Demo Psychology: The Real Truth of Rip and Replace

I’ve worked with more than one salesperson who believed that if they showed a prospect a mathematically better alternative — one that saved them money and gave them more capability — it would be enough to make a sale. They believed that business value was based on a logical justification.

I had the pleasure of experiencing this firsthand. We met with a prospect who was using Excel to manage millions in technology spend — everything from creating their budget to then reporting on it. The process was very manual and error prone. There was a staff of people to create, manage, and email spreadsheets around to all relevant stakeholders. It was complicated and took a lot of effort, but everyone was used to it and knew how to use it.

In their defense, they had tried alternatives; looked at software packages to help them. Nothing they found suited their needs. They believed this was, in fact, the only way to do what needed to be done.

As you can guess, THEY were wrong.

My company’s software did exactly this and more. It would save them dozens of hours every month and protect them from human created errors, while freeing up this team of people to do more important stuff.

We engaged. Demonstrated product. Used data that looked just like theirs. Walked them through the process. Provided a business case with an overwhelming return on investment. This was compelling. We were confident about this deal, and even committed it for the quarter.

As you can guess, WE were wrong.

The prospect told us two things:

1. They didn’t believe our software would work with their data.

2. Even if it did, they didn’t see enough value in implementing it.

I was stunned. How is this possible? They were so CLEARLY WRONG on both counts. And yet, they insisted. I believe we were the victim of a one-two punch combination from the Automatic Brain: Theory-Induced Blindness and the Endowment Effect.

Theory-Induced Blindness is a term coined by Nobel prize winning psychologist Daniel Kahneman. In his words: “Once you have accepted a theory and used it as a tool in your thinking, it is extraordinarily difficult to notice its flaws.” Indeed! That would account for that first bit of feedback. We clearly didn’t do enough to push them past the cognitive ease they felt believing their manual error fraught system was the only way. We appealed to their sense of logic. What we needed to do was appeal to their emotion.

The Endowment Effect refers to an emotional bias that causes individuals to value an owned object higher, often irrationally, than its market value. Now, I may be stretching the definition of the Endowment Effect a bit. But I believe the prospect attached an emotional value to their Rube Goldberg financial management system that we completely underestimated. Even though we showed them that by the numbers our product was better, that didn’t matter. We focused on value — we should have focused on utility. More on that in a coming Demo Psychology installment.

What to do? The answer is something I’ll share in a later post. For now, the message is this: emotional value always trumps logical value. Showing the numbers won’t get you the deal. Winning their hearts will.