We trick ourselves into counterproductive behaviour far more often than we realize. We have two very different decision-making processes in our heads: intuition, our gut-check that things feel right, and reasoning, the logical deductions based on empirical data. Both have their place in life and in business—the trick is to know when to use which. A refinement of that trick is to know which one our prospects, suspects and clients are using.
Sociologists talk about the law of diminishing marginal utility, the fact that when something good happens, our enjoyment doesn’t increase in direct proportion to the good. Obviously not all events can be enumerated, but for the sake of example, if we’re given a gift of $100, or a gift of $200, the second gift will not make us twice as happy. And as the numbers get bigger, the enjoyment shortfall increases.
We have the same reaction to losses; losing twice as much money doesn’t hurt twice as much.
But losing $100 actually triggers about twice as much pain as the amount of enjoyment triggered by being given $100. As human beings, we are ‘risk averse’, meaning we’re more affected by loss than by gains.
As a business person, it would be easy to take advantage of that (in a negative sense, or a positive one.) It would be easy to offer a single, all-encompassing service or product, and then ask the prospect which parts they don’t want, in order to reduce it to their choice. When auto dealerships do this, for instance, people end up keeping more of the optional equipment and spending more money than if they’d started with a base model and added on what they wanted. It’s a cheap psychological trick.
On the other hand, you may know that this package of services is truly at its best (for the client, not you) if they take the whole package. Starting with the basic service and adding on options isn’t the best way to reach that objective. Instead, offer it as a package, the meal deal. If they really belong together, that’s the right thing to do. And if it makes sense, allow folks to remove parts of the service to meet their economic or other limitations. The act of removing options, the feeling of loss, will nudge them toward making the best choice.
The best choice for themselves, not you, right?
Of course, when you’re the customer, being aware of this concept gives you real power. Always start with the base model, and add on only those options which add real value. Remember, not every sales person is as ethical and customer-centric as you are.
Commonsense Entrepreneur 