How to Change a Buyer’s Tolerance for Risk & Eliminate Deal-Breakers

Blog111_RiskTolerance_1-1One of my favorite companies to follow is Netflix. I began using it back in 2000 when I bought a new DVD. Rather than go down to Blockbuster and deal with the hassle of returning a video, which I was always late in returning, Netflix made it simple by mailing me the disc and with a return envelope.

Netflix’s strategy eventually helped to put Blockbuster and Hollywood Video out of business. Seeing the future of digital formats and potential of web streaming video, it took the huge expense of adding a streaming service because it didn’t want to be the next Blockbuster Video destined to render DVDs rentals obsolete.

Netflix invested $100 million into producing House of Cards, and more money into Arrested Development and Orange is the New Black. People thought this leap was crazy. What Netflix proves is that change can be a good thing as long as you embrace it with gusto. If you don’t change with the times, times will change you.

Altered Selling Environment

As we look at our organizations, products, services, and sales processes, what has changed over the last few years? Here are a few examples of what I hear from salespeople:

  • More informed buyers spend hours researching solutions.

  • Buyers changed how they made buying decisions.

  • More buyers occupy the decision-making process than ever before.

  • New buyers sit on the buying team, like procurement.

  • Differentiation in products and services is harder to show than ever.

  • New legislation and compliance further impacts what we sell and what we charge.

  • New competitors entered the marketplace and changed the way prospects do business.

  • Competitive positioning has changed due to consolidation in industries.

  • Prospects take longer to make decisions.

  • The status quo is our biggest competitor; a large percentage of decisions end up in no decision.

Let me zero in on one of the greatest changes─how buyers have changed how they make purchase decisions. Those companies and salespeople who adapt to these changes will thrive, and those who don’t will perish. Do you see these changes as a threat or an opportunity?

In my opinion, these changes have made it more difficult to open up new opportunities with prospects. Even if your prospect is somewhat dissatisfied with the status quo, it’s safe for him not to make a decision. There may be problems or issues he’s dealing with where you can help, but for some reason, they’re not priorities, so business goes on as usual. You may bring in a compelling reason for change, and the buyer even tells you she wants to change, but when it comes down to it, according to Sales Benchmark Index, 60 percent of the time there is no decision.

Why is that? People detest change for a litany of reasons, even when they know there is a better solution.

As an example, I’ll cite my wife, Eileen. Up until yesterday, she was still paying for AOL e-mail service. Even though for the past five years she knew the service was now free for e-mail, she kept paying the monthly fee for AOL. For her, switching to a new e-mail provider would be a major change. It means she would have to learn a new interface, figure out how to import her contacts or created a new contact list, and then communicate her new address with everyone on her list. Since she has been with AOL since 2000, she doesn’t feel there’s a better “free” solution. It’s simpler to stay in status quo. Change is a disruption.

I understand this, too. A property and casualty company has suggested I am paying too much for my homeowners, auto and liability insurance. Its representative suggests I could save $1,800 a year if I switch. Why wouldn’t I take advantage of the savings? To be honest, I don’t know, but the status quo is safe. There are two reasons for this inertia:

  1. People do not believe their problem is significant enough to take action, if they recognize any problem at all, or

  2. They do not believe the proposed solution will work.

The way to overcome this inertia is to show your prospect that the status quo is unsafe or unsustainable. He has to see the risk of staying with the status quo.

The Questioning Prospect

Blog111_RiskTolerance_1-2I’ve asked several decision makers to share the questions they ask themselves in their decision-making process. They claim it begins with “Why do we need it? What problem does it solve? Is this the best solution? Why do we need to do it now? If you are not starting your sales process by addressing these questions with potential prospects/clients/customers, you have a long and painful road ahead of you.

I regularly witness too many salespeople dive into the product and solution discussion before they have a good understanding of the prospect’s situation. It’s not about your solution at this stage; it’s about your understanding of the prospect’s situation, and your ability to bring perspective to the conversation.

The Risk Factor

Leading with your product or solution up front rarely works. So what does work? Dealing with perceived risk and the problems your prospect faces currently.

No matter how persuasive you or your solution is, someone with a high degree of influence in the prospect’s organization is bound to express concerns about the perils of selecting the wrong seller or solution─or not doing the project at all.

Aversion to risk is a natural human response to making complex decisions. Ignore this reality, and don’t be surprised if you lose the sale. Nobel winner Daniel Kahneman says we typically fear loss twice as much as we relish success. That’s why it’s so hard to take the risk.

Learn Prospect Theory

One very important result of Kahneman’s work is the demonstration that people’s attitudes toward risks concerning gains may be quite different from their attitudes toward risks concerning losses. For example, when given a choice between getting $1,000 with certainty or having a 50 percent chance of getting $2,500, people may well prefer and choose the certain $1,000 over the uncertainty of getting $2,500, even though the mathematical expectation of the uncertain option is $1,250.

This situation is a perfectly reasonable attitude described as risk-aversion. But Kahneman found that the same people when confronted with a certain loss of $1,000 versus a 50 percent chance of no loss or a $2,500 loss, do often choose the risky alternative. This behavior is referred to as risk-seeking behavior. This behavior is not necessarily irrational, but it is important for analysts to recognize the asymmetry of human choices.

Kahneman put the sum of these two concepts together and labeled them Prospect Theory. The graph from his paper [Chart 1] displays two axes. The horizontal axis shows losses or gains for your prospect. The vertical axis shows the psychological value your prospect places on losses and gains.

Notice the steepness of the curve in Chart 1. When your prospect experiences a loss of the threat of loss, the curve drops much more quickly than it rises when there is a gain or the possibility of a gain. A prospect who knows she has a need but feels the status quo is fine, has a perception that is at the intersection of the axes.


A product-driven salesperson will then start to tell her how great his product or solution is and the value it will bring. As an example, a retirement plan advisor tells the prospect that his solution will lower the company’s fees and produce a better value to plan participants in the 401(k) plan. But the prospect might not see the value or her need to change the status quo.

What the salesperson needs to do is show the prospect that her situation isn’t quite as safe as she thought it was; in fact, if she doesn’t do something different, she will quickly move to the lower left-hand of the curve. Then, she will see twice as much value in the salesperson’s solution dues to potential losses.

As we have said many times, a prospect buys when she wants to fix, accomplish or avoid something. Therefore, the salesperson needs to show his prospect that she’s already down on the left-hand side or heading in that direction. But you can help move her all the way to the upper right-hand side of the curve.

You need to be able to gauge your prospect’s receptivity to change (buy your solution) because, without an understanding of this factor, you can easily end up trying to sell someone who doesn’t see a need for change. Too many salespeople take their perceptions of reality as the key to the sale.

As we teach in Strategic Selling®, “People buy when, and only when, they perceive a discrepancy between reality and their desired results.”

Realize the Size of the Problem

To overcome the status quo or a no decision we discussed earlier, you need to show the prospect that the problem or issue is bigger than he or she realizes. For instance with our retirement advisor example, you might lead with new compliance rules or legislation that, if not fixed or complied with, can be quite costly to the company. Or maybe you can show him that something he is doing is outdated and that from a competitive standpoint he is falling behind.

Proper planning needs to take place here. This area is very sensitive to the selling/buying process. You simply can’t lead with the sky is falling because someone in the prospect’s organization is responsible for the status quo. Therefore, you need to ask questions to understand the status quo and to demonstrate the dangers of staying in the status quo.

How do you do this? You need to bring perspective to your prospect with good data and a strong meeting plan. As you uncover the discrepancy in their situation, you can validate it with solid research and supporting data. The key here is to have information that is of value to your prospect even if he is not aware of your products and services. Information that is above and beyond your offering will be considered extremely valuable. You need to open conversation with what is valuable to your prospect.

Let me give you an example. I have a client that was trying to sell deferred compensation benefits to physicians. Over the years, it had been reduced to talking to the human resource and employee benefits managers in hospitals. And since the physicians and executives are the ones using the deferred compensation plan, my client’s ability to land new clients became severely hamstrung.

We helped my client build a white paper that laid out: “Healthcare Post-Obamacare the Coming Dramatic Shift in Talent: How Healthcare Must Prepare”  which resulted in meetings with heads of physician groups and senior management at the hospitals. The data was excellent, legitimate and packed with bad news. Oh, did I mention the part about bad news?

The Bad News

Blog111_RiskTolerance_1-4A great eBook or white paper should be loaded with bad news to your prospects. Why? Because bad news motivates. We’d get in front of a group of hospital executives and show it that only one-in-three physicians will remain independent by the end of 2016. The number of independent physicians has declined over the last several years, from 57 percent in 2000 to 49 percent in 2015, according to a study by Accenture.

The study further predicts that next year this number will drop again to 33 percent. This decline represents a ten percent drop from Accenture’s 2012 report. Thirty‐six percent of physicians cite reimbursement pressures, and 23 percent gave overhead costs as the reason for departure. This paper was packed with bad news. Much of this news had nothing to do with deferred compensation plans. Keep in mind, it didn’t matter. Bad news motivates, even if it’s unrelated. The paper and conversation points to the discrepancy of fewer physicians and now into a collaborative discussion on what the impact is to the hospital, along with possible solutions.

Your prospect, when viewing a great deal of bad news, will suddenly feel the need to take some action. Any action he takes will make him feel better. In the case of the hospital, the executives and physicians in the room wanted more information or wanted to understand what solutions were available after the meeting.

Now don’t take this too far. The more the data in the paper sets up a need for your product or service, the higher your closing ratio. So in the case of the hospital, the shortage of physicians and the need to attract and retain them, created a need for solutions that my client offered.

Bringing Perspective

So bringing perspective to your new prospect opportunities means that the data should “set up a buying criteria” in which your product or service becomes the most logical choice. When my client laid out all the ways most hospitals could be impacted, it made the prospects open their arms and invite my client to look at how they might help them.

What’s your client’s current buying criteria? Is it price? Is it easy to overcome with the right value proposition. Is it that he wants to buy only from the biggest provider? It is easy to overcome with bringing perspective to the meeting. Is it that the prospect doesn’t think he even needs what it is that you sell? Is it easy to overcome with the right conversation with what his issues are (what he needs to fix, accomplish or avoid). Data can motivate your prospects in all and any of the situations mentioned.

Addressing risk aversion requires you to be highly targeted in your communications about your plan to mitigate risk. That means you have to understand the prospect’s perception of risk, whether you think those views are valid or not. With data to support your discussion and demonstrate the discrepancies, you’ll make major inroads into closing the sale.

Too many salespeople emphasize all the reasons why their offer is the safest choice, instead of focusing on the prospect’s chief concerns. Resist the urge to cover every base in this area. Use your interviews and sales meeting plan to pinpoint your prospect’s perception of risk. Be candid about your views on the potential risks your prospect faces and, chances are, your prospect will reciprocate.

Then, create a communication approach, using your meeting plan that provides compelling evidence for how you will address each specific area of concern. Offer relevant examples of the ways others have successfully managed similar risks. To overcome the prospect’s reluctance, you need to prove that you know how to handle what he thinks are the deal-breaker risks of a project.

Follow these concepts and you’ll succeed breaking through the 60 percent of the time that prospects stick with status quo and make no decision. Imagine the improvement in your sales performance.

See you on the upside,

For more information on how to simplify the complex sale, go to Or call William L. MacDonald in San Diego at PleinAire Strategies LLC at 760.340.4277 or 213.598.4700

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