I was scrolling through some TED talks the other day and came across a few interesting videos that covered various aspects of the science behind how we make decisions. Since we all rely upon prospects making decisions to select our business over their other choices, I thought you might find this interesting.
The first talk was an old one by Psychologist Barry Schwartz. His premise is that the dogma, freedom equals choice is flawed. His research shows that having too many choices creates downsides. The first downside is decision paralysis in that we tend to procrastinate about making decisions when we have too many choices. The second is that when we finally do make a choice we feel less satisfied with our decision the more options we have. Fewer options mean that we don’t expect perfection and that we could be pleasantly surprised. Greater options mean that if what we chose isn’t perfect then we tend to beat ourselves up for not having made the right decision.
In fact, as consumers, we are often placed in situations where we are asked to make a decision that really doesn’t make sense. Healthcare is a prime example of this. I say this having grown up in Canada under a system of socialized medicine where we went to the doctor and the doctor determined the best course of action for our health. Many years ago when I first moved here to the United States I remember visiting a doctor for the first time. He presented me with two different tests he could run for me and told me the price and information he could gather from each. He asked me to make a decision. But I’m not the doctor I thought. How am I supposed to know how to make this decision? Having that choice certainly wouldn’t help to make me any healthier. All it served to do was leave me feeling concerned that perhaps I had made a poor one. There are times when even though you are the paying consumer if you’re not the expert you would really prefer someone to lead you toward the right decision rather than be left to wonder if you messed up.
Venture capitalist Patrick McGinnis concurs. His talk on how to make faster decisions coins the acronym FOBO or fear of better options. He studies how people tend to become paralyzed when faced with too many choices. He presents an interesting methodology on decision making that suggests our process should differ according to the stakes of the decision outcome. For low-stakes decisions, He suggests that we simply flip a coin or use some other form of random selection since the choice really doesn’t matter too much. An example of a no-stakes decision could be what to order for lunch. Whatever you choose is unlikely to have a strategic impact on your business, although it may impact your waistline. An example of a low-stakes decision could be something like buying a printer for the office. It may be slightly more important but it’s certainly not a make or break. These are decisions that he recommends we delegate, after providing your employee with the decision criteria. And then we have high-stakes decisions. Examples might include making a buying decision for your business. Clearly, these are more complex and require your attention. McGinnis recommends a waterfall approach where you first identify the criteria for the decision, collect data on each of the options, and then pick one option as a front runner to which you are not yet committed. One by one compare each remaining option to the front runner and eliminate one of the two. Once an option is eliminated consider it gone forever. This way by forcing yourself to always choose between only two options you are more likely to arrive at a stronger decision. if you get completely stuck then he suggests outsourcing the decision to a small group of five or fewer people with expertise in the area. The trick here is to accept their recommendation.
As agonizing as the decision process can be at times it does help to put ourselves in the shoes of our prospects when they are making a decision regarding whether or not to engage with our business. In most cases, we are asking them to make a high-stakes decision. Not only are they faced with the option of engaging with our competitors, but we may have multiple packages from which they must decide. The more options they have, the more likely they are to delay, and the greater the chance they will question their decision after they make it.
Psycho-economist Dr. Sheena Iyengar in her TED talk supports this theory. Her research tells us that on average in this country we make 70 decisions per day. If you’re a CEO then that number jumps to 130 but on average a CEO makes 50% of their decisions in 9 minutes or less and only 12% take them 1 hour or more. But the interesting thing about the results of her study of companies is that the fewer choices we give customers, the more likely they are to buy. Vanguard plans with more funds offered, had a significantly lower participation rate. In fact, the more choices available, the more likely people were to avoid funds entirely. More choices result in more procrastinating, worse choices, and choosing things that make them less satisfied because they second-guessed their decision.
A classic example of simplification is Apple. When Steve Jobs returned to Apple as CEO, his first action was to simplify. He cut from fifteen desktop models to one. He cut all portable and handheld models back to one laptop and he completely cut out all printers and other peripherals. He focused on only the products that were making a profit In doing so, he not only provided a better focus for Apple’s resources, but he made the decision for a consumer to buy an Apple product an easier one.
In case you’re concerned that I’m about to suggest you cut out all of your wonderfully complex services down to one, I’m not. It turns out that when it comes to buying psychology, there are ways to make it easier for your clients to buy. Now clearly you’ll still want to take the New Year as an opportunity to cut out products and services that are poor sellers or have a low-profit margin, but there are a few other techniques you can use to aid the buying decision.
First, find a way for your customer to visualize their buying choices. Show examples of the end result, provide scenarios and case studies. If you’re a trust and estate attorney, you already know that not everyone understands the nature of all of the documents you prepare. When you discuss various estate planning packages, give them examples of which ones make sense for someone who is single compared to someone with a family, or to a U.S. investor who is a foreign national. Let them know the types of decisions that the documents will cover without the need to go to court. Provide anonymous examples of clients who benefited from having different plans in place and the nightmare scenarios they were able to avoid.
Second, it turns out that consumers can handle more categories than choices. Categories tell you how to tell products and services apart. So if you do sell a long list of products or services, place them into categories with names that will mean something to the person making the decision. In the case of my company, we sell a comprehensive list of marketing services, but rather than list them individually, we group them into categories. So for someone looking for help with their social media, they can check out that category and see a small number of packages. Plus, we provide a complimentary evaluation to help prioritize their choices according to their budget and goals. This works really well and is an approach I highly recommend. Our health insurance rep used this approach when it came time to select the programs for open enrollment this year. She probably had hundreds of plans to choose from but she presented me with two choices based on her knowledge of my business, compared the pros and cons of each, and recommended the one she would make if it were her decision. She made my choice extremely easy.
Buyers can also handle a lot more information as long as we gradually increase the complexity of the choices we present them. Make simple and interesting choices come first. If I start you off easy, then I can get you excited about the options, rather than feeling overwhelmed. A great example is custom-ordering a car. Some car companies will give you a long list of options but research shows that when they start off with the categories with the most choices, people are more likely to choose the default because they’re less engaged. But if they start with a category that contains fewer options, such as choosing among 4 transmission types, and ease up from there, then by the time you need to select from 30 different paint colors you’re well into decision mode and better able to handle the choices.
These techniques of simplifying, making it visual, categorizing, and prioritizing information apply to so many other areas, including how you deliver your pitch. We often become attached to our complexity, but now is a great time to look in on our companies and make it easier for customers to buy from us.