Sales Psychology

The Truth About Loss Aversion

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hands fighting over a chocolate glazed donut

Imagine it’s 11:51 PM…

You’re laying on the couch, scrolling on your phone and starting to doze off.

Just as you’re about to put your phone down, you get an email from the bakery you visit every morning on the way to the office.

It says:

“We’re giving away a dozen FREE DONUTS to our favorite customers — if you can come into the shop right away.

“The night shift employees forgot we close at midnight now, so they just pulled 300 fresh glazed donuts out of the oven. We can’t hold these beauties until morning. Get here by midnight and you can have a dozen FREE. The glaze is still dripping!”

You have 9 minutes to jump up and shoot over to the bakery, which is just down the street. You’d have to rush, but you can make it.

Or you could keep scrolling on your phone until you slip into sweet unconsciousness.

What would you do?

Now imagine a different scenario…

It’s 1:51 AM.

You had a brutal day. Your team stayed late working on a big project and they agreed to come in at 6:00 to help finish up before the deadline.

To show your appreciation, you promised the team donuts in the morning. But your favorite bakery doesn’t open until 6:30, so you picked them up tonight.

You just crawled into your bed to get a few hours of sleep.

At that moment, you hear your brother unlock your front door and walk into the house. He pops in whenever he’s in town and doesn’t want to pay for a hotel.

The first thought that crosses your mind is that you NEVER should have given him that key.

Your second thought: that dude eats everything in the kitchen whenever he stops by. And he loves donuts…

What do you do?

In the first scenario, there’s a strong chance you’re not taking any action. You’ll ignore the “irresistible” offer of free donuts and fall asleep on the couch.

In the second scenario, there’s a 99% probability you’ll fly into action. You’re jumping out of bed and running toward the kitchen to make sure your brother doesn’t eat your team’s donuts.

You see where I’m going with this.

We’ve always heard that people are twice as likely to take action to avoid pain than to enjoy pleasure.

Some more recent studies indicate that, in fact, people react just as strongly to gains as they do to losses.

Apparently researchers haven’t been able to replicate results proving that “loss aversion” alone has a significant impact on decision-making.

(I wanted you to hear about this from me.)

Now, I haven’t conducted any clinical studies. When I think about it, I haven’t run loss aversion split-tests in a while.

I assumed the old info was true.

But based on experience, I still believe loss aversion is a compelling emotional force. The scenarios with the donuts above are solid illustrations.

So what’s the big takeaway here?

You know me. I’m always encouraging you to test different ideas to see what works best for you and your audience.

If you haven’t tried loss aversion as a tactic to increase conversions, give it a try. For example, you can use:

  • disappearing bonuses
  • real scarcity where people will miss out on the opportunity
  • expiring credits toward purchase (instead of discounts)

Test this stuff against simply trying to “add more value.” Then draw your own conclusions.

My second point is this: Researchers found that loss aversion begins to take over when losses are serious (because self-preservation is a priority for the brain).

When you’re using the negative argument, intensify the size and severity of the potential loss. Show the reader how much it’s going to cost him not to act:

  • Heart disease is inching closer every minute if you [BLANK]
  • The IRS could take thousands right out of your bank… unless you [BLANK]
  • Your wife will lose interest in you if you don’t do [BLANK]

Big losses, big reaction.

Give it a try in your own marketing.

Foolproof Attention-Getting Tactics of Great Copywriters

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attention-getting copywriting secrets

How do you break through the hullabaloo that your “should-be” customers are immersed in and get YOUR message across?

Well, it starts with attention. “Have I got your attention? Good.” **Queue scene from Glengarry Glen Ross**

I got the chance to spill some of what I’ve learned about getting attention online, in print and in person on The Small Business Marketing Report podcast (now called the Click and Convert Podcast) with Robert Tyson.

In 56 minutes, we discussed:

  • How to use hidden dangers and unexpected consequences to draw people to your message like moths to a flame
  • Why certain kinds of statistics get shared on social media
  • Why picking a fight is often great for business (and how to benefit even if you don’t do the fight-picking)
  • How to use personality… and how much personality is too much?
  • How to use secrets and codes for almost guaranteed attention

Check out “The Psychology of Attention: 5 Foolproof Ways to Grab ‘Em by the Eyeballs”

Honestly, I’ve been fiending to be a guest on The Small Business Marketing Report podcast for quite some time, and I’m a big fan of Robert and his co-host Sean Clark, so I’m excited about this.

Enjoy!

Update: Now you can listen to the interview here!

Why Selling Is So Hard?

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No Trespassing. No Selling Allowed

Most people won’t say this in public, but behind closed doors and in their innermost thoughts, you hear it with staggering frequency:

“Why won’t these dummies buy my product?? They know they need it! I’ve clearly shown them how much better their lives will be when they start using it.

Selling is HARD! Argg!!

Yes, selling is hard. The reason is simple: it is impossible to change someone’s mind. Literally impossible.

But you still have to get people to say yes or click a button for your business or career to survive. How do you do it? Why is there a small percentage of people who make selling look so easy? How do I become one of the ones who make it look easy?

Your prospects have “No Trespassing” signs posted at every one of the entrances to the mind. The guards are very selective about who they allow inside the gates.

If you try to punch a hole through their mental defenses, you’ll soon find out how ineffective (and exhausting) that can be. Using hype and high-pressure tactics is a foolish approach — no matter how cool the Wolf of Wall Street makes it look.

Here’s what it boils down to:

There are things that your would-be customers really want to do, but for numerous reasons they can’t bring themselves to take action.

They want to start investing so they can retire comfortably. They want six-pack abs. They want to meet their soulmate.

Your job is to give your customers the psychological, emotional and volitional strength to get out of their own way.

To empower them to grab hold of their better future.

That’s what we’re going to talk about during Monday’s Irresistible Offers teleseminar.

We’re going to tackle the topic of persuasive selling based on how the brain works…how human emotion works…how language works.

There is one psychological reality that puts all the pieces of the persuasion puzzle into a single, cohesive concept.

Instead of long lists of complicated techniques and formulas (which all talk about different things), you’ll discover a simple but incredibly enlightening illustration of the how the mind works and what makes persuasion work.

You’ll learn why people say ‘yes’ and you’ll learn what it takes to get more yeses from your sales and marketing.

Everyone who makes selling look easy leverages this reality, consciously or unconsciously.

This session is going to be a real eye-opener, with research gathered from

  • the U.S. Army
  • the Central Intelligence Agency (CIA)
  • the latest psychological and neuroscientific studies
  • social movements
  • millions of dollars of direct marketing testing
  • and Hollywood, possibly the greatest influencer of culture on the planet.

If you’re an entrepreneur, salesperson, marketer, copywriter or anyone who needs to be more persuasive, you don’t want to miss this call. The insights you’ll gain could change everything for you.

Understanding what makes people tick and learning to make offers they can’t resist — now that’s a good investment.

My promise to you:

The teleseminar starts from 8:00pm Eastern on Monday, August 11th. The cost is $58.

I’ve condensed the best insights I have on selling in person, print or pixel into an hour-long. I’m not holding anything back. I’ve only spoken publicly about some of this information once in the past 2 year (at my paid workshop in June). Parts of it I’ve never shared before, which is why the teleseminar is more expensive than the workshop.

At $58, it’s a freakin’ steal. I guarantee you’ll get 99 times more value than what you spend or I’ll happily give you a full refund — before I go to bed Monday night.

I can’t stand sitting in on presentations and listening to the “same old, same old.” Don’t you hate that? I’m not going to put you through that torture. If you don’t learn something brand new, I’ll give happily your money back.

Let me help you get past your customers’ “No Trespassing” signs. Sign up for the Irresistible Offers teleseminar here.

Raise the Bar on Your Value Proposition

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What is Rolex’s unique value proposition (UVP), really?

What do they do that no other watchmaker does? Do they make the world’s most accurate timepieces? The most durable? Nope. The most aesthetically pleasing? I’d give that a “no,” but I guess that one is debatable. Do they offer special features that can’t be found in other watches? Not really.

So what is it that makes Rolex so special? If we think about that for a moment, we may gain insights that will immediately impact the way we run and market our businesses.

Two Unique Conversations

apple vs. samsung marketing war

I’ve long been an advocate of finding your uniqueness. If you’ve been reading my stuff for any length of time, you’ve heard this conversation on numerous occasions. But my thinking about how uniqueness works out in the real world is evolving. Two conversations have really sparked my changing perspective.

My first inspiration came during a conversation with a brilliant marketer, my good pal Chuck McKay. He was explaining to me how there’s really no way for products to be truly unique anymore — at least not for more than a few months. Companies that create technological advancements that customers get excited enough to pay for usually see copycats coming up right behind them almost immediately.

Exhibit A: The multi-billion dollar global battle, Apple vs. Samsung.

Jack Welch said that “If you don’t have a competitive advantage, don’t compete.” So what do you do in an environment where your advantages can be ripped off so quickly?

Well, the force that creates loyal, enthusiastic customers (ones who don’t make price the the primary factor in their buying decisions) for companies like Apple, Rolex and Harley-Davidson can work just as well for you.

Boiling It All Down

You may point to the way that strong brand positioning is propelling companies like Rolex forward, and you’d be correct. But what really lies behind this branding thing? More importantly, how can you use it to build of loyalty and top of mind awareness like a Nike.

The second conversation I mentioned earlier was more of a conversation I had in my own mind after reading an article written by Kimanzi Constable. When you boil it all down, business is about relationships and experiences. Branding is about relationships and experiences, both real and imagined.

unique relationship as value proposition

Have you ever seen images of fans at a Michael Jackson concert? People went bananas! Security personnel and paramedics were always on hand to handle people who whipped themselves into a frenzy and often passed out.

Good music was only part of the cause. You can bet these folks didn’t pass out every time a Michael Jackson song came on the radio. But at the concert, perfectly rational, even-keeled people became emotional, delirious fanatics . Their relationship with Michael may not have been personal, but it was very real.

Your favorite musicians may have a similar effect on you. Music creates powerful emotional experiences and, in a way, we have vicarious relationships with musicians (and other fans) through the art they perform.

Those experiences and relationships are where true uniqueness can be found. Even in a commodity business where unique value propositions are hard to come by, you can create unique experiences with customers. Just like famous musicians, you may never see them face to face, but the unique relationships you forge can be very real.

Years ago, I had a manager who told me that “every man should own a Rolex.” Rolex represents success, refinement and even masculinity for those who own them and those who desire them. This is the unique relationship Rolex has with its customers. The brand is capable of providing them with a highly-esteemed status symbol, one that draws both admiration and jealousy, in a way no other timepiece can quite replicate. The brand is an extension of the owner’s self-image, the self he wants to portray to others. He will gladly pay thousands of dollars to accomplish that.

Building Your Unique Value Relationship

Even if you have an established USP/UVP, you should start to think about your marketing and branding in terms of relationships instead of propositions. There are countless ways to build your unique value relationship (UVR). Since it is unique to each individual, I can’t tell you the best way for you to put everything together. But here are some principles to get you started.

1) Make and keep bold promises. Inspire, excite and challenge potential or existing customers. Most of your competitors will never do anything to shake people up and make them take special notice. They’re too busy playing it safe.

2) Provide remarkable customer service. Treat the customer like royalty (note how royalty and loyalty rhyme, at least in English). Give ridiculous guarantees and take away as much of the risk as possible from your customers. Make it easy to buy, easy to ask questions and get answers. Go further than your competitors are willing to go to take care of your customers’ needs. Live the Golden Rule. Don’t just say you care–prove it.

3) Stand for something. Or against something. Be a hero, an advocate. Champion the cause of your audience. Few things build and strengthen relationships like a shared goal or a common enemy.

4) Create an exclusive clique. Starbucks initiates customers into a whole new world of coffee enjoyment. I worked there for years, so I’ve seen the effect firsthand. These people are forever ruined to Folgers. But it’s more about being a member of an elite class of coffee connoisseurs than the quality of the drink. I had plenty of people tell me that Dunkin Donut’s brew tastes just as good.

If there’s anything in the world that’s a commodity, it’s coffee. Starbucks still found a way to become unique. It’s all in the experience.

5) Make the most of your location. Be THE neighborhood auto body shop. Or accountant. Claim your territory and dominate it. To steal a popular slogan, like a good neighbor, you should be there.

I believe the only way to free your business permanently from the commoditization rat race (a.k.a. the economy of today and tomorrow) is to develop and maintain a uniquely valuable relationship with people you can truly help. That is something no competitor can rip-off or destroy.

Go get started. Today.

Strategic Subtlety: A Quick Copywriting Tip

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Blatancy does not command respect.

Over-statement, in reaction, creates commensurate resistance.

   – Lord & Thomas Creed #1

While I’m a big fan of big claims and bold promises, strategic subtlety can be very persuasive, in a stealthy kind of way.

Take a look at an recent example I got in the mail. Here’s an excerpt from Imagine, a quarterly “magazine” from the University of Chicago Medicine.

U of Chicago

Notice how the writer implies that the University has a noteworthy history of “contributions to science and healing” without coming out and saying it. The sentence gently forces you to draw assumptions, subtly prompting your imagination to fill in the blanks.

This is more effective, not to mention easier to consume, than sharing a list of achievements that most readers will probably find boring.

One of the great secrets to persuasion is that people almost never doubt their own conclusions. A simple statement like the example above convinces us that the University of Chicago Medicine has a remarkable past of medical advancements, which makes a promising future seem almost inevitable.

All of that with no apparent effort to “sell” the idea to the reader.

Consider this: if the writer had tried to convince you of all the wonderful things that have been accomplished in the past, how would you have reacted. The mere attempt to convince is a turn-off. As Lord & Thomas Creed #1 says, “Too much effort makes men think that your selling task is hard.”

Strategic subtlety makes the quality of your product, service or brand seem to stand on its own. It’s so good that you don’t even need to explain it.

Where can you use subtlety in your sales copy to improve its persuasive power?

Expect Resistance and Overcome It

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Selling is hard.

Rather, selling can be hard.

Each of us has certain built-in psychological resistance to “being sold.” The challenge marketers and salespeople face is circumvent that resistance.

In a 2-part series on the Diamond Website Conversion blog, I’ve gone into detail about several specific forms sales resistance takes on, and more importantly, ways you can bypass it.

No matter what you sell, no matter what field you work in, these obstacles exist in all of your prospects to varying degrees. Do you know how to overcome them?

Overcoming Your Prospects’ Hard-Wired Conversion Obstacles
Part 1: Skepticism, Inertia and Reactance
Part 2: Cognitive Biases (confirmation bias, normalcy bias, etc.)

Cognitive Biases: Overcoming Your Prospect’s Hardwired Resistance, Pt. 2

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In Parts 1, of this we talked about how you can write copy for your website that overcomes the skepticism, inertia and reactance that naturally work against your sales message.

Another set of psychological phenomenon applicable to business and marketing is in the realm of cognitive biases.

The brain is not — and cannot be — completely objective in perceiving information. You can become a much more effective communicator and persuader by understanding the angles and spins that our minds apply to every bit of information we consume.

Let’s examine how cognitive biases and think about ethical ways we can use the brain’s predispositions to strengthen our marketing messages.

Confirmation Bias

We are wired to look for evidence that supports what we already believe to be true. We tend to interpret data in ways that agree with our positions. We value people who are on our side of an issue or debate – we have an automatic kinship with them.

The opposite is also true. We tend to reject information that contradicts our opinions. That’s known as the Semmelweis reflex. In fact, information that disagrees with our preconceptions has been shown to strengthen our original beliefs. That’s called the backfire effect.

Our brains need consistency and predictability, so we automatically find ways to support the paradigms we hold. Information that contradicts our ideas about the world is often discarded out of hand.

That’s why it’s difficult for a Democrat to become a Republican, or a Yankees fan to start rooting for the Red Sox.

You need to present your product or service and your message in a way that agrees with what your audience already believes. Confirm their suspicions about themselves and the world around them.

Normalcy Bias

You have to relate to the members of your audience right where they are. People have a hard time spending money on solutions for issues that haven’t “hit home” for them yet. We’re inclined to think:

“That could never happen here…”

“I’ll never be in that situation…”

Even if we logically understand the possibility, we don’t feel the need commit to anything that seems far removed from our everyday experience. Our brains can’t contemplate every conceivable occurrence that might come to pass in our lifetime. So the status quo becomes our default mental setting and we don’t give much thought to other scenarios.

You’ve probably noticed how hard it can be to convince people that danger may be on the horizon if it’s outside their personal “normal.” That’s one of the reasons disasters like Hurricane Katrina wreak as much havoc as they do. That same bias is present in all of your customers.

Are you selling a vaccine or a pain killer? Ibuprofen is almost always easier to sell than flu shots.

Knowledge Bias

People tend to choose the option they know best instead of the best available option. (This is another reason why “building a better mousetrap” doesn’t guarantee people will beat a path to you door.)

This raises 2 important questions:
1) Are you building valued relationships with your audience
2) Are you providing enough information as your prospects need to feel confident in choosing you?

You can see how important transparency, honesty and credibility are. This cognitive predisposition is the one of the psychological reasons behind the Know-Like-Trust concept most of us have heard about a million times.

In Jack Trout and Al Ries’ 22 Immutable Laws of Marketing, Law #1 says that it’s better to be first than it is to be better. Law #3 states that it’s better to be first in mind than first in the market.

How well-known are you in your arena? What can you do to improve that?

Selective Perception

This is all about framing your message properly.

When you properly set expectations in the mind of your potential clients, you affect their how they perceive the topic you’re discussing. You can make them see what you want them to see, just like a magician…

Education is a wonderful selling tool. You can use it to shape your prospects’ opinions about how to shop in your industry, which gives you the upper hand over all of your competitors.

When people we trust share information with us about something, it has a huge impact on how we experience that thing in the future. For example, when I was young, my mother told me that I didn’t like cranberry sauce, even though I don’t remember having tasted them before. I can’t tell you how many years I missed out on eating them, without ever trying them for myself.

When we’re not experts on a particular subject, we usually take what the “real experts” have to say at face value (unless it contradicts our current worldview). They define how we think about that topic. Parents, doctors, mentors, etc. have tremendous influence because of this fact.

So, how are you framing your marketing conversations? What expectations are you setting?

Bypassing Your Prospect’s Hardwired Resistance

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resistance keep out

In his 2003 book Resistance and Persuasion, Dr. Eric Knowles explores the psychological reasons people to say “no.” Understanding why your website’s visitors tell you “no thanks” can go a long way in helping you change more of their responses to “yes, please.”

Dr. Knowles talked about 3 main root causes for the natural resistance to the sales process: skepticism/distrust, inertia and reactance. Today, we’ll analyze skepticism in more detail to see how you can neutralize it and increase your site’s conversion rate and profitability.

Skepticism – Resistance to your offer

People are trained from a young age to think that “if it’s too good to be true, it probably isn’t.” Nowhere is this more applicable than in business and marketing.

Does the copy on your website make hard-to-believe claims? Maybe you have to make bold statements because your product or service is just that good. Why should you be penalized for having an incredibly great selling proposition?

You overcome skepticism with evidence. Can you back up the claims you make with proof? Do you have testimonials of satisfied customers whose lives you’ve changed? Can you give statistics from authoritative sources that give credence to your statements? Can you demonstrate that you’re telling the truth with pictures or video?

Don’t hold back on the proof! The more evidence you can show that your claims are 100% legitimate, the less room you leave for skepticism.

Want to do even better? Offer a free trial or sample of your offering. It’s hard for people to argue with results they’ve experienced for themselves.

(Just a thought: if you can’t confidently offer a free trial of your product or service because you’re nervous the customer won’t make the final purchase, maybe you need to improve it until you know that if they try it, they’ll buy it.)

A major reason people hesitate to pull the trigger on a purchase is the fear of feeling ripped-off or disappointed when they finally get what they ordered. You can effectively alleviate that fear by offering strong guarantees and/or service after the sale. When they know they can get their money back if things don’t go the way they hope, making the decision gets a lot easier.

Another mistake many businesses make is sounding just like everyone else in their field. If your website looks the same as your competitors, if your copy says the same things in the same “voice,” your potential customers are very likely to think of you as the knock-off of the sites they’ve already seen. When everyone looks the same, everyone is seen as a commodity.  But worse than that, everyone sounds fake and insincere.  Distrust is a conversion killer.

Use specific language to show readers how well you know them, how well you understand their needs and how experienced you are in delivering solutions for those needs. Speak directly to your audience in language that resonates with them.

Don’t try to talk to everyone. Generic language almost always misses the mark.

Inertia – Resistance to change

If you’ve lived on this planet for more than 10 years, you know how difficult it can be to convince people to change their established routines. People like to do things the way they’ve always done them (even when they know there’s a better way). Studies show that our brains go out of their way to form habits, then “reward” us with happy hormones when we maintain them.

It’s Newton’s First Law of Motion applied to human behavior; bodies in motion stay in motion. We tend to keep doing what we’re currently doing, and it’s hard to start something new.

Habits are hard to break. And there’s a sense of comfortable familiarity and security that come from keeping things the same. So we resist change.

As marketers and salespeople, we often think the way to make our propositions more compelling is to increase the perceived payoff customers will get when they buy from us. That’s why we pile hundreds of dollars of bonuses on top of our offers. Not that there’s anything wrong with that; giving more value is always a good idea.

What we don’t realize is that habits are their own payoffs. That’s part of the reason people get set in their ways.

Alan Weber is quoted as saying “Real change happens, when the pain of staying the same is greater than the pain of changing.” The same is true when it comes to selling your product or service from your website. You may have difficulty demonstrating that the payoff of using your product (which they haven’t felt yet) is greater than the payoff associated with their current product or lack thereof (which they’re currently enjoying).

Consider trying another route. Instead of focusing on the payoff of taking action on your offer, show your visitors how much it costs them to keep doing things the same way. What do they lose by continuing on the path they’re currently taking?

According to Weber, change happens when that reality hits home. Then your prospects can replace their old purchasing habits with better ones – yours!

Reactance – Resistance to persuasion itself

Jeffrey Gitomer wrote in The Sales Bible, “People don’t like to be sold but they love to buy.” When you look at your own experience, you can see the truth in this statement.

Of course, that fact is one of your biggest challenges as an online marketer. People want to buy things to satisfy their desires and remove unpleasant aspects of their lives. They just don’t want to feel like they’re being “sold.”

Claude Hopkins wrote that “Any apparent effort to sell creates corresponding resistance.” It’s an instinctive reaction. Instinctively, our brains think “Hey! This guy is trying to benefit at my expense. Well, he’s not gonna get me!”

A customer’s sales resistance is related to a psychological phenomenon called reactance. In layman’s terms (as per Wikipedia), reactance is a person’s subconscious rebellion against what he thinks someone else wants him to do.

We see the other person’s will as a threat to our freedom to decide and act as we please.

When a salesperson asks “how can I help you?” you don’t believe her true intention is to help you, do you? You think she wants to help herself. You imagine that she’s going to do everything in her power to make you purchase what she wants to sell you, not necessarily what you want to buy.

You’re sure she’ll try to make you buy now; you want to make up your mind in your own time.

People want to operate on our own terms, not those of a salesperson (or anyone else). So we resist.

You neutralize reactance by not appearing to sell. You hear a lot of talk about push vs. pull marketing regularly. That’s largely what this issue boils down to.

Have you ever noticed that commercials on TV are louder than the program you tuned in to watch? Obviously, that’s an attempt by the advertisers to get your attention, and it works. You can’t ignore the blaring sound. But is that a good thing? Most would agree that it’s not.

No one likes to be pressured and no one likes to be shouted at. It may grab your attention, but it’s also irritating and puts you in a negative mood. That defeats the purpose of your message.

Don’t “shout” your sales message. Hard-selling is counterproductive. Instead, seduce. Give your visitors reasons to listen. Make them want to know more about what you’re talking about.

Engage your readers by talking about topics that are truly important to them. Tell interesting stories. Create a sense of curiosity. And really communicate what’s in it for them. When you start sounding like someone who just wants to sell something, you’re in a heap of trouble.