The Emotional Journey of Buying and Selling

When someone makes Prospect Theory generalizations—saying that buyers either over-weight gains or over-weight losses—Blair wants us to remember that both are true at different times during the sales process, and we need to adjust accordingly at the right times to close the sale.

Links

Prospect Theory (Tversky & Kahneman, Econimetrica, 1979)

Alternative Forms of Reassurance

Slapping Down Your Childlike Glee

Transcript

David C. Baker: All right, Blair. Finally, you showed up.

Blair Enns: Oh, yes. Here we go, let's get this over with.

David: We should have had a contract where we each pledge equal contribution to our 2 Bobs, not one and a half plus half, it's one plus one.

Blair: Your interpretation of my very rich life is fascinating.

David: Well, you've been, "writing a book," whatever that means.

Blair: Some of us suffer when we write.

David: You bleed through the fingers and through your ears. You're writing this "book," which nobody's seen yet and there's no independent external validation of this, but you're writing a book. Finally, we get to record an episode. I, as well as the listeners, have every expectation that this will be worth the wait, this will be really good. Then you send me this outline that says the emotional journey of buying and selling, and it looks so academic, I'm thinking, "Wait a second, what is going on here?"

All I could think of when I read this outline, which is very interesting to me and also somewhat confusing, I'm interested. I figure I'm going to leave here in a half-hour knowing a lot more than I know right now, but all I could think about was The Price Is Right. Do you have that show in Canada?

Blair: Yes.

David: Do you have TV in Canada?

Blair: Yes.

David: You do?

Blair: Yes.

David: There's somebody who's never been on TV before and they're presented with an option that says, "All right, you can keep everything you've earned and go home with this or you can risk it all for the opportunity to win a lot more."

Blair: Hold on. Are you sure that wasn't Let's Make a Deal?

DavidOh yes, you're right. Never mind.

Blair: That was Monty Hall who is from my hometown of Winnipeg, Canada. Yes, we have television and television stars in Canada.

David: This is unnecessary detail at the moment, back to my story. The crowd is always yelling for somebody to give up everything they've earned and go for the big thing, of course, because it's not their money, and the person sitting there is thinking, "Oh, I don't know." That's at the crux of some of what you're talking about today, right?

Blair: Yes. There's a modern version of that show, or somewhat modern, Deal or No Deal. There's this idea known as choice theory, how do people make choices. In 1979, Daniel Kahneman and Amos Tversky wrote a paper in Econometrica on prospect theory. This is why it's academic because I actually went back and read the original paper. I've read all the books that talk about it, even Kahneman's book.

In the last month or so, people keep throwing prospect theory in my face, or at least that's the way it's felt to me. People are starting to extrapolate this theory, which we'll talk about, into sales. They're saying things that are proven to be true by this theory, but they seem to be these blunt instruments or generalizations that don't work in sales. I've heard some people who should know better, make these generalizations around how prospect theory applies to sales, and I want to clear it up.

David: The title is the emotional journey of buying and selling, and we're talking a little bit more about understanding the emotional portion of buying. Actually, I'm just as interested in the emotional journey of selling too. How do we want people to listen to this? What in particular are you wanting them to walk away with? Then we'll get into the details.

Blair: I think I want to explain prospect theory because it's been out there long enough, and it's almost pop-science now. Explain that it's a little bit more complex than people understand. I'll identify the one thing people should take away from prospect theory when it comes to applying it to selling, then then we'll take that one thing and walk through the emotions of the buyer, the emotional roller coaster that they go through when they're buying, and talk about how to properly apply prospect theory in a sale.

David: What I took away from this, tell me if this is accurate or not, was that you could come to, basically, a perspective of the buyer's journey and make some big broad sweeping statements. What you're saying is that the buyer's journey is more of a journey and not just one thing in time and that different parts play a different role at different places in that journey.

Blair: Yes, that's exactly right. Some of the generalizations that you hear about prospect theory, I've said them myself and they're generally true, the idea that people value losing something about two to three times as much as they value gaining something. Then at other times, you will hear and I read the other day, the statement that people place more weight on perceived gains than unperceived losses. Well, how can that be true if what I just said, the fact that people value losing something that's known as loss aversion bias about two to three times, as much as they value gaining something. How can both of those statements be true?

They both are true. It just depends on the context. This idea of weighting gains versus weighting losses, another way to speak to it is this idea that at times we are risk seeking and at other times we are risk averse. We need to explore when we are risk seeking and when we are risk averse and we need to understand that the client we're selling to is neither risk seeking nor risk averse they are both and they're both at different times in the sale. Therefore we need to modulate our own behavior and we need to think about how we're framing things at different points in the sale.

David: Right. This goes to something that you've talked about quite a bit and done a lot of research and writing about and basically the arc of the sale, the four conversations and how we need to understand where we are in that. When you say risk seeking, you mean greater openness to risk, that's what you mean by that?

Blair: Yes. You want to do some experiments?

David: I don't know. Is it going to make me look stupid?

Blair: No.

David: Then I'm all for it. Yes, let's do it.

Blair: [laughs] Well, it might. No. Like I said, I went back and read the original paper from 1979. I looked at the original experiments they were doing, because my sense was all the experiments that are cited in the popular literature. These are experiments where people have to make a decision in a moment which doesn't really reflect the arc of a sale where you have over time, the emotions change and the context changes, new information is added, et cetera. It's always the spur of the moment decision.

I've heard generalizations made about selling and about negotiating and about investing and I think a lot of those don't really translate because each of those three domains are domains that have longer timeframes, where we have more time to sit with the decisions and our emotional state changes. Whether we are risk seeking or risk adverse changes over time.

I'll pose to you some of the experiments in the original paper. The paper was looking to challenge this at the time, standing economic theory called expected utility theory that said, people are really rational and they will actually do rough math on the probability of something. They will make decisions that have give them the highest probability of utility.

Now, utility is one of those words, economists use it's a suitcase word into which a whole bunch of information is packed. It's a broad term that means gains and avoiding losses of monetary and non monetary types. It's a word that does a lot of work, but let me give you a choice between a couple of options, David. Option A is I gave you an 80% chance to win $4,000 or option B is I just give you $3,000. You have an 80% chance to win $4,000 or a 100% chance to win $3,000. There is no wrong answer. Which one do you want?

David: I'd take the $3,000.

Blair: Yes. 80% of the people who were posed that question chose the $3,000. Now, if you do the math on this, so a 100% of 3,000 is 3000, 80% of 4,000 is 3,200. Expected utility theory says that most people who are rational would take the 80% chance at $4,000. Now, when you stop to think about that. That's actually ridiculous. It shows the assumptions that underpinned expected utility theory. If we think of this again, 80% chance of winning $4,000 or a 100% chance of winning $3,000, most people take the certainty and that's known as the certainty effect. You think of the saying that we're all familiar with a bird in the hand is worth 80% of 1.3 birds in the bush.

David: I haven't heard it quite like that.

Blair: That's what's going on here.

David: Doesn't have a ring to it, but if you'd said, we're going to do this eight times, then that would give me enough probability to even out, and then I would've gone for the 80% of four, if you'd said we're going to do it eight times in a row or something.

Blair: Yes. If you do it over multiple times or you consider a population where a bunch of people doing it multiple times, then you get the sense of why expected utility theory works on populations or numerous instances. It doesn't actually work over populations, but when it's one person making one decision at one time, it's known as the certainty effect. People overweight outcomes that are considered certain relative to outcomes that are considered probable. Even when the expected utility of the probable event is equal to or even greater than the certainty to a certain extent.

Let's flip it around. Let's do another experiment. First, I'll give you $4,000. Now you have two choices, choice A is there's an 80% chance that you lose the $4,000 and a 20% chance that you keep it. Or you just give me $3,000. You've got $4,000. I say you can just give me $3,000 and you get to keep one, or you can roll the dice. There's an 80% chance you lose it all. Or a 20% chance that you keep it all. What do you take?

David: Oh gosh, I'm not sure about that one. I guess it depends on how close to payroll I am.

Blair: Let's pretend I don't give you $4,000. It's your own money? I say, "Okay, David, give me $3,000 or roll the dice. There's an 80% chance you give $4,000 and a 20% chance you don't give me anything."

David: Yes. I'd probably flip things around then, right?

Blair: That's known as the reflection effect. 92% of the people chose what you chose. I'll take my chances that I'll have to pay you more, but there's a 20% chance I won't have to pay you anything. Again when you looked at the expected utility, the math is the same in the previous problem, but in the first problem you were considering gains. In the second problem you were considering losses. Then we can go on and do more experiments.

What's interesting. If we go back to that first one of $4,000 or $3,000 if I said you can choose between option A which is a 2% chance of winning $3,000 or a 1% chance of winning $6,000, the expected utility are the same, but 73% of the people will say, "The odds are so low. I'll just roll the dice on the bigger number." All right. It goes on and on and on.

What's the net takeaway here. There are times when we are overweighting gains. There are times when we're overweighting losses. There are times when we're risk-seeking and there are times when we're risk-averse. Let's just take that last principle and take that forward into the sale. This idea that there are times when we're risk-seeking. There are times when we are risk-averse.

David: I keep wondering if you're standing at the gas station that I do sometimes, standing in line behind somebody that's buying lottery tickets.

Blair: My car's electric. I don't stand in line-

[crosstalk]

[laughs]

David: Every chance you get to rub that in. The whole point of this is the emotional journey of buying and there are certain points where different things happen. Let's talk about that. You've got multiple phases that we need to go through and then we can dig into each one.

Blair: Yes. I'm going to draw on a different branch of science. It's change management. I do this somewhat hesitantly because if Robert Prochaska, the lead author on the Transtheoretical Model of Change ever heard me talk about my bastardization of his model. He would cringe but I've talked about this before. This idea that buying is changing, therefore selling is change management. If you want to understand how people go through the emotional journey of buying, just look at the emotional journey of selling. I've got these different phases. I'm calling them phases for the purpose of this podcast.

Come with me as we enter into this journey of the phases that people go through when they buy. The first one is the pain. Each of these phases might last different amounts of time but they are typically sequential in nature. Pain is first and that's usually the first one.

Blair: Yes. There's even a phase zero where everything is fine. If you think of this idea of The Hero's Journey I think it was Joseph Campbell, where in the beginning everything is fine. Then it isn't so everything is fine is phase zero. Then all of a sudden everything isn't fine. The buyer, the client is experiencing some pain. It can be a current problem they become aware of or it could be a potential future problem, but it's causing them some consternation it's causing them pain.

David: They're losing sleep at night over something. Okay. That's the first phase.

Blair: Yes. What's important to know, and I've heard some sales methodology systems say you should have people and I'm paraphrasing here, basically marinate in their pain. Keep bringing up pain problems, but what's not well understood is that we do not decide to move away from pain until we can see a beautiful vision of a better place. Now that's not true when we put our hand on a hot stove. We pull away from pain reactively, but in a sale, especially a complex B2B sale, it's not this instant pain where we can just do something reflexively to get away from the pain.

Usually the pain that we experience they're complex problems. They take a long time to develop or for us to see the patterns or even if they come at us quickly they're so complex, there's no immediately obvious thing that we should do. We go from pain and we stay in that pain. We marinate in that pain on our own, and we don't make the decision to move away from pain until we can see the beautiful world that we're moving to and that's phase two, this vision of gain.

David: You've talked quite a bit about helping prospective buyers discuss and envision and dream about their desired future state. That's what you're talking about here, right? Division of gain?

Blair: Yes, that's right. We use that term to describe what's often referred to as need, what's the client's need? We talk about desired future state. If there's no vision, this is a saying I've repeated many times, I don't know where I heard it the first time, but no vision, no decision. If people did not have this vision of this desired future state, they're not going to decide to move away from their pain. One of the things that we do in the sale, we do it in a qualifying conversation, and then we confirm that vision again in the value conversation, is we get them to sketch out a vision of future success.

Sometimes that's easy for the client because they've really thought of this and sometimes it's really the first time that they've actually allowed themselves to put themselves into the future and describe this vision of success. It's a very cathartic, often emotional in a positive way exercise for people to do, so we're helping them cement that vision of gain. The important thing in terms of prospect theory is this place, which is fairly early in the buying cycle, which we're calling Phase Two, Vision of Gain. This is where people are risk-seeking. This is where they overweight gains and underweight losses.

David: You want to paint a picture that takes advantage of that. Is the picture that the prospect brings to the table when you talk with them and pull out how they think of their desired future state. Is that usually pretty accurate or do you have to embellish or change or clarify? I'm just curious about what the role the seller plays in painting the picture of the desired future state? Or is the buyer coming with a pretty accurate picture, and they just need help with it?

Blair: Oh, I think it's rare that a buyer has thought through this vision of success, let alone articulated it to somebody else in the detail that we would have you do that. At Win Without Pitching for this exercise of drawing out the client's desired future state, we lean heavily on one question. It's not just one question, but it's the linchpin question that's known as the Dan Sullivan Question. I think I've referenced it before. There's an 84-page book that you can read in 60 minutes on this question. It's a high-gain question that puts people into their desired future state and gets them to describe it.

Just very quickly, the Dan Sullivan Question is a version of this. David, imagine that you and I are having this conversation three years from now. You're really happy with your progress over the last three years, what has to have happened for you to be so happy. We don't have time to unpack that question in more detail here but what I'm saying is, jump ahead in time, three years. Ideally, three years actually transcends the transaction that we're talking about. I get you into that vision of success and I get you to describe it to me and by you describing your reality in three years, you achieve the emotional benefits of having achieved whatever success that you are describing so it feels great to you.

That's part of what we're doing here in this phase two, this vision of gain, no vision, no decision. We're trying to pull out of the client this vision. Again, it's important to know that in this moment, when they are first coalescing this vision, they are risk-seeking. If they were to buy in that moment, given the nature of the complex things that we sell, ideas and advice, if we were to buy in that moment, we could just leverage that to the close but because the sales cycle takes longer, it involves more people, et cetera. That vision doesn't last.

In fact, it peaks at about four hours, which somebody explained to me that that's about where the serotonin has left your bloodstream and you're back to normal. You're not only back to normal, you come down from this emotional high that's chemically driven, and you slip into a bit of an emotional hangover that's known as buyer's remorse, which sets in even before you buy. I'm getting ahead of myself here. We go from, as a buyer in pain to this vision of gain, the salesperson, if they're doing their job right gets us to articulate that vision, we feel fantastic and because we feel fantastic, and we can see this beautiful place we want to move to, we commit, we decide we're going to do this. That's phase three is commitment to action.

David: Phase one is pain. Phase two is a vision of gain, which the prospect typically comes to you already with enough pain, but you need to help them in phase two during this vision of gain side, to help them see what's possible and to align with their vision and then using that momentum, you move straight into phase three, which is a commitment to action. Is that accurate?

Blair: Yes. This moves quickly. You think of the peak of the vision of gain at the peak, that's where the client tends to make a commitment. First, they say to themselves, "I'm going to do this," then they say to others around them, "Okay, we're going to do this and then they start applying resources, people, budgets, etcetera." Now, I need to point out here that we're talking about the buyer journey and you asked about the role of the salesperson in this moment, the buyer journey does not necessarily sync up perfectly with the sales cycle.

We think of the sales cycle as how we are interacting with the client. A client often comes to us already having had that vision of success, already having made the commitment to take action, but we still want to get them to articulate that vision to us, and put them back into that emotional state of gains, where they're overweighting the possibility or the probability of gains and they're underweighting the costs or consequences of failure.

David: Let me ask a question. Tens of thousands of people get my emails and, every once in a while, somebody will send an email and say, "Hey, I think we want to hire you to do such and such," and they say, "Can we find a time to chat." We get on the phone, and often there's other leaders on the call. There's a principal and then other key people and then I'm sensing that the call is coming to a close and I'll say, "Hey, just let me know if you have more questions, happy to get back on the phone," and the principal says, "Well, probably need to ask around but I certainly want to go ahead." Then there's this awkward moment where he looks at the other people on the call to see if they agree.

I always feel awkward at that point. It's like no, don't decide right now. You put your heads together? What's going on at that point? It feels like the commitment to action. Is it healthy, and I should just embrace that it's already happening, or is that premature, and I should push it away, it just feels uncomfortable to me?

Blair: Well, generally speaking, momentum is really important because as we go from phase three, to phase four to Phase Five, you'll see that all of these great things, this vision of success, this overweighting of the possibilities or risk-seeking behavior, that all changes, it all flips but there's something else potentially going on that you just described and that is the fact that different decision-makers or different stages of the buyer journey. Some are really excited, and some are past excitement and they're at phase five, which is doubt.

David: The first is pain. Second is vision of gains. Is there anything else you need to say about commitment to action or do we go to stage four here?

Blair: Right on the heels of commitment to action is stage four, which is elation. I said, getting the client to describe their vision of success is an emotional, cathartic moment and that's matched again, or even peaked when the client makes the decision when they go to phase three commitment. When they make the commitment, that's when the elation peaks and they feel fantastic and again, this is where they feel the way they imagined they will feel when they get everything that they are striving for.

David: Yes, but nothing has happened yet.

Blair: Nothing has happened.

David: That's interesting about this, right?

Blair: Yes.

David: They're borrowing from the future and they're almost assuming that this is 100% not an 80% chance of happening for them.

Blair: Yes. I think there's more than serotonin and I think there's a norepinephrine and a couple of other chemicals involved but there's this chemical cocktail going through your body that says, "Yes, I've won. I've already won the race, I can taste victory." Then it starts to wear off. Phase four elation lasts no more than four hours. Then we move to phase five, which is doubt and this is where as I said earlier, this is effectively buyer's remorse that sets in before you buy, and this is where the client, the buyer goes from risk-seeking. "Hey, I'm going to wait I can already taste the victory. Let's do this."

Damn the consequences to risk-averse and everything flips here and this throws many people it throws many people, especially creative people who are great at those first few phases of describing a vision, not necessarily pulling a vision out of the client but painting a picture, getting people excited at a time when they're actively looking for emotional stimulation, creative people are great at that. Then when the emotions change and the attitude towards risk inverts completely, the creative person tends to lean on their strengths, the tools that got the person to that commitment and elation. Now it backfires.

David: Yes, because for a living, they tell fantastic stories and they make stuff that isn't true look true, and now they're faced with some doubt and they figure, I can repaint this picture and get this elation back, but the prospect has already moved beyond that, and using that elation-building elation propping methodology at this point can even backfire, right?

Blair: That's exactly it. You think of what does it mean to be creative? At least one answer to that question is it's the ability to see the possible. Creative people tend to be emotionally buoyant or up and down. They get really excited about the vision. They're very good at getting others excited about the vision, that becomes the go to tool and I've talked about this before. We did whole episode on alternative forms of reassurance, where we talk about this last half of the buying journey of managing doubt of when excitement turns to doubt and concern and risk-averse behavior.

I can remember the moment in my career when I first realized this was a thing. I didn't have a name for it. I didn't understand it but we were presenting creative to a prospective client early in the buying cycle. The client was very visibly excited about the portfolio that we were showing. It was a design firm and he was trying on what it would be like to have work that good. He was just getting up out of his chair. It was very obvious he was emotionally excited and then the sale progresses. We assemble the other decision-makers. We go in to present the proposal. Before we present the proposal, my boss, who was the president creative director, did what he always did.

Which is he would say, "Oh, before we present the proposal, there's some people here who haven't seen our portfolio yet so let me show the portfolio." This is a horrible mistake, but I didn't realize it at the time. I thought this, oh yeah, this is where we get them. We get everybody at this moment because the work is so beautiful. He presents the same work and nothing, not even nothing, negative, quiet stewing, like what are you doing here? You're trying to get us excited about the possibilities at a time in the buying journey when we are worried about what's going to go wrong and you're trying to get us excited.

David: That's where it backfires. Right?

Blair: That's exactly where it backfires because.

David: You're not answering our big question. You're avoiding it, which is worse than just saying nothing essentially.

Blair: Yes, at that point, the buyer, the client, the customer, they just want to know that everything's going to be okay. Let's go back to this idea of prospect theory and the key takeaway. It's not about overweighting gains or overweighting losses. Let's not make this generalization. What we need to take from prospect theory is sometimes people are risk-seeking and sometimes they're risk-averse and in a sale of creative services or a complex B2B sale that involves any type of expertise. I believe we just use this idea, this line, that people are risk-seeking early in the buying journey and they're risk-averse later in the buying journey. We need to behave accordingly.

David: Yes, this is really interesting. It's also something that needs a fair bit of practice where you're throwing up different antennas and you're listening to those signals a little bit differently and seeing those patterns and then adapting how you normally sell. I used to work for a boss. His name was Chuck Yeager. Not that Chuck Yeager is a different one, oh, but he was also a pilot.

His sales process was exactly the same every time and so much of it was nonsense, but he just defaulted to his normal way of talking in a way that he was completely oblivious to what was happening on the other side. I would talk with him about it and say, "Why do you keep telling that story? You've told that story for many, many years. It doesn't relate to this.

You need to listen a little bit differently," but in a sales cycle, it seems like creatives are pretty uncomfortable with the whole sales idea and sales process. Because of that, they don't listen quite as carefully in, they get tunnel vision and they land on the normal way they talk.

If you don't think that's happening at your firm, take somebody along with you the next two or three times or somebody to listen on your side of the conversation and you're going to be saying the same thing at the same point every time. That's not listening to what's happening on the client side and adapting your style, not only to the individual client, but adapting your style to where they are on this journey of four or five steps.

Blair: Yes, it's a great point. We as creative people in general, get so excited at new opportunity. We did a podcast a couple of years ago called Slapping Down Your Child, like Glee.

David: I love that title.

Blair: We were saying there are times when we need to tame our enthusiasm, reign it in. Generally, throw out quite a bit of the sale but there's a time when you can let it go, when you have a client, just because it's early in the sale does not mean that they are early in the buying journey. Early in the buying journey is pre-commitment. When they're having conversations with you, they're gathering information, they're weighing the costs and benefits of maybe making a decision, but they have not made the decision to hire a firm like yours to help them.

That's what I mean by pre-commitment. They're actively looking for ideas. Sometimes we get requests for proposals, from people who haven't even decided that they're going to hire a firm like ours. They're still thinking about what the problem is and looking for a vision of future success.

David: They may not even be at the correct point in the journey, and they're asking you for a proposal and you're all excited when in fact maybe they don't even know what they're buying yet. They're just like, there's no cost to them to ask for a proposal. They ask for it, you get all excited, you do it and you wonder why they disappear.

Blair: Just because they've asked for a proposal does not mean they're late in the commitment stage. We do have to be careful about making the mistake of assuming that the buyer's journey is the sales cycle. Again, what I mean by that is the point at which we intersect with the client is not the beginning of the buyer's journey. The buyer's journey started before that. Let's not assume that we're intersecting at the first half of the journey or the second half of the journey we need to find out.

That's one of the things we're trying to do in the qualifying conversation where we're vetting this lead to see if there's an opportunity there. We're trying to determine is this in what I call the interested stage or is this in the intense stage? Has the client decided to hire a firm like ours to help them achieve this vision of success or they still looking for information, kicking tires, et cetera?

Are they pre-commitment or post-commitment? If they're pre-commitment, then we need to understand that they are risk-seeking. They're excitable. They're looking for emotional stimulation and we can let our creative self go a little bit and help get them excited. If they're post-commitment, we don't want to do that. We don't want to play to our strengths as a creative person of getting them excited. We're still drawing out this vision of their desired future state. We want to see if they have a vision. We want to see if they can articulate it to us but we want to make sure that we're not leveraging possibilities when somebody is risk-averse.

David: The five stages, pain, vision of gain, commitment to action, elation, and then doubt. It's important to see where the buyer is and adapt your selling style. What you're saying, what you're talking about based on where they are. Then let me just read this one big statement again, for everybody. The buyers of creative or expertise are risk-seeking early in the buying journey and risk-averse later in the buying journey and behave accordingly. This is great.

Blair: When somebody throws prospect theory in your face and says one of these two opposing generalizations that people overweight gains or they overweight losses, ignore it, both are true at different times.

David: Thank you, Blair. This is great.

Blair: Thanks, David.