Fable Friday: Great Sex, the Dallas Cowboys, the NYS Thruway and praise your team!

The 570 mile New York State Thruway, completed in 1957 and now the fifth busiest toll road in the U.S., runs from New York City up to Albany and then west to Buffalo.  I remember its construction well because my father appraised a great deal of the property the State claimed from individual owners, and I tagged along to keep him company, just a little kid enjoying going to work with his dad.

Gregory at Medtronic 10-2010 CroppedThe Thruway Authority got this huge project approved in large part by conducting “research” to determine if the highway was needed.  They had people conduct surveys of drivers along Route 17 in upstate NY during the summer months.  Imagine you and your family are driving north out of the City in July, moving at a snail’s pace with no air conditioning in your car. At a roadside stop, a State employee asks you to respond to a survey, with questions such as, “Would you be in favor of a super-highway that would allow you to go upstate in no time at all, rather than get trapped in a traffic jam?” What do you think people said?

It fascinates me how research is conducted and statistics are used to make a point, often misleading those who are unfamiliar.  Last Monday, after the Dallas Cowboys-Denver Broncos game, Brandon George, a sports reporter for the Dallas Morning News, wrote this gem:  “In games in which Dez Bryant scores two touchdowns, the Cowboys are 1-7.”  Are we to suppose that the next time Bryant catches two TD passes, this will be bad news for the Cowboys?  What if he catches three?  Statisticians will point out the difference between correlation and causation, so these “factoids” may be interesting, but they are useless in predicting the future.

And then this Miley Cyrus comment, that people don’t have sex after age 40, drove journalists wild.  Not only was it amazing that anyone would pay attention to what she has to say about anything, it was further surprising to see how many people dug up the statistics for the decline of sexual activity as people age. What a surprise!

Daniel Kahneman, in his popular book “Thinking, Fast and Slow,” relates another example from his days in the military, when a fellow officer suggested that praising a soldier for an exceptionally good performance was ineffective because in most cases the next time the soldier performed that same task he did not do it as well, and that similarly, if you chew someone out for a bad performance, the next time you’ll see him do it well.  Kahneman points out that this is a simple example of “regression to the mean” in which all performance tends to move toward its own pre-defined average.  But over a long period of time, a regular habit of positive reinforcement and coaching for all behavior will facilitate continued growth and improvement.

How would you like to work for someone who believed that praise led to failure the next time and the only way to see you improve was to scold you when you made mistakes? Sadly, there are plenty of managers like that.

Don’t you be one of them.  Conduct research fairly and use statistics with care. The decisions you make about people and business are important.

Think Like Your Customer

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