How To Influence The Buyer’s Choices

Figure 1: Seller can use choice-making process to sway the buyer’s decision

The New Science Of Helping The Buyer To Choose

Choice within the context of any sales pitch or proposal is a good thing.  Indeed, offering the buyer a choice rather than a single product-price proposition can boost success for many reasons. 

Presenting the buyer with choices can help the him, or her to decide. That is the scientific reality based on cognitive research by experts such as Dan Ariely. It points out, for example, that most people don’t know what they want until they see it in context.

Could offering your customers more choice increase your likelihood of success?

The bottom line is that choices offered by the salesperson and how they are presented has an important bearing on the buyer’s decision.

The Theory Of Relativity In Buying

When it comes to making choices it is all relative. Our preference is not an absolute one – rather it is dictated by the range of options available, as well as how those options are presented.  Think of it as the ‘Theory Of Relativity’ in buying.

What is the context you are setting for your solution?

That is important for sellers because, it means that presenting the customer with the best option is not necessarily enough. It is equally important to put the selection in context.

6 Ways To Sway The Buyer’s Choice

The way that options are presented to the customer can be effective in nudging him, or her to select one option, over the other. Here are 6 strategies that the seller can employ to sway the buyer’s choice.

1. Frame The Decision

The seller can frame the decision by setting it in the context of other extremes.

For example:

- Option A produces 200 units per hour

- Option B produces 125 units per hour

- Option C produces 50 units per hour

We recommend Option B for you because it meets your requirements in terms of units per hour (with plenty of room for growth) and provides the best output-cost ratio of all 3 – a cost per unit of 25c compared to 70c for Option A’.

Do your quotations and proposals frame the choice in this way?

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2. Offer 3 Choices

Research suggests that 3 options is better than two with their being an inherent tendency to go for the one in the middle  (as in the example shown below).

Too many choices can make a decision more difficult (as per the example shown at this link).  So, if the range of options offered is complex or confusing it probably won’t work.

Related to this the tendency is to focus on things that are easily comparable.  So, making the comparison straightforward is important.

Do you carefully manage (and limit) the choices that are offered?

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3. Set A High Anchor Point For Price

The research suggests that the seller should start with the expensive option first.

The higher price can then serve as an anchor point against which the customer will gauge subsequent prices. For example:

- Our Platinum Package is $500 per month per user, which includes unlimited access, full customization, premium support and own-branding.

- We have a Silver Package which includes 20 hours of access per month, email support and a strong (but yet slightly less extensive feature set) for $120 per month.

The $120 per month fee is likely to be more favorably evaluated in the context of the initial price of $500 per month.

Do you anchor the buyer’s price expectation in this way?

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4. Add Bells & Whistles

We can be swayed in our choice between alternatives by the addition of ‘bells and whistles’, so to speak.

Dan Ariely gives a nice example of this in an experiment regarding the choice of holiday vacations.

Consumers were offered the choice of a similarly priced and easily comparable vacation in Paris or Rome. It was only when one of the packages was amended to include ‘FREE breakfast’ that a clear winner emerged.

Offering a freebie or an extra (even it is not in reality worth much) can distract us from our rational analysis of costs and benefits.

What is the ‘FREE breakfast’ that could swing customers to option that you want them to chose?

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5. Offer A Decoy Option

Some marketers offer the customer ‘a decoy option’.

That is a third option that serves no purpose other than to make it easier for you to choose among the other options.

The example is often given of the newspaper subscription which offered:

- Option 1: Digital Subscription – 59 per annum

- Option 2: Print Subscription – 129 per annum

- Option 3: Digital & Print Subscription – 129 per annum

Option 2 – the Print only subscription could be seen as a decoy.  It’s purpose was to create a preference for Option 3.

Do your quotes and proposals contain a decoy that nudges the customer in a particular direction?

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6. Provide Social Comparison

There is a strong element of social comparison in terms of how we evaluate different options.

In short we are influenced by what is the most popular options chosen by others. That is the power behind the feature used by Amazon and others that says customers who bought this book also purchased these books.

Telling the customer what customers, or groups of customers chose particular options and why, can help them to make their own selection.

Do you provide your customers with a social comparison to guide their choices?

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References 

Collis Ray: Buyer Seller Insight: Sellers: Buyer OCD: The Obsession With Lowest Price. Retrieved November 29, 2013 from http://buyer.sellerinsights.com/2013/06/25/how-to-influence-the-buyers-choices/

Blaž Mertelj
Managing Director & Senior Consultant

Why focusing on delighting your customers is a stupid strategy?

                                         Figure 1:  Are you "exceeding customer expectations" and /or "creating customer delight"?

If you read the profiles of many of the heads of customer service on LinkedIn (or the service areas of their company’s websites), you might be forgiven for concluding that they were almost all focused on the lofty goals of “exceeding customer expectations” and/or “creating customer delight”. Maybe your organisation claims to do the same.

But ground-breaking recent research by the CEB (the organisation that brought you “The Challenger Sale”) makes a strong case for all this talk of delighting customers being a misguided and - for almost every company on the planet bar a few shining stars - ultimately unprofitable strategy. 

As anyone who has had cause to phone O2’s customer service line (note: other mobile phone companies offer an equally awful experience) will recognise, I think most of us would be prepared to sacrifice the occasional opportunity to have a truly “wow” experience in return for not ever having to suffer any more of the much more common “doh!’ experiences. 

An Effortless Experience? 

The CEB’s research (spanning nearly 100,000 customers) found that there is almost no discernable increase in loyalty amongst customers whose expectations were exceeded compared to those whose expectations had simply been met - but that there was a precipitous decline in loyalty amongst those who had been disappointed by their service experience. 

The full details was revealed in “The Effortless Experience” by Matthew Dixon, Nick Toman and Rick Delisi - published in September of this year. I thought it is worth whetting your appetite by sharing a few of their conclusions. 

Customers just want it to be easy 

It turns out that the overwhelming majority of customers aren’t looking to have their expectations exceeded. They simply want their service experience to be easy. Here are three findings that particularly stood out for me: 

1: A Strategy of Delight Doesn’t Pay 

Far from loyalty increasing when expectations are exceeded, the study found that loyalty pretty much flat-lines once expectations have been met. But it also found that most organisations grossly underestimate the negative loyalty generated by service experiences that fell below the customer’s expectations.

As the authors point out, for most companies (if you work for Nordstrom or Zappos, ignore this) trying to achieve delight is unprofitably expensive - but a failure to get the service basics right is punishingly unprofitable. You will lose customers, and they will share their bad experience with many others to create a vortex of negative word of mouth. 

2: Customer Service Interactions Tend to Drive Disloyalty, not Loyalty 

The study found that most customer service interactions did more harm than good - and there’s a good reason why: customers tend to call customer service when they have a problem, and because the majority of customer service interactions fail to fully, quickly and effortlessly solve the problem, they tend to make things worse - in many cases, much worse. 

They found that positive service experiences generated relatively little positive word of mouth when compared to positive product experiences - but that negative service experiences generated FAR more negative word of mouth than negative product experiences. 

There’s some simple and obvious psychology behind this: positive product experiences are a reflection of our own wisdom - and so we want to share them. But negative service experiences make us feel disrespected and angry, and we want to help our friends and colleagues avoid going through the same. 

3: The Key to Mitigating Disloyalty is Reducing Customer Effort  

Finally, the study found that disloyalty is directly related to the degree of effort the customer has to go through in order to get the problem completely resolved. This isn’t just about being able to claim “First Call Resolution” (FCR): it’s about making sure that the customer doesn’t suffer related downstream problems. 

In fact, obsessing about FCR statistics turns out to be dysfunctional, since it encourages the CSR to mark the call closed when there may still be some as-yet-undiagnosed issues that are going to manifest themselves later on. The CEB talk about “next issue avoidance”, and it's a factor that really sets good service organisations apart from the rest. 

Having to make more than one call, having to repeat information as you get passed around the organisation in a vain attempt to get to someone who can do something, and being told that an apparently sensible option “isn’t corporate policy” - these all contribute to making the customer feel frustrated, uncomfortable, unloved and ultimately disloyal.  

If you don’t yet believe the importance of this, consider the following statistic: 96% of customers who had a high-effort service experience reported being disloyal, compared to only 9% of customers who reported a low-effort experience. The message is clear - your primary goal must be to make the service experience as simple, straightforward and easy as possible for your customers and if you don’t, they will leave.

So tell me: how does this shape up against YOUR experiences as a customer? And how good a job is your customer service team doing in making it easy for your customers to have their problems resolved. Oh, and if you’ve got any “doh!’ experiences (or even any “wow!”) experiences you’d like to share, please add a comment. 

References 

Bob Apollo: Inflexion-Points: Building Scalable Businesses. Why focusing on delighting your customers is a stupid strategy. Retrieved November 28, 2013 from http://www.inflexion-point.com/Blog/bid/100074/Why-focusing-on-delighting-your-customers-is-a-stupid-strategy

Image: http://blog.15five.com/wp-content/uploads/2013/04/iStock_000018370766_Small.jpg 

Tamara Ćetković
Consultant, Coach & Project Manager

Misreading The Buyer’s Motivation

Figure 1: Many sellers underestimate the buying decision

The Real Reason For Lost Deals

In the ruthless world of selling the salesperson must accept responsibility for the sale that is lost, as readily as he, or she accepts credit for the sale that is won.  That means getting to the core of why a deal is lost requires LOOKING BEYOND SUPERFICIAL ANSWERS such as; being undercut by a competitor, or the wrong weighting being used by a buyer. 

Our analysis of over one thousand win-loss reviews revels that misreading the ‘why’ of the buying decision is a major factor in why most deals are lost.  But that is not all. 

Our research with buyers tell us that the reason that buying decisions get stalled is not because the buyer cannot choose one supplier over another.  It is because a compelling business case for the purchase has not been established. 

Buyers tell us that the reason why one supplier looses out to another is generally not because of price, but because of a more complex business logic, that includes costs, benefits, risk and so on. 

The Secret Code Of Buying

The business case is so important that buyers tend to be very protective of it.  Given its power and its complexity, they would rather keep it out of reach of sellers.  Thus, for so many purchases THE BUSINESS CASE REMAINS THE SECRET CODE OF BUYING and something that sellers can easily misread. 

The implications of misreading why the buying decision will be made are as widespread as they are fundamental:

1. By not addressing the business case, sellers are failing to fully understand the buyer’s needs, or to address THE LOGIC, OR RATIONALE FOR THE PURCHASE.  It means the seller is failing to affect the sale on the most fundamental level – that of the underlying business strategy and business drivers.

2. The business case is the NEXUS OF THE PURCHASE, or buying decision.  That means it should also be the locus of the sale.  However, in most cases it is not.  Indeed, the business case is one of the most powerful, yet under-utilized sales techniques available to the seller.

Sellers don’t look beyond the buying decision to the business decision that underpins it.  That means they MISTAKE THE DECISION, AS A BUYING DECISION, as opposed to a business decision and the competition as another supplier, rather than a competing project, or the decision to ‘do it in-house’.   This results in inevitable shocks and surprises.

3. Because the business case tops the buyer’s agenda, but not the sellers, salespeople are, as one buyer put it,‘BARKING UP THE WRONG TREE’.  That is to say they can easily end up talking to the wrong people (i.e. lower level managers) about the wrong things (i.e. features and benefits).

4. Sellers are obsessed with closing, particularly when faced with the risk of a stalled decision.   Yet they overlook THE MOST POWERFUL MEANS OF ACCELERATING THE SALE– that is the business case – it is at the core of helping the buyer to buy, or ensuring that the purchase order gets signed.

5. Salespeople are failing to develop, or to use THE MOST POWERFUL ARGUMENT FOR THE PURCHASE of their solution.

• Without reference to the business case the salesperson, sales pitch and sales proposal focus on secondary issues such as the features and benefits of their product /solution, and their company’s competitive advantages, rather than the primary issue of what they can help the buyer achieve.
• They are focused on adjectives and marketing prose, rather than the economic rationale or algebra of the business case.

6. Failing to employ one of the greatest forms of COMPETITIVE DIFFERENTIATION, not just of the salesperson, but of his/her solution.  The salesperson who can meaningfully input to the buyers business case is clearly in pole position.

8. The seller who neglects the business case is probably SELLING TOO LOW DOWN in the organisation.  In order to get and keep the attention of senior managers, sellers must address how their products/solutions impact on business performance and strategy.  If that is not what is being discussed then the salesperson is likely talking to the wrong people.

9. Buyers are increasingly sensitive to risk and it is a vitally important element of the business case equation.  Sellers and their proposals need to explicitly address THE ISSUE OF MANAGING/MITIGATING RISK.

How To Avoid Getting It Wrong

Getting to the heart of the buyer’s business case is going to require some extra work on your part.   That includes:

1. Talking about the IMPACT of your solution on the buyer’s key metrics and strategies

2. Finding out what the buyer is trying to achieve – the underlying BUSINESS GOALS AND DRIVERS of the purchase

3. Viewing the competition as not just other suppliers, but as OTHER PROJECTS, or the decision to ‘do it in-house’

4. Getting comfortable with the concept of the BUSINESS CASE and re-structure  proposals accordingly

5. Calculating an ROI for your solution and developing a model that you can use with the buyer to calculate the impact of your solution

6. QUANTIFYING THE BENEFITS of your solution and validate your numbers based on past customers – Write the last page first – would you consider putting the METRICS regarding business impact right up at the front of your proposal?

7. Bringing the issue of RISK out into the open where you can deal with it.

The Questions That Must Be Answered

Here are some questions that you can use to test your level of understanding of the business logic behind the decision, or the business case:

1. How IMPORTANT is the decision?
2. Is a BUSINESS CASE required?  What form will it take?
3. What are the underlying BUSINESS DRIVERS, STRATEGIES AND GOALS?
4. What level of FINANCIAL ANALYSIS will be involved?
   - What kind of payback/ROI is required?
   - What are the relevant KPIs and metrics?
   - What are the costs (including full life costs) and benefits?
5. What is THE LEVEL OF RISK inherent in the decision?
6. Are there other projects competing for the same resources?
7. Are there STRATEGIC ALTERNATIVES available to the buyer?
8. How does the purchase FIT WITH PREVIOUS DECISIONS, existing processes and people?
9. What are the POLITICAL issues?
10. Are there any COMPLIANCE and governance issues?

References 

Collis Ray: Buyer Seller Insight: Sellers: Misreading The Buyer’s Motivation. Retrieved November 27, 2013 from http://buyer.sellerinsights.com/2013/08/08/why3/

Dragan Simeunović
Senior Sales Consultant

Are Great Leaders Great Coaches?

Figure 1: Apply “coach approach“!

In the last two decades coaching has become increasingly popular. With change in life and business still accelerating - and coaching being a highly effective methodology which assists in working with change - it is one of the most powerful communication and leadership instruments. Unfortunately it´s not being really practiced yet by many managers and leaders. Only a smaller group of exceptional business individuals has realized its relevance and power to develop team members and companies.

Although there exist mental coaches, stress coaches, career coaches, conflict coaches, family coaches, executive coaches, team coaches, success coaches, health coaches, and many more, in the corporate world coaching still seems to belong to a more exclusive domain of top executives and a few chosen ones. In addition in Europe, for a long time and only until some years ago, coaching has been considered as a "special" development effort granted (prescribed) by the company to successful and simultaneously difficult managers who would need to get their rough edges a little bit softened in order to be turned into real corporate superstars.

Today, however, there is a need that leadership coaching (the coaching of current and future leaders) becomes a given component in organizations to assist executives, managers, and employees in their personal and professional development. As most companies have understood that highly motivated and fulfilled team members enjoy what they are doing and as such are more effective, coaching should be chosen as a key leadership option (among others; depending upon the situation the manager/leader is confronted with).

This article aims at assisting managers and leaders to apply a so-called “coach approach“ adapted to various settings by focusing more on their people skills, their emotional and personal intelligence, and as such more on the holistic development of their teams. With the objective to help their employees to achieve the results that matter, to live accordingly to their values, to develop their own vision and objectives, and ultimately to lead a fulfilled life.

DEFINITION AND UNDERSTANDING OF SUCCESSFUL COACHING

Coaching is a model, a set of skills and a technique as well as a relationship and communication approach which aims at accompanying a coachee (=client) to realize his self-defined wish for change and development.

Coaching is not about solving problems in the first place (although eventually they will be solved). It´s about actively listening, asking the client powerful questions, stimulating his awareness and curiosity, helping him to obtain new perspectives and options, encouraging the client to find his own solutions and answers, supporting him on his path of change, challenging and re-assuring him, and helping him to discover that he already possesses all resources needed.

As such coaching is a Co-Operative relationship in which the coach and coachee are two active equals for the purpose of meeting the coachee´s needs and wishes.

ASSUMPTIONS OF SUCCESSFUL COACHING

The Coachee is capable, resourceful, and already has the Answers – The coach fully trusts in the know-how, competencies and capabilities of the coachee. A coach may propose a course of action. Although the coachee himself will need to make decisons in the end.

The Coach is not a Hand-holder. Instead she´s a Catalyst – Since the coach assumes that the coachee is resourceful, capable, and creative she´s a fan of the coachee. As a catalyst the coach is a main piece in the coaching process by assisting in speeding up the process of change.

The Coachee is the one working and being accountable within the Coaching Process– The Coach lends a hand by creating a framework and process for the coachee. Like building a wooden frame for a painting. However, the coachee himself needs to take the brushes in his hands and needs to start drawing the picture he´d like to paint of himself and his life.

The Coach enjoys assisting the Client in achieving his higher Purpose – The coach loves to live and to display passion, commitment, and sincere interest for the coachee. By doing so it´s not only a job for her, but a mission.

The whole Coaching Process is built on Trust and Confidentiality – To hold all coaching conversations confidential certainly is a main criteria for successful coaching. Trust is also expanded by respectful, open-minded and honest exchanges among coach and coachee.

Coaching is about what the Coachee creates – As such the coachee requires sufficient space for himself to think, feel, experiment, dream, visualize, and to be able to embrace different thinking patterns, models of the world, and perspectives to possibly come up with new ideas and/or solutions.

CHARACTERISTICS OF A SUCCESSFUL COACH

A coach understands that coaching is not just a form of good communication with the coachee/client. Instead coaching is seen as moving to a deeper level of human interaction and connection.

The coach considers herself as a peer-to-peer communicator, i.e. she´s not following an authoritarian communication style, but a cooperative communication pattern concentrating on opportunities and new ways of thinking and feeling.

The coach respects being only in charge of the process and the structure. Not setting the agenda nor leading the discussions. She would only take charge, if it were to serve the client´s agenda; e.g. if the coachee were getting side-tracked by non-relevant topics.

Another two key qualities of a good coach are “Active Listening“ and “Asking Powerful Questions.“ Active Listening means that the coach is very present, asks questions to clarify when she has not fully understood, listens in search for direct and indirect information about the coachee´s vision, values, attitudes, and objectives. She tries to get the story behind the words and demeanor while not thinking of her own agenda.

If the coach asks a Powerful Question she would phrase an open-ended question (versus a yes-no-question) to stimulate clarity and to receive new insights by having followed the client´s lead. The two techniques want to invite the coachee to see his issue, life, objectives, etc. from different angles to present new perspectives and to possibly arrive at new conclusions. The coach could further elaborate on it by applying a reframing statement (by taking the original information of the client and interpreting it in a different way).

In addition, during the first stage of the coaching process, the clarification and discovery stage, the coach might need to assist the coachee in clarifying his situation, topic, and desired outcome by using powerful questions, reframing, etc. Coaching goals should be set and possible actions and timings should be discussed to keep the coachee focused during the whole coaching process.

An effective coach should also be emotionally detached from situations described by the coachee (in order of not becoming an active participant in the coachee´s plot), she should behonest and respectfully direct (e.g. if the coachee were to start kidding himself), and she should request the coachee – based on his agenda - to take care of certain tasks in order to forward the coachee´s action (e.g. asking him to write a coaching diary that might include homework, observations, etc.).

Finally, a successful coach would enable the coachee not only to achieve his originally defined objective, but in addition enabling him to put it into a broader context. She would have realized the inter-connectivity and inter-dependency with other aspects of the coachee´s life. She would try to assist the coachee in seeing the bigger context and variety of options. She would encourage and induce transformation.

FINAL CONSIDERATIONS FOR LEADERS AS COACHES

As a leader and line manager you´re always wearing multiple heads. That´s okay. You just need to be aware of it and to be clear with your coachee. As a line manager you´re having the right – if the situation demands it – to impose your agenda on the employee. As coach you are following, however, the coachee´s agenda. Full stop. You would need to change your head and your attitude in many situations, if you are a more directive leader and if you were serious about applying a coach-driven leadership style.

Still it´s acceptable, if you possess valuable and relevant expertise and information which would help the coachee to accelerate his development process, that you share these with the coachee even when you are wearing your coach head. In such an instance you would act as a "consultant“ and you would need to ask the coachee for permission in order to be sure that he really wants to hear it. Be also clear offering it without any strings attached.

Most importantly, as a coaching-driven leader you will need to be able to build trust with your employee to accept your coaching leadership style. Creating a safe and highly confidential coaching environment is key. The coachee must feel respected, reassured, and being in good and trustworthy hands to talk freely and to open up.

Coaching is a complex and at the same time very rewarding exciting communication medium with specific rules and techniques. It´s built around mutual respect, listening, asking, clarity, relying fully upon the coachee´s own resources, opening up new perspectives, and the absolute willingness to address challenging conversations and situations. Coaching assists people to achieve the results which truly matter living a successful and fulfilled life.

What do you think? Looking forward to receiving your feedback. Join the discussion!

References
Andreas von der Heydt: Are Great Leaders Great Coaches?  Retrieved November 6, 2013 from http://www.linkedin.com/today/post/article/20131030102103-175081329-great-leaders-are-great-coaches

Blanka Cigler
Senior Consultant, Coach & Project Manager

How to Sell To Buyers Who Know More Than You?

Figure 1: Why traditional sales techniques does not fit complex buying decisions?

Most traditional sales techniques presuppose that the seller knows more than the buyer. However, this does not fit with reality in respect of most complex buying decisions.

Often those doing the buying have more grey hairs, more experience and more impressive resumes than those that are doing the selling. They know more about their businesses and their industries than the salesperson could possibly know and if they don’t know it themselves, then they have access to a wide array of sources (analysts, consultants, etc.) to find out.

The salesperson who assumes that he, or she knows more than the buyer is on dangerous ground because:

• He, or she runs the risk of underestimating the buyer and getting caught out as a result.
• The seller who treats the buyer as dumb can quickly find him, or herself on the outside looking in.

The Implications For Sellers

What are the implications of selling to buyers who may know more than you? Well, we asked some experienced salespeople and here are their recommendations:

1. Ask more questions and make fewer bold statements and claims. For example, rather than stating ‘you should be aiming to cut costs by 35% by employing this technology’ ask instead ‘what type of saving are you aiming to deliver using this technology’. Ask more questions and make fewer assumptions.
2. Coach rather than seeking to control the buyer. Put aside any notion of trying to exercise control over the buyer. That means laying off on the use of what could be seen as manipulative selling, or closing techniques. Instead coach and facilitate the buyer by helping the buyer to clarify what he, or she wants to achieve and then helping them to achieve it.
3. Be prepared to learn from the buyer. Find out what has worked and not worked for buyers in the past, including their past experiences both good and bad.
4. Take extra care in closing the sale. Rather than using closing techniques to coach or cajole the buyer into prematurely making a decision, ask the buyer questions such as: What does he, or she want to do next? or ‘What extra information is needed?’. Find out where the buyer is at in terms of the buying process and help him, or her move to the next stage.
5. Give them better information. Before off-loading lots of information on the buyer, ask what information is needed. Understand where the information gaps and enable buyers to be selective in terms of the information they review. Provide useful information, not marketing blurb, for example replacing brochures with white papers and case studies.
6. Adopt a more evidence-based approach to the sale, recounting the results achieved by others and leveraging third party validation. Simply adopt a more expert-led approach by employing subject matter/domain experts to bring some specialized information to bear on the buyer’s decision.
7. Get the level of detail right. Senior managers are more likely to be focused on the bigger picture, that includes the issues of results, strategy, risk and performance. They are less likely to be interested in the same more detailed information that interests their lower level colleagues.
8. Peer your team with theirs. The cross-functional buying team means you should peer-match those specialists on the buying team with your own. That means your CTO talking to their CTO, etc. It is too much to expect the salesperson to be able to communicate on the same level with all those from different functional backgrounds involved in making the decision.
9. Give him/her space to decide. The more knowledgeable buyer won’t be rushed into a decision, so don’t try to rush him, or her into making a decision. For example agree in advance when you are going to follow-up on the information you have provided and wait until then. Don’t chase the buyer continually with unnecessary voice and e-mails.
10. Don’t just provide the answers, help buyers to work out them out for themselves. Buyers that are more knowledgeable are likely to be cautious about information that is handed to them by vendors. That is unless they have been involved in its preparation, or analysis. Take for example vendor ROI models – the challenge for the salesperson will be to get buy-in, or ownership of any of the information that is provided.

References 

Collis Ray: Buyer Seller Insight: Sellers: How to Sell To Buyers Who Know More Than You. Retrieved October 30, 2013 from http://buyer.sellerinsights.com/2010/11/16/how-to-sell-to-buyers-who-know-more-than-you/ 

Tamara Ćetković

Consultant, Coach & Project Manager

Buyer OCD: The Obsession With Lowest Price

Figure 1: Obsessive Compulsive Disorder (OCD)

Buyer OCD is a diagnosis offered by salespeople who are witnessing first hand the ongoing buyer obsession with price and the compulsive; price checking, competitive tendering and price re-negotiation, that accompanies it.

…price checking, competitive tendering and price re-negotiation.

For sellers who are positioned on value, buyer OCD can be a real problem. It makes moving the conversation, or more to the point the negotiation, off price and onto value a real challenge. The result is that sellers margins are under sustained attack.

The Rise of Buyer OCD

‘Imagine that your mind got stuck on a certain thought or image… then this thought or image got replayed in your mind over and over again no matter what you did… then along with the thoughts come intense feelings of anxiety…’ That is how the International OCD Organization explains obsessive compulsive disorder.

Now replace the term ‘thought or image’ with ‘price’ and you can see why many sellers are calling the buyer obsession with price an obsessive compulsive disorder.

OCD – The Background

Buyers are inevitably going to be concerned with price, that is except in extreme circumstances (such as where there is an emergency requirement). But, for some buyers price can become an irrational obsession.

OCD or Obsessive Compulsive Disorder is a disruptive psychological illness which some studies suggest affect up to 2.5% of the population. But in an era of sluggish markets and slashed budgets OCD afflicts a much higher proportion of buyers.

…in an era of sluggish markets and slashed budgets OCD afflicts a much higher proportion of buyers.

People with OCD are often aware that their behavior is not rational but nevertheless feel compelled by it. That explains the pursuit of lowest price by many buyers who know that lowest price does not mean best value, or even lowest total cost of ownership.

Price – A Rational Obsession?

For many purchases (or categories of purchases) lowest price is all that matters and obsessing on price makes sense.

For other categories the oasis of lowest price is often a mirage. Short term savings, can obscure long term costs and non-price variables have a major bearing on making the right decision. In these cases obsessing on price is not rational.

There are exceptions however. For example sellers often don’t realize that the procurement professionals with whom they negotiate are incentivized to cut supplier price. Obsessing on price makes sense if cutting the seller’s income, directly increases the buyer’s income.

Short term savings, can obscure long term costs and non-price variables have a major bearing…

Research points to a range of environmental factors at play in OCD. For the buyer the environmental factors that result in price obsession include the absence of; a clear category strategy, or strategic procurement objectives.

There is no known cure for OCD in the general population, but a number of successful treatment options are available. The same is true of an irrational compulsive obsession with price. That means some seller psychotherapy is required, including counselling the buyer around price verus value and the total cost of ownership.

Implications For Sellers

The seller’s challenge is to move the buyer off price and onto value. The problem is that if as the seller you can’t communicate your value – all your value – price is where you are going to get stuck. But in dealing with numbers obsessed buyers you must calculate your value before you can communicate it. 

…you must calculate your value before you can communicate it.

The seller must interrupt the pattern, when the buyer focuses on prices, he, or she must redirect the focus back to the total cost equation and more broadly onto the value equation. In particular re-focusing the buyer on the end result, or life after the purchase. This technique is what pyschologists call “thought stopping”.

Many sellers think buyers suffer from Price OCD because they are only being called to the table at the competitive tender or call for quotes stage of the buying decision. That may be as much as three quarters of the way into the decision. At that stage the buyer may only to be focused price.

The problem is that if you are only getting involved at the call to tender stage your ability to influence requirements and the specification is going to be limited. It can mean that the only variable left to compete on is price.

OCD is of course a very serious condition and building public awareness of the condition is important for those suffering from it. With that mind you can learn more about OCD from the International OCD Foundation or on Wikipedia.

References 

Collis Ray: Buyer Seller Insight: Sellers: Buyer OCD: The Obsession With Lowest Price. Retrieved October 30, 2013 from http://buyer.sellerinsights.com/2012/08/03/buyer-ocd-the-obsession-with-lowest-price/

Blanka Cigler

Senior Consultant, Coach & Project Manager