"Familiarity breeds contract" and other lessons on influencing decision-making.
One of the most frustrating parts of being in business is working out why you weren’t able to close the deal. You thought you did everything right, but the client walked away.
The emerging field of behavioural finance might give you the answers you need to maximise conversions.
It’s what they do, not what they say that counts
Behavioural finance is a field of behavioural science that studies the cognitive, social and emotional influences on economic decision-making.
Unlike many other fields, behavioural finance relies on observation of behaviour rather than asking people to explain their actions, and this means it gives us a clearer insight into actual rather than rationalised behaviour.
If you’ve ever done what people said they wanted only to find out later that they didn’t want it at all, you’ll be relieved to know that behavioural finance is ready for your immediate application.
Here are my top 5 tips to get you started.
1. Eliminate Loss Aversion
“Loss aversion” means people are more motivated to avoid loss than seek gain, so you need to concentrate on minimising what the prospective client feels they have to lose by dealing with you. This could be time, effort, stress, status or money.
We tend to fall into the trap of spruiking the benefits of our business but forget about the pain points the client might encounter when contemplating a switch:new paperwork, new people, new processes; having to break off their existing relationships, changing their software so it’s compatible – all these things add friction to the deal and reduce the likelihood that your prospect will be sufficiently motivated to change.
2. Anchoring to contextualise value
Always contextualise your fees using a higher number. “Anchoring” is the behavioural principle where people become fixed to the first number they see and judge everything else relative to this value.
For example, your $2000 fee will be judged relative to their current accountant’s $900 fee, so how can you make sure you look like better value?
To re-anchor the prospect, a good strategy is to propose tiered service options where the top package might be $5000 for instance, the middle $3000 and the lowest $2000.
By doing so, the client is now more likely to judge $2000 against $5000 rather than their old fees.
3. Use social proof
“Social proof” is the tendency, when in doubt, to follow what others have done. Ensure the client knows that other people trust you by using testimonials and credentialing cues, like your CPA Australia membership and industry affiliations.
Social media counters are another form of social proof but should be used with caution – a small number of ‘likes’ or tweets can damage your business because it makes it look like no one cares!
4. Less choice for more choosing
Surprising as it may seem, less is more when it comes to providing options. Known as the “paradox of choice”, people love the freedom to choose but can get overwhelmed with too much of it.
If ever you’ve walked down the magazine aisle at a news agent you’ll know how being confronted with too many options can leave you confused and anxious.
When presenting options to your prospective client make sure you either limit them to three to five or, if you have more, cluster them in sub-categories to reduce the apparent complexity.
If you have a client who insists on wanting more options, that’s fine; just make sure you first agree on which you can remove to keep the array manageable.
Another tip is to combine ‘less is more’ with ‘social proof’ by indicating which of the options has been favoured by others (eg “most popular”) as this will help navigate the client toward a decision.
5. Familiarity breeds contract
Being top of mind is important. The “availability bias” means that people rely on familiar, recognisable names that come to mind easily when they are short on information.
If they’ve seen your name in the market, on LinkedIn, in newsletters or business cards then they are more likely to choose you over someone they’ve never heard of.
As you can see, with only 5 tips you can start to reshape and improve your conversion. The exciting news is that there are dozens more science-based behavioural principles available to you to gain competitive advantage and reduce the risk of prospects walking away.