Hi, I’m Chris younger and welcome to another sales thought of the day and today’s still thought we’re going to jump into the psychology of the sale now to do this.
I want to touch on a field of study called behavioral economics.
Behavior economics, quite simply, is the combination of psychology and economics.
What it does is provide some valuable insights, though it lets us know that we’re not always as rational and logical as we’d like to think we are when it comes to making either large or small decisions for that matter.
Now, behavioral economics is a field, that’s grown.
Quite a bit and it’s grown out of the discovery of several core biases cognitive biases that were identified in the 1970s by Dan Connell, Minh and Amos Tversky.
These two men were the pioneers in this particular subject.
So we’re going to dive into some of the common biases that they found and we’re going to see how we could use them to help us a little bit more in the sales process.
Kahneman and Tversky defined cognitive biases.
As a systematic pattern of thinking, which deviates from formal, logical thinking and influences our judgments when it comes to decision making simply put, we think most of our decisions are rational when it comes to decision making.
But the fact is they’re.
Today’s topic is going to be on how to use these cognitive biases in the psychology of the sale.
Now cognitive bias, when you research, the specific cognitive biases you’re, going to come up with anywhere from twelve to over a hundred different cognitive biases, which have been identified by different researchers.
Today, we’re going to only talk about three we’re going to talk about three that I feel are going to be very influential and helpful in sales.
So that’s the reason I wanted to bring these to you today and and see how we can use these common biases to move the sale forward in nineteen.
These two psychologists found that people tended to prefer not to lose something they already have then to acquire something that was an equivalent type of value.
In other words, people find it more painful to lose ten dollars than it is to acquire or gain ten dollars.
Now this phenomenon that Traverse key and Kahneman discovered they coined the loss, aversion and there’s a growing body of research out there recently shows were primitively hardwired to be loss averse.
We don’t want to lose because of the way loss aversion works in that people will protect.
What they already have, sometimes to almost an irrational extent, what might be very helpful is to appeal to their fear of loss that could even be more effective in a sales situation than talking about what the future gains that this product or service could provide for them.
Now that we know a little bit more about what loss aversion actually is, how do we use it to help us in sales? Well, let’s take an example, let’s say, for instance, that we’ve got a used car that we’re showing a guest.
It’s a 2015 Chevy Malibu LT, with 98 thousand miles on an average condition on the exterior it runs.
Well, it’s been well-maintained, it’s just an average car.
In fact, when you go to the car gurus, the cars calms, the Kelley Blue Book’s the sites that say if it’s a good deal great deal or ok deal they’ve listed it as a good deal.
So it’s just a car.
In our example, we’ll say that the gas was great to deal with.
They allowed you to do a presentation.
They took their time, they weren’t in a rush.
They looked the vehicle over carefully, they took it on a demonstration drive and you were with them.
You got to go through service, you did all the things that you wanted to do with the gas to be able to build value in the dealership and in the vehicle you introduced them to your management team.
You got to the point where you ask them for a signature to sign on the dotted line and they said sorry, we need to think it over.
I’ve got a grip word track for you today.
That will help you with this natural fear of loss, that we all have this loss of version that Kahneman and Tversky had discovered back in the early 70s, and we know now plays very important role in decision making.
Here’s how it goes folks, I bet every time you get ready to leave and you were looking at some type of a used car.
The dealer tells you hey.
I had somebody looking at this car yesterday and I just wanted you to know that if they come back and buy it, it’s first-come, first-serve they get the vehicle.
You’ll lose out.
I’m here to tell you that I don’t have somebody that is looking at this vehicle.
Not that I know of but here’s the facts and here’s what I know right now.
This view 100 % yours and when you leave, you lose all that availability and it’s open back up to everyone.
That’s searching online, the 250,000 people that make up the Quad City area and the 20 other colleagues that I have at this dealership that are also trying to sell used cars in our goal with this word track is to not sound like every other salesperson, but yet Let them know that right now, it’s their vehicle and when they leave, they lose that ability, and we also want to remind them that if they found this online and thought it was a good deal or a good vehicle.
There’s other people out there online searching and there’s people in the Quad City area that could just drive in and look at the vehicle and then lastly, we’ve done other sales people that are also looking for vehicles to call back prospects that were maybe in two or Three days ago, and they didn’t have a vehicle that fit the needs and this vehicle will fit so that’d, be our goal with this word track.
Try it, I think, it’ll help you.
The next cognitive bias I want to discuss is framing now a little background on this.
There was a study in 2009 in the Journal of economic behavior, and the researchers found that, when they addressed pH students to register for a particular conference, 93 % of the time if they framed that they would be a penalty or some type of late fee.
For not signing up on time that they went ahead and complied versus 67 % of the time when it was presented like it be a discount or some type of early registration fee.
So people are more worried about losing things than they are gaining things similar to our theory on loss aversion, in other words, similar to risk aversion, we’re more worried about losing what we already have than gaining something new so much so that people tend to avoid risk.
When we put it in a positive frame and then they’ll actually seek out a risk when it’s presented in a negative frame, what do I mean by that? Let’s take a couple examples for an example in framing: let’s use an investment banker, let’s say, for instance, that he or she was trying to secure an appointment with a prospect to discuss a new opportunity with them.
What do you think might be the best approach bill? I to meet with you to discuss an opportunity to put $ 10,000 in your pocket or bill.
I just wanted to meet with you, because I need to discuss the chance of you losing $ 10,000, which would be more effective in another example.
In framing, let’s use the automotive business, let’s pretend we’re a car salesperson and we’re showing a ghast a new vehicle that gets quite a bit better gas mileage than the vehicle they’re currently driving.
In fact, let’s pretend that the vehicle that they’re currently driving cost them $ 200 per month in gasoline and the vehicle that we’ve got them looking at the newer vehicle, it’s only going to cost them 175 dollars a month in gasoline.
Well, we could frame it either way, which do you think would be the better way to frame hey Bill if you guys trade this car in and get the new one you’re gon na save $ 25 a month in gas or hey.
If you guys leave now and go home – and you don’t do anything – it’s gon na actually cost you $ 25 per month more in gasoline savings.
The third cognitive bias I want to discuss today is the halo effect or the liking biased, and this is the tendency for us humans to ignore or embellish the actions of people that we like loved ones or friends.
In essence, it’s when loved ones or just people.
We like do something wrong, we’ll consciously or a lot of times subconsciously downplay what they did, because we just don’t see it quite for what it is.
Why? Because we like them, for instance, when a leader of an organized crime organization, is indicted for murder, tax evasion and racketeering.
What’s the mother usually say hey, he was a good boy when he was growing up.
He just got him with the wrong crowd.
Well, she’s right about one thing: he was in with the wrong crowd.
However, she doesn’t realize he’s the one that created and organized that wrong crowd.
Another example would be say, for instance, you’re complaining to your friend about your spouse, not picking up after herself around the house and being a slob and then all of a sudden.
Your friend jumps in and they kind of start in on the spouse, bashing and think they’re, helping you out by saying yeah.
He is kind of an inconsiderate pompous jerk.
Well, you didn’t say was a pompous jerk.
In fact, he might be a pompous jerk.
Your pompous jerk so a lot of times because you like and love this person, you defend this person again.
It’s part of the liking effect to give you a few tips on this liking, biased or the halo effect, and how it can be used in other sales industries.
I think we should turn to the book influence that was written by Robert pal Dini.
In fact, it’s dr.
Robert Cal Dini and in his book on enhancing the liking biased.
He says that there are several things that you can do.
That will help you that are in the first one is physical attractiveness, yes, good, looks suggest other favorable traits like honesty, humor trustworthiness, so that a lot we can do about how we already look in our physical traits.
There was some things I guess we could.
We could, through plastic surgery, but to go ahead and use the mug that you’ve got.
I would tell you this: you can make sure that you’ve got a clean haircut, whether you’re a man or a woman beard if you’re a man trimmed properly.
Hopefully, if you’re a woman, you’ve trimmed it pretty properly, also you can make sure your clothes are clean depressed.
You smell good.
You look good that you’re dressed appropriate for that particular sales type of industry.
The second thing that we can use or dr.
calvini talks about is similarity, and we tend to like people that are similar to us.
We like people, we think favorably of them.
If they’ve got the same occupation, opinions, background or interest that we do, and lastly, dr.
calvini talks about the use of compliments and how they can help enhance the liking bias.
And it’s a known fact that we just we like to receive, compliments and it’s kind of crazy, but even when we know sometimes somebody’s complimenting us hey, you lost weight, hey that looks good on you and we know it’s a sales situation.
We still feel good about it and still enhances our thought about that person and it increases that common ground and helps develop rapport, so don’t lose out on that now.
For some other tips, you can go to my car salesman’s meet-and-greet video in that video.
I talked about how to establish common ground and rapport and a lot of the tips I give you aren’t just specific to the automotive business.
You could use them in any sales situation or service situation.
Well, there you have it psychology and sales 3, very common biases and how you can use those to help.
You move the sales process forward now.
In conclusion, let me say this: I know when it comes to decision making and buying items, especially high ticket items that we’d all like to think that we’re very rational, thoughtful and logical.
However, as we found out today, that’s just not always so common.
Why, well, I think Zig Ziglar said it best when he said people don’t buy for logical reasons.
They buy for emotional reasons.
If you learn something new today or relearn, something please do me a favor and hit that, like button also comments I’d like to hear any type of comments that you have, but I’d also like to hear there’s some subjects that I should do more videos on.
Do you want to hear more about cognitive biases? Should I move to a different topic? If you leave me a comment, I’ll be sure to see what the demand is for that particular subject, and that could influence the next videos that I do with all that I’d like to say have a great day and thank you.