OG Notes (AUG-2018)
Free For All
A great way to defeat the endowment effect and status quo bias is to use what’s called the “zero-price effect” to your advantage…
Zero-Price Effect: When an item is free, it’s viewed as having no potential downside, and we place more value on it then there really is.
In other words, we as humans love free shit.
Just the word “free” triggers something in our brain that makes it more desirable...
When we buy something, we take a risk. If the item is not worth the money, it’s considered a loss.
However, when our mind sees free, it’s perceived as having no risk, therefor no chance at a loss.
Many companies use this to their advantage and some tactics they use are subtler than the others...
One example I’m sure we’ve all been victims of, would be when a company offers a free trial (i.e. 7 days or 1 month)...
We talk ourselves into it because we think there’s no downside as we can cancel any time. If were on the fence it gives us the push we need to “at least try it”.
Companies don’t do this because they are trying to help you test if you like their product or not, they do it strategically because they know that most won’t cancel their subscriptions once they start.
After we start the trial, the decision to cancel will be relative to our new reference point, which has adjusted because we’re now used to having the product/service.
Let’s take HBO. During the free trial, we’re binge watching some great shows and when it’s time for the trail to come up, we already feel like we own it and the thought of giving that up makes it very difficult to cancel.
The other layer is that we simply forget. I’ve done this more than I care to admit; now put calendar reminders in right before the trial is up. Little pro-tip for you.
Another example is Jos. A Bank’s ridiculous deals on suits... (joke) What is it, buy one pair of socks and get 7 suits free?
Realistically, they often promote if you buy 1 suit, you can get 2 free: 3 for the price of 1 – great deal!
People think they are getting a killer deal when in reality, they pay $700 or $800 for 1 extremely marked up suit and 2 at their actual value.
Net savings is almost always minimal or nothing.
The last example is offering something for free, if a certain dollar amount is hit. Take free shipping for example…
Let’s say there’s free shipping if you spend over $50 or $100. Has anyone gone to purchase something online and realized you’re just short of the free shipping mark, so you add something you might not normally buy to hit that?
That’s not a fluke – There’s a series of formulas and analytics that companies use to strategically price their products for this reason.
They know that this wouldn’t apply to every situation as people often spend way more than the limit, but for those that don’t, they want to trigger something in the mind that pushes you to get to that point.
Regardless of the tactic, the goal is the same…. Entice the consumers with something to get their foot in the door. Because of human behavior and natural tendency, once you do, there’s a strong chance you are already hooked.
Remember, in our mind… Free = no downside
The reason you see examples of this on a daily basis? It works.
So how can we use this notion to play into our advantage as sales people?
Key Sales Take-Aways
There are a number of ways you can incorporate in your sales game. Here are a few that I used…
Use the Word Free… What do: free trial, buy one get one free and free sample have in common?
The word free – start replacing words like “comes with” “we’ll throw that in” and “included” with the word FREE.
Instead of saying EAP is INCLUDED, tout how they are getting it for FREE and do it for as many things as you can (i.e. SS advocacy, will prep, etc)
Implementation Incentives: If you can offer the company a free month, or some sort of incentive to get the process started, you know it will be unlikely they will change their mind.
Implementation credits, service guaranties specifically for a smooth implementation could very well end up being the difference maker.
Strategic Pricing: The power of discounts
This will vary depending on how much pricing flexibility you have, but use discounts to your advantage as much as possible.
Upselling – this can be huge for upselling. If you buy X we can give you an extra discount on Y.
We will cover strategic pricing and the use of discounts in more detail in the final section.
The moral of the story is to reduce the perceived risk of something by focusing on how you can lower the potential downside. The lower the downside, the more likely it is they will buy.
In the next section, I will review how the mind makes quick choices, even when it lacks enough information to make rational decisions.