2 Nobel-Winning Psychologists on the Biases Holding Back Your Sales Team
The science of sales starts in our (easily confused) heads
I want to take a second to explain why the writings of two Nobel Prize-winning psychologists can have a big impact on your sales team.
Sales teams in tech companies work with complex and abstract concepts. Buyers make decisions based on those concepts.
Our brains are amazing pieces of hardware, but they have blindspots. Like driving a car without a rearview mirror, ignoring these blindspots can lead to disaster. Your own sales team may also be falling prey to these mistakes, with a significant impact on your customers and sales.
As briefly as possible, I’ll explain some common errors and how your sales team can fix them.
A Quick Overview Your Brain
I recently re-read Daniel Kahneman’s Thinking Fast and Slow. A lot of modern ideas, from behavioral economics to the concept of sunk costs, are deeply influenced by ideas proposed by Kahneman and his research partner Amos Tversky.
Kahneman and Tversky both won the Nobel Prize in Economics for their research into human psychology, culminating in something called Prospect Theory.
If we stop to think about it, two psychologists winning a Nobel Prize in Economics is pretty weird. But, one of the reasons they were awarded the prize is the same reason their research applies to sales. Their theories are some of the best tools we have to explain human decision-making in uncertain situations. This mirrors the challenge for sales teams, and helps explain why certain sales team succeed with the most challenging and undecided prospective buyers.
Psychology shows that humans often act irrationally, in spite of our best intentions. This is in contrast to the classic economist view of people, which models them as rational decision-makers.
Most sales people would intuitively agree that psychology better explains people’s behavior when they make buying decision. Our brain is the product of millions of years of evolution and is not always perfectly suited to the complexities of the modern world. We think we’re acting rationally, but we have been fooled.
If you’re anything like me, you’re probably resisting this explanation. So, here is a simple example.
You’re Not as Smart As You Think
Look at the picture below and tell me if the two lines are the same length. If you can, don’t scroll lower until you look at the lines.
There are precisely two kinds of people in the world: people who have been fooled by the illusion in the past, and people who haven’t yet seen the illusion. Our brain is hard-wired to see the bottom line as longer: it’s a quirk of our hardware. It’s our blind spot.
Here is another way to show this image, which is known as the Muller-Lyer Illusion:
Even if you know both line are identical, your brain will still try to tell you that that they aren’t. You’ll have to pause and override that quick analysis. When their length is shown in red, it’s obvious they’re the same length. Yet look again at the first image — the bottom one looks distinctly longer. Knowledge of the illusion doesn’t override its biologically-rooted distortion.
The research of Kahneman and Tversky shows that our brain does something similar when it comes to many decisions, especially those involving assessing the future value of something (like a stock purchase) or probability (like the success of a project).
We make mistakes because some parts of our brain are not hard-wired for today’s complex decisions.
This doesn’t mean we’re dumb. Our brain is hardwired to be great at some things and not others. But, overcoming those heuristics isn’t as simple as being aware of these pitfalls. You have to rethink how you design the buying process and how you communicate to counteract those natural mistakes.
Sales teams sometimes design their approach around the classic economist view of people. We’re taught to maximize value for clients, even though clients don’t always choose the products with the most value. We present information piece-by-piece, as if people made decisions through a careful analysis of all the evidence, rather than heavily weighing facts that have emotional resonance or are otherwise more easily remembered.
Humans are terrible economists.
Yet, a lot of sales is also based around the psychologist view of human decision-making, without knowing it. We continue to create content, present information, and succeed in sales without actually knowing why we’re effective. We go for quantity over quality: we speak with as many clients as possible and hope what we say lands. This is no way to scale a team.
Below, I’m going to summarize four key ideas of Kahneman and Tversky, and explain how you could improve your team’s performance with that research.
Representativeness: Can You Repeat the Question?
Take a look at this quick question:
An overwhelming amount of people tend to select option 2.
If we stop to think about it, 1 is much more probable: the subset of bank tellers who are also feminists is much smaller than the total number of bank tellers.
But our brain is maddeningly hard-wired to try to select option 2. It just fits.
We do this because instead of thinking about probability, we think about how much one thing resembles another. So, we’re likely to intuit that Linda resembles our idea of an active feminist. We search our memory and ask: how many of our friends were concerned about the above issues when we knew them as students? Did many of them become active feminists? If I met Linda, would I assume she was a feminist?
Broadly, what’s happening here is the substitution of an easier question (what is more representative) for a harder one (what is actually more probable).
We focus on what is representative of what we know, and happily come up with an answer to the easier question, satisfied that we’ve solved it. Probability requires thinking about math and capital-L logic, and forces us to ignore tempting but extraneous information. Our brains are terrible at that. We like what feels right. Answer 1 is more probable, but answer 2 is more satisfying.
Lesson: In the early stages of discussion, it’s very common for companies to essentially ask questions about representativeness, even if they’re hidden in questions about features. Modern technology is complex, so a lot of questions about your company, product, and price may be feeding into a representativeness analysis.
A client wants to select a good product, and they believe that a good product comes from a company that looks like X. If a company doesn’t look like X, the shortcut goes, then they won’t have a good product.
If you can understand what is representative of a good product and a good company for your client, you’ll better understand their needs and wants. You won’t talk past each other.
I want to be clear that sometimes heuristics can be good! If you visit a doctor, and their clinic is messy and dirty, it’s better to use representativeness. A doctor with a dirty clinic looks like someone who doesn’t care about their patients. It’s ok to run away.
However, this also tends to generate a lot of B.S. ideas, such as: a good product comes from a company that’s innovative. Innovative companies hire young people and don’t wear suits. Company X looks like that, so they will have a good product. Witness the proliferation of hoodies in the startup world.
Especially among startups, this can be challenging. If you’re new, investors can use heuristics to assess your value. They will try to gauge the probability that your product is innovative and useful. If you don’t push for a proper and balanced evaluation process, they’ll either ignore you or ask: how much does this company look like one that will succeed?
Being aware of the temptations of representativeness will make you more aware of deals unlikely to go anywhere, while helping you position yourself in the best possible light.
Anchoring Effect: Where You Start Determines Where You’ll Go
Numbers, and the order they are presented in, have a big impact on our estimates. Sadly, they don’t tend to impact accuracy, just our expectations. In a very simple test, people were asked to judge how old Ghandi was when he died, and if he was older than 114.
114 is a decoy number: clearly, Ghandi was not that age at his death. Other respondents were asked if Ghandi was older than 35 years when he died. They gave a much lower estimate.
The superfluous number had an anchoring effect.
Lesson: Be aware that numbers will have a strong anchoring effect in sales discussions. A silly lesson that has been taken from this problem is to present the highest possible price to clients, in the hope they will see anything else as a “deal.”
In today’s information-rich environment, this is a ridiculous approach. Clients will often do their own research, and you’ll be anchored to a price whether you like it or not. This is why it’s important to have a serious price discussion early on. If your software costs $1,000 and a client tends to see this as a $25–50 purchase, you will likely not find a middle ground, especially if the buyer is defensive about this price.
Be aware of the precedents in your industry as well as the client’s likely perceptions, and know that starting numbers will have a big pull on the discussion. Take the edict to qualify on price seriously.
WYSIATI :What You See Is All There Is
We can all be irrational from time to time. We assume however that on a good day, our decision process looks something like this:
Research shows that our decisions often follow a different pattern. This is hard to accept, and people tend to be defensive when they realize they can act irrationally. So, let’s leave aside others and focus instead on Bob, a bad manager.
Here is how Bad Bob thinks:
This process perennial in Bob (and sometimes in us lets admit) involves a lot of small and big things we do when we think and analyze information. But, broadly speaking, it can be summarized as: What You See Is All There Is (WYSIATI).
WYSIATI is often useful. For example, people with years of specialized experience actually tend to have great intuition. Our brains are powerful pattern-recognition machines: if we get regular and clear feedback on our decisions, our biases will get honed into useful tools.
Doctors that have seen thousands of patients tend to make accurate assessments in seconds. Sales people with years of experience expertly pick up on some customer’s needs. Firefighters (in the famous example used by Malcolm Gladwell in Blink) can figure out if a fire is in a house or its basement. There are upsides to WYSIATI.
Unfortunately, this process comes at a price.
Our first intuitions can often be wrong. If we don’t get regular feedback on our decisions, we will reinforce bad intuitive judgements, unaware of what we don’t know. We will continue to repeat this loop, in the absence of feedback, each iteration further confirming our sense that what we believe is true.
And as we come to feel increasingly certain about the truth of our assumptions, we will also discount evidence that contradicts these assumptions. This echo-chamber makes these assumptions very difficult to correct. Just look at your Facebook feed to see how one side of an issue can seem like the only possible perspective.
Lesson: I often see that WYSIATI has a massive impact on how salespeople (especially junior ones) treat an opportunity. A good conversation will make them believe that a deal is headed for greatness. A bump in the road tends to make everyone think the relationship is doomed. Both are far from reality.
It’s helpful to slow down and talk through the deal with your manager or senior salesperson, who likely have experienced more iterations of the process. As well, realize early on that your intuition may be wrong and follow the sales process. It’s there for a reason.
Similarly, for potential buyers: decisions that are made by one person or come down to one person will be impacted by WYSIATI. This is the reason that in-person discussions, clear communication, and a rigorous approach to decisions in organizations are important. It’s great if you’ve built a good case for your software, but will it be communicated to the decision-makers? It sounds obvious to say that we’ll often make decisions based on the information in front of us, but WYSIATI is a danger both to Bob and us.
Framing: Think Inside the Box
How questions are framed has a huge impact on decisions. This idea is well-discussed by the authors of titles like Nudge, and even in some sales manuals, but not always explicitly. The gist of this idea is that the reference points of a discussion have a huge impact on our decisions.
A good example: imagine you’re sick and asked whether you would agree to a surgery with a survival rate of 90% and would completely cure you. Many people would say yes. But, if told that the mortality rate is 10%, people are more likely to say no. Both situations are identical, but they yield drastically different responses: how we frame questions massively impacts our decisions.
Lessons: Framing is the reason that understanding a client’s context will have a massive impact on your success or failure. Understanding context means knowing your client’s reference points. How do they think about this decision? Do they frame it as a possible gain or a potential loss? What are they trying to achieve?
I often reiterate the point that a salesperson’s top tool is listening. So, take the time to hear where the client is coming from. We’ve all been the victim of a meeting where both sides seem to talk past each other: it’s not because we’re speaking a different language, we’ve just framed the discussion completely differently.
