How Do C-level Executives Make Buying Decisions?

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Those who follow my LinkedIn articles must know my respect and admiration for sales and marketing expert, Tim Riester, also the Chief Strategy Officer of Corporate Visions. I’d recently written an article recapping his brilliant talk on creating a “why change” dialogue with your customers, which was also the opening salvo for Digital Sales Camp.

I recently came across another webinar that he conducted for Sales For Life, talking about selling to executives (VP-level or higher), and the psychology behind their decision making. Tim starts off by explaining that they are generally perceived to be as the Tin Man, as someone with no heart – as a non-human entity which takes decisions purely on a rational basis, almost like a machine. Even if they DO have emotions, we assume they leave them at the door.

To verify this claim, Tim collaborated with Nobel Prize winner economist Daniel Kahneman, who is also the first non-rational economist (or neoclassical economist) to win this prize. He confirmed that human beings are very emotional in their decision making – in fact, emotional in a very specific way.

His finding was that people will make a decision to make a change, they will choose to do something different, two or three times more often and with two to three times stronger preference in order to avoid a loss versus acquire a gain.

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What does this mean?

Daniel defined this as risk-aversion behavior. What that means is that human beings are generally risk averse. And when a sales person is selling to his prospect, he is convincing someone to do something different. Which is risky. And since most people are risk-averse, so the question becomes how do you convince those people to agree to the risk?

Daniel found out that people will seek risk more often to mitigate a loss, than they will to get a gain.

Let’s test this. I give you these options:

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What would you choose?

Tim concluded that most top executives would go for the guarantee of $75,000. They’re not too excited about taking a risk for some potential gain or some potential upside even though they’re playing with house money here, and not going to go back home any poorer.

80-90% will say I’d rather take the 75,000 than put it at risk to try and get more.

In other words, risk-seeking didn’t take place here.

Tim then spun the situation a little.

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Now the question is: which do you choose? The risk of losing significantly more, or the known loss of 75,000?

Suddenly everyone becomes a riverboat gambler and take the risky bet. They sought risk to avoid a loss; they’re willing to do something different to avoid a loss, but not to acquire some gain, even with house money.

So the idea that an executive is all about money is now in question. Tim then set out to do an experiment, and got Dr. Zachary Thomalla as his social psychologist research partner. He’s a persuasion expert, and together with Tim, they built a specific study. They recruited 100+ top executives in multiple industries and multiple geographies, and split them into two groups.

The premise given to them was that they were an auto manufacturer coming up on hard times, and had to take some tough calls.

Case 1 given to them was:

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74% of people went for Plan A, and only 26% chose plan B.

Tim them reframed the question.

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Don’t get confused with the math, it’s the same situation worded differently. It’s presented as a loss scenario.

The numbers completely changed!

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There was a 70%+ increase in persuade-ability.

What is the learning here?

Tim advised to think of yourself and your solution as the risky bet. When you ask customers to take a chance on you, you ask them to do something different than they’re doing – to change maybe their vendor or their partner or maybe change the way they’re doing something, to try the new and improved thing from you. What salespeople don’t realize is that when they ask this from the customer, they ask them to do something different with NO REAL guarantee of success.

Which is why they perceive it to be risky.

When the proposition was shown as gain, only 26% could be persuaded to go with the risky option.

However, when the proposition was reframed as a loss, 45% went for the riskier option.

The situation in both “Gain and loss” was exactly the same, the math is exactly the same, so logically, the results should have been same in both the cases.

But the way the story was framed had tremendous impact, and as marketers and sellers, we need to think about how we are crafting our story, and how we are comparing our solution to a competitive alternative.

The key to getting someone to think about your risky bet and choose your solution is by helping them see their current status as a potential loss.

It is how your frame and phrase the story, where the current state is painted as a loss to be avoided, and the riskier alternative suddenly becomes more interesting and palatable.

So the next time you are pitching to an executive, and he is humming and hawing, and asking for an ROI, or TCO, or this or that calculation, remember that the part of their brain responsible for decision making – the amygdala – is actually emotional and intuitive, and NOT the rational logical part of the brain.

The rational logical part where language resides is used to EXPLAIN the decision, and validating it, but it is not what moves somebody to actually make the choice. The place where the decision is actually happening, that place craves contrast, and wants to see the value in taking the risky bet.

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So what’s the takeaway?

If tomorrow you’re writing a story that talks about your features and benefits, and what makes them different and better, make sure you’re portraying value in the way the customer perceives value. You need contrast in your story, and your solution should be perceived as the safer state.

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Thanks so much, Tim Riester for this enlightening talk!

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