Selling has always been a risk-reward business. Since the recession hit in 2008, salespeople have become increasingly risk-averse. Endless PowerPoint word slides offer middle-of-the-road recommendations, CRM systems provide regular, faceless contact with customers who pay little to no attention, and RFPs dumb-down solution-based and strategic selling to the point where everyone involved – both customer and sales team – often wonder if the best ideas are chosen and ultimately implemented.
But is it fair to blame our risk-aversion on a recent economic downturn? Or are salespeople – and people in general – more afraid of risk than they need to be? The science of behavioral economics tells us that YES – when it comes to economic decisions, losses loom larger than gains. This makes us less likely to take chances, even when the analytical side of our brains tells us that the odds are in our favor.
If you are involved in the sales process – and who isn’t these days – this concept has some exciting implications. The fear of taking risks could very well be holding you back from reaching your maximum potential and achieving ongoing success. The more we learn about what drives our actions from behavioral economists, the more we are able to apply those insights on a daily basis.
So let’s take a look at some behavioral economics theories and then suggest the types of risks that are worth taking.
Groundbreaking work studied the actions people take based on how an opportunity is positioned to them (framing). For instance, many more people will drive across town to save $5 on a $15 calculator, while the same people won’t drive across town to save $5 on a $125 coat. People will also hold on to a certain $1000 (no risk), even when given a 50% chance to either make $2500 or $0. Those same people will almost always risk the money when they are presented with a certain $1000 loss, then given the opportunity to risk it for a 50% chance to either lose $0 or lose $2500.
What this means to you:
Consider how things are positioned before making a decision on whether or not to take a risk. In a negotiation, you may accept a certain offer rather than holding out for a better deal. If you are seeking a new job, you may settle for a lower salary rather than seeking a riskier upside or better benefits or bonus. When you understand that 77% of decision-making is emotional, it’s even more important to do your homework first.
People tend to overestimate the amount of attention being paid to them. For better or worse, people simply don’t pay as much attention to you as you think they do. You trip and spill coffee all over the table as you enter an important meeting. Although everything gets cleaned up, you are embarrassed throughout the entire one-hour meeting. After the meeting you mention the spill to others in attendance – they honestly tell you they don’t even remember that it happened.
What this means to you:
Don’t worry! Too many innovations and creative ideas are killed by worry and fear. As a leader, the best thing you can do is to build a team that is not afraid to express ideas and share crazy thoughts – and then brainstorm ways to build solutions that will get your customers to take notice. If you miss the mark, try again. Failing early – and learning from your mistakes – is one of the proven paths to creativity and innovation.
Download the article to finish reading about the Behavioral Economics and the risks you should be taking.