Tell your customer he’s a loser!

Today I’ll give you a simple “what if” question and use your response to discuss a powerful tool in selling. (Some of the content below is excerpted from “Thinking, Fast and Slow” by the Nobel-winning economist Daniel Kahneman.) You are offered a gamble on a coin toss. If it’s tails, you lose $100. If it’s heads, you win $150. Would you accept this gamble?

Gregory at Medtronic 10-2010 CroppedTo make this decision, you have to weigh the psychological impact of a $150 gain versus a $100 loss. Although the expected value of the gamble is clearly positive, you probably dislike it. Most people do, as their fear of losing $100 is far more intense than their hope of gaining $150.

In many experiments similar to this one, psychologists and economists have concluded that losses loom larger than gains and that most people are loss averse. In almost all of my sales training programs I discuss the following simple premise as one of four reasons why people buy: “Everything I do, and everything you do, is done for one or both of these two reasons; either to gain something we don’t have, or to avoid losing something we do have.”

And while it’s easy to demonstrate that self-interest is a powerful buying motive, you can see from the above coin experiment that loss aversion is far more powerful than the desire to gain. In fact the loss aversion ratio has been shown to be 1.5 to 2.5, that is, the amount you stand to gain has to be between 1.5 to 2.5 times the amount you stand to lose in order to make a buying decision.

There are numerous studies on this subject. One I found interesting was conducted by Devin Pope and Maurice Schweitzer at the University of Pennsylvania on how professional golfers putt. They analyzed over 2.5 million putts and found that pros putt more effectively for pars than birdies. Why? Because missing a birdie putt is a foregone gain, not a loss, but missing a par putt is a big loss.

What does this have to do with selling? It means that you have spent your sales career focusing on helping your customer see the benefits of your product or service. In sales training you role-played benefit statements and other “here’s what’s in it for you” conversations. I’ve written a number of posts here on this subject.

But if loss aversion is approximately twice as powerful as the desire to gain, then it stands to reason that you will be more persuasive when you can show your customer why the present way he is doing something is costing him money, or could cost him money in the future. This is why so much insurance gets sold, especially product warranties, which are often be a bad bet.

Down here in the Dallas area we have a store called Stacy Furniture. The owner does his own TV ads and they’re kind of hokey. But at the end of each one he drawls, “If you’re not shopping at Stacy’s, you’re burning money,” and the screen shows a handful of cash on fire in his hand. Corny, but effective.

Ask your prospect how he’s doing it now, whatever “it” is. And look for sub-optimal behavior. For example, he uses a service he pays for monthly, but doesn’t use all its features because he doesn’t understand them. Your service is easier to use, and you’ll show him how. You tell him, “Right now you’re spending $200 a month on services you don’t use. What could you be doing with that $200 each month?”

Think Like Your Customer

About Gregory LaMothe
I teach people how to sell things. I own the company ActionSystems. Visit my website at

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