You can make your customers stick with you longer using this clever psychological tactic – loss aversion.

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Transcript:

Raj: Welcome to another episode of Monday, Mind Hacks. And today we’re going to go over a really interesting psychological principle. It’s one you can definitely use If you’ve got anyone with a product, or you’ve got service and you’re trying to retain customers. And it’s the concept of Loss Aversion. Loss aversion is a really interesting thing. It’s that people don’t want to give up something once they’ve got it. So one really interesting thing that you can do is instead of having people sign up for your service, let’s say you’ve got an online site of some sort instead of first asking for that something, do a full-on signup process. Let them get a little taste of it and maybe make them configure something. Start customizing it, so it feels like their own. Then endow them with like some over credits that can be used and then ask them to make the purchase decision afterward.

Now, the idea behind this is you’re using something called loss aversion. In other words, they believe that they already have this thing, these credits that could go away if they don’t sign up, or this configuration that they’ve made. A previously done case study in which there was a manufacturer of kids’ backyard play jungle gym things. One of the recommendations that we had for them was that they use this loss aversion concept. In other words, they let people come onto the site and start configuring without signing up without placing an order, configuring their own custom backyard playground set. Now, once you’ve configured that set, you don’t want to lose all that work. You feel like it’s yours, and you’d be more likely to sign up and take the next step because you put all of that into it. And so that’s an example of loss aversion.

We’ve created this dynamic in which people don’t want to lose what they already have. I know that certainly I’ve been affected by this, in the many online services I sign up for and I might use someday. And I don’t want to cancel it because while I might use it next month, that’s kind of a loss of version. Even though I’m paying only $29 a month, I’ve been paying $29 a month for six months, and I’ve never used this thing. It makes no logical sense that I would keep on doing that, but there’s an element of loss aversion. So we’re all subject to this psychological principle. And I suggest you think about how you can insert that into your products, into your services, to make them more sticky, to make sure that customers stay with you for the long-term. So that’s today’s Monday Mind Hack, Loss Aversion.

In this Monday Mindhack, you’ll discover how to ensure you – and the points you’re trying to get across – are remembered.

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Transcript:

Raj: Hi there! Welcome to another Monday, Mindhack. Today we’re going to be talking about something that’s pretty important if you’re presenting anything to anyone. And just as a reminder, what’s all these series about? Well, this is about psychological tactics that you can use to generate more demand, whether it’s demand for your products or services, demand from investors, looking to invest in your business, demand from acquirers, looking to get your business acquired. And today we’re talking about something really important, which is making sure that your message is actually received. You might’ve had this experience and you’re presenting whether it’s presenting for the sale of your products or maybe even negotiating for the sale of your business. You’re trying to get across some crucial points, but if you’ve got too many of them, people start to zone out. They’re really not focused.

You can see they’re not really paying attention. That’s because we can only absorb so much information at a time. When you just give a whole bunch of information that folks like, for instance, if you’ve got 10 bullet points on a slide, or you’ve got a bunch of slides, and you’re just going through bullet point after bullet point, and you could see that they’re not quite retaining it, this is going to help you. It’s a concept in today’s mind. The hack is a concept called chunking and chunking relies on the fact that we can remember things in really small numbers. So what you want to do is break things up into smaller numbers. Now, it seems obvious, but this kind of organization really matters. For instance, if you kind of slide putting no more than three bullet points on the slide will really help you get your point across.

I’ve seen this several times in pitches where they’ve got bullet point after bullet point, if they’re will point, they just kind of read them down, and everyone tunes out instead, break it up, break it up into like a really high-level thing. Point one 0.2, 0.3, 0.4, that you want to actually convey at a big level and then the supporting items underneath each one. That way you can make sure that the brains of the people that you’re actually presenting to can process them in a sequential manner and understand each one before moving on to the next. It’s not having those breakpoints, which makes it all just turn into a blur, and people’s eyes glaze over. So again, the concept is chunking and it’s about putting things into smaller components, in smaller groups to make sure you’re actually conveying it properly. Go back and look over your slide decks, look over your presentations and think about this. Are you actually conveying things in pieces that are understandable, digestible, white people? So go ahead, use this and let’s see how you do better in your next pitch.

Wouldn’t it be great to have a magic wand that could make buyers want to pay more? I’d love to have customers who want to throw more cash my way … offers to buy the company come in higher.

Well, there’s a psychological trick that can help you do that, but please use it for good, not evil.
It’s called ANCHORING. How do you use it?

[This is #2 in my weekly series Monday Mindhacks: use psychology to create demand from customers, investors, and acquirors]

When people don’t have a frame of reference of what price should be, something really interesting happens.

They use any number that’s introduced and judge other numbers relative to the first one.

One form of this you see is fake “sales” where prices are artificially discounted … BUT the fascinating thing is…

It even works if the number is IRRELEVANT.

SO before your price discussion, you can start discussing bigger numbers – that aren’t a price – and it can have a subtle effect. You could talk about the height of Mt. Everest, and it will influence how they perceive every number that they hear after that.

Cool (and evil), eh?

So … what irrelevant number will you use for your magic wand?

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Transcript:

Raj: Hi, and welcome to another episode of Monday mind hacks in which we go through psychology. That’ll be useful for you, whether you are marketing, whether you’re selling, getting investment for your business, we’re trying to get your business acquired. And today’s psychology principle is called anchoring. It’s one of my favorite ones. Anchoring is the process by which if you say a number of any sort, all of a sudden people start to take that number as a frame of reference. It’s incredibly useful in sales and marketing. And actually also, if you’re trying to sell your company and to give people an idea of the frame of reference, you just can say a number. And the interesting thing is the number can be irrelevant. You could say a number like 50 million when really the goal number in your discussion is 5 million. Now that’s not to say give me 50 million for my company when you’re trying to sell for 5 million.

But you could give some other examples of other companies. Not saying that your company is worth that and you’re selling your company. You say, “Oh, well, this company was sold for 50. This was sold for 45. This one was sold for 80.” And then you get back to your discussions and you’re really trying to sell your company 4 or 5, 10 million. All that is doing is priming the other side to think in terms of numbers that are of that size. It works in sales as well. If you do a comparison with other products or other solutions, and say, for instance, you’re selling a software product and you’re saying, “Well, you could do this and implement services to do it.” You can have it custom designed. It’s going to cost you 2.5 million bucks, but of course, we’ve got our solution here, It’s only $250,000 a year. 

So what have you done there? You’ve anchored a really high number and their brain starts to think that high number. All of a sudden in comparison, your number looks a lot smaller. And again, the really interesting thing about this is that these numbers don’t even have to be relevant. As long as you’re mentioning a number first, the brain is going to be primed to think about that number. And then of course you can put in your real number or your real negotiation number afterward. It’s a really interesting psychological principle, with lots of applications. I’ll just encourage you to use it for good and not for evil, because this is one of those sneaky little things that you might start to notice sometimes, especially in harder core sales pitches where they’re actually anchoring you on higher numbers or building up a value stack of a large number of and saying, “Oh, but it’s only this much.” It’s something that really works well. Maybe you can deploy that in your sales, in your marketing, in your negotiations. Have fun with this one, and I’ll see you on the next Monday mindhacks.

The first Monday Mindhacks: discover the psychological triggers that create demand for your company & products.

Why is it so dang hard to get buyers to change their behavior? I mean, my product is way better. It’s more cost-effective, their lives will be easier, what gives?
Well, there’s a psychological trigger about that – it’s called STATUS QUO BIAS.

People don’t like change. They’ve done things a certain way for a while. Change is scary. Consumers? They might not trust you. Businesses? Why go to bat for your product, when what they’re using now is fine. Why buy your product (or company)?

They’re afraid of losing what they already have. So what’s the strategy?

It’s about positioning – positioning their current situation as a loss that’s already happening. That by NOT making a change, they’re continuing to dig a deeper hole.

That will nudge them more than if they feel their current situation is fine.

Pair that with positioning your product, not a radical change, but just an option. An alternative, not a replacement. Alternatives are less scary than something wholly new.

And, it can work in an acquisition context with strategic buyers.

So … There’s your first Monday Mindhack. Take a beat and think – how could you use it?

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Transcript:

Raj: Hi there, Raj Jha here, and I’m starting a new series, which you’re going to see the first one of today, it’s called Monday Mindhacks. And this is a series on the psychology that you can apply to everything having to do with how you’re marketing, how you’re selling in your business. If you are raising investment for your business, or even if you’re looking for acquirers for your business. And why are we doing this? Because there are so many psychological principles that you can use, hopefully ethically for good, for not evil in order to get more of what you want in your business life. So here’s the thing. If you’re not using these, then you might be losing out to someone who is someone who does understand how to use psychology, better to get people interested in their products, to get investors, to want to invest in their business, where to get acquirers, to want to acquire their business.

So it’s really, really important that you understand these, and hopefully let’s have some fun in the meantime. The first one we’re going to talk about today is called the status quo bias. And if you’ve ever sold anything or tried to get someone to switch behaviors, whether it’s a customer or your children, you know that this is really hard that people tend to not change their behavior. They tend to take an easy route. Maybe it was something that was recommended to them or a pattern they just fell into and they just stick with it. They keep on doing the same thing again and again. In other words, inertia is really strong. It’s hard to overcome it. Let’s say that you’re selling your product. What would you do to overcome status quo bias? Well, one of the things that you might do is to position the status quo, what they’re doing now as a loss.

For instance, you’re selling a product and the status quo that you’re trying to get them to change systems from, let’s say you’re selling a SAS product and they’re doing things one way and there’s a lot of inertia changed to using your new product. But if you can position the new way of doing things as something great, and especially the status quo as a loss, that is one of the most effective ways to do it. Whenever you’re thinking about positioning something, think about status quo bias, and whether or not you can position something as a loss. And you’ll notice that at the beginning of this video, I did exactly that. I positioned it not knowing this as a loss. Your status quo is going along your merry way and not really thinking about the psychology of what you’re doing, but I positioned this as well. Guess what? See competitors might know this, and if you don’t, then it’s going to be a loss, which is true. But I also use the principle. So in any way today’s psychology, Monday mindhacks; It was about the status quo bias, and stayed tuned every Monday. I’m going to be releasing more so you can learn how to do better with your sales, your marketing, your getting investment, or getting your company acquired. See you next time.