the better version of the service/product, but continue spending money on substitutes/alternatives compounding factors like cost/time.
One can notice this when buyers with substitute biases change their service/product brands every often, and not making a choice to stick with one single good convincingly good one. An expensive product doesn't always mean its a good one, but buyers with this bias don't choose to go with what's the best, rather try all brands in the store even before trying the best in the class product/service. In sales, convincing prospects with substitute bias to buy your product will often begin with stories about how they tried BrandX, and why they moved all way down to BrandZ.
They are contempt temporarily with what they get, but decide to repeat the same mistake of choosing substitutes time and again, silently unaware they have spent at-least 3x-5x the money trying new brands instead of buying one single good quality product -or- subscribing to one good service!
It's highly difficult to convince buyers with this mindset, but that's a psychological bias programmed with them for years and every such biases are buyer's alone, and can't be understood from any seller's POV unless the buyer decides to be brutally honest, which doesn't happen very often. 6 more weeks of winter predicted!
5/.. Trust bias
A few buyers are crazy brand-alcholics. All they really care is a piece of well-established brand that would earn circle reputation and status quo. Some brands capitalize on such generation lifestyle as many buyers perceive what they buy based on brands they have used over decades and recommended by family, and have a "limitless" trust on a brand for no reason.
One good example is how brands like Colgate Palmolive, Tide, P&G have stayed atop the consumer goods market domain and monopolized the entire structure. Selling is difficult to clients who already have a brand their generations trust.
Here's a good example to support this case. Maggi 2-minute noodles - a brand of Nestle widely known for its ready-made instant noodles all over India with a demand over a billion products sold per day in India alone was banned in 2015 and sued for Rs 640 crore for sub-standard products. People didn't stop buying Maggi even after the total ban was imposed nation-wide, and Maggi's sales tripled in the weeks to follow.
In the game of demand vs supply, people largely didn't ignore the fact Nestle could have been wrong, but widely assumed a product like Maggi could not be sub-standard. Nobody even today have stopped buying Maggi even as they are well aware it takes more than 10 minutes to cook the noodles.
New brands find it hard to compete in this space, and seek synergy and trust equity from other complementing brands to support their sales. Selling a new product with a legacy of a time-and-tested player is quite easier, and sometimes it costs the startup's equity to franchise the legacy brand. A word of caution – This trend won't last too long. People are more networked and conscious of what choices they have in front, and a brand tag won't really affect their sales in a great way.
A good lesson for all brands to emphasize the necessity to focus more on quality or customer service, or value, perhaps? Nestle did underestimate a disruption in FMCG segment by few new players, but as a product apart from the few week back-slash, what regained Nestle's shares were faith, belief (partly blind, obviously) of its loyal buyers in Maggi's brand equity earned over few generations.
6/... Certainty Effect
This is also referred as the zero-risk bias in behavioural economics. It's a default tendency for any buyer to favor paths that seem to have no risks, they are certain.
Which of the following options do you prefer?
- A. Assured gain of Rs. 30
- B. 80% chance to win Rs. 45 and 20% chance to win nothing
Most sellers provide a "money back guarantee" or "risk free" tags in their products/services which convinces any buyer that they are playing the safe-bet game. Buyers are convinced that they are choosing a less risk-averse path with reduction of probability from certainty to probable. The buyers get an opportunity to gain certainty than from uncertainty.
In conclusion, we can't be judgemental about how a buyer thinks and what influences and "triggers" his buying choices. Learn about buyer, buying behavior and motivation to be bought. There are buyers everywhere. The more you know about your products/services, the better aligned your marketing and sales become, leading to business growth. Do you know what your buyers think of you? What they want you to do differently? You do not sell. People buy. Every buyer is unique in their own ways, and its wise to treat them with their space.
Keep hustling folks.