When I was starting out in my career, I went for a job interview with a financial services firm. Before the interview began, they asked me to take a multiple choice test to determine whether I had the right stuff for the role, I guess. A few minutes after I took the test, a guy came out and told me the interview was cancelled. He explained that I had zero talent for selling intangible services, so it would be a waste of time to even talk to me.
I guess I must not have listened closely when he informed me of my enormous handicap, because I’ve made a very successful career selling nothing but intangible services for several decades now.[1] I’m not saying it was always easy, but I learned a few things along the way that have helped me tremendously, and which I share in this post.
So what?
The first tool I had going for me was a lifelong habit of always asking SO WHAT? any time I heard or read new information. I always wanted to know, “What does this mean to me, and what does it mean for me?” It was a useful way of thinking, but it truly became a powerful tool only when I learned (quite by accident), to direct the question outwards, to preemptively answer the SO WHAT? question in the mind of my customer. So what, you might ask, how did that change my selling style? I quickly figured out how to describe our (intangible) financial services not in terms of what they were or how they worked, but in terms of the tangible ways that the customer’s life would change if they used them: how they could produce more widgets, build that big new warehouse they were dreaming of, have more zeros on the bottom of their income statements.
Make it personal
Next, I learned that since customers can’t see or feel your intangible service, their minds pay attention to the tangible things that they do see. The most tangible thing they see—often the only tangible thing they see—is you. They make predictions about the quality and potential value of what you’re selling unconsciously, based on the tangible signals they see: Do you look professional, do you look them in the eye and smile to show you care about them? Does your body language project confidence; does your voice sound warm? Do you ask penetrating questions; do you answer questions candidly and directly?
SAVE it
After many years of just doing it, I started systematically studying the science and craft of persuasive communication, and a lot of what I learned I distilled down to my own acronym: SAVE. SAVE stands for Stories, Analogies, Visuals and Examples. Any one of these can turn an abstract concept into a “real” experience in the customer’s mind. Make sure you have a few good stories of how you helped a customer with a similar need, or better yet, make the customer the hero of their own story through asking great questions. Use analogies to express unfamiliar ideas in terms of things they know well. Use visuals to bring those stories and analogies to life, and don’t limit yourself to slides: some of the most charismatic speakers are those who can paint word pictures that seem as real to the listener as anything you could show on a screen. Finally, use examples put flesh on the bones and show that you’ve “been there and done that”.
By learning to always ask SO WHAT?, by taking special care with the personal relationship, and by putting SAVE in my toolbox, even someone with no talent like myself can make a good living selling intangible services and ideas. Imagine what you’ll be able to do with them!
[1] I’m not sure what it says about the validity of these types of tests, but that’s a topic for a different day.
I’ve met thousands of B2B sales professionals in my training career, and I can confidently say that only a small percentage of them are comfortable with the language of finance. That lack of comfort causes them to shy away from using it in their sales approach, and that unfortunately means they leave a lot of value on the table—for both sides.
Here are at least seven ways that financial literacy will make you a better and more productive salesperson, and pay off for you, your employer, and your customers.
Speak the language
When in Rome, speak Italian. If you’ve traveled much overseas, you know how useful it can be to pick up some basic phrases. They don’t expect you to be perfect, but the locals do respond to the effort. It’s the same way as you travel those foreign lands in your customer account known as the C-Level. The higher you sell within an organization, the more likely it is that financial measures will enter into the conversations. In sales, you get sent to who you sound like, so if you avoid going where you’re not comfortable, you give up the high ground to competitors who are.
Control the story
Even if you’re not primarily selling at those levels, your lower-level contacts may need to justify the investment internally. If you can help them put together a business case, you can ensure that your story gets told on your terms—and they’ll thank you for it.
Know the score
While you may think you’re selling products, your customers are buying business outcomes. There are a number of ways that they measure those outcomes, but almost all ultimately connect to some financial measurement. Financial measurements are the scorecard use to guide their decisions, so you must be comfortable with how they think and talk about that scorecard.
Make you credible
Generic value propositions that sound like vague promises don’t get anyone’s attention. When you can express the potential value of doing business with you in financial terms, it makes it more concrete and more believable. It’s one thing to say you can increase your customer’s profits; quite another to quantify the improvement and express it in terms of ROI or EVA.
Spot opportunities for improvement
Familiarity with the language of finance will help you take advantage of one of the most overlooked tools for improving your high-level customer conversations: the “Management’s Discussion of Financial Results” section of the annual report. In addition, when you get good enough to compare your prospect’s financial performance to their peers, it’s like using an MRI machine to figure out what’s going on inside their business, and potentially uncover useful clues about specific needs you may be able to address.
Improve your questions
Financial literacy can definitely improve the quality of your questions. One time I was talking to a prospect in the copier industry, who was being very coy about admitting that his sales force needed to improve their sales approach. I tactfully noted that their gross margins had declined for three straight years, and asked him what that said about their ability to sell the value of their boxes. The minute I asked the question, it was like the ice melted and he opened right up.
Improve your negotiation position
Without financial literacy, you enter a negotiation in the position of a participant on the old “Let’s Make A Deal” game show, where the host knows the value behind every one of the three doors and you don’t. Financial literacy gives you a glimpse behind those doors in two ways. First, it enables you to better understand the true value of what you sell. Second, allows you to better understand the customer’s true needs so you can structure more attractive deals that work better for both sides.
What do you need to know?
Financial literacy as it relates to sales comprises three general areas:
Financial statement structure and terminology. You don’t need to take an accounting class, but you should be able to make basic sense out of the customer’s income statement, balance sheet and cash flow statement.
Financial ratios. You should have an understanding of financial ratios, so that you can gauge how they compare to their peers. General ratios include profitability ratios such as gross and net margin, asset efficiency measures such as return on assets or return on equity, and activity ratios such as days sales outstanding and inventory turnover. In addition, you should know the specific operational ratios that your offering impacts.
Investment metrics. Finally, understand the basics of how investment decisions are made, whether using payback, ROI, IRR or EVA. You may not even have to do the calculations yourself, but you should know basically what they mean. (So you don’t say something like “your ROI is six months.”)
It’s not that hard
Too many salespeople psych themselves out, thinking that it’s too difficult to become financially literate. Fortunately, it’s not as hard as you might think. To succeed in high-end B2B sales, you don’t need to go toe to toe with the CFO—in fact, I wouldn’t advise it.
I’m not talking about becoming a financial whiz; your day job as a salesperson is busy enough to make that difficult. But the good news is that you don’t have to be fluent in financial literacy—quite frankly, the bar is pretty low in your prospect’s expectations.
It’s pretty to educate yourself—there are plenty of books on finance for non-finance people. But there’s only one that’s written specifically with B2B sales in mind: Bottom-Line Selling: The Sales Professional’s Guide to Improving Customer Profits .
I read a quote this morning that referred to “lethargic, lie-in-wait predators”. No, I wasn’t reading a diatribe about sales prospecting written by Mike Weinberg.
The article was in the New York Times science section, and it was about the habits of the reclusive angler fish. The angler fish is so called because it has a little “antenna” that dangles in front of its mouth, tipped by a faint colored light that gullible fish find irresistible. When they come close enough, the fish suddenly opens its huge mouth, which creates a vacuum that sucks in the prey, and it chomps down, trapping it inside.
What a life the angler fish has! They don’t have to do much work, and food just comes to them. By the way, the angler fish that do this are all female. The male angler fish has it even easier. It’s tiny compared to the female, and once it mates, it attaches itself permanently to the female and actually gains sustenance via her body—sort of like a sales manager, to extend the metaphor.
It’s a good life if you can get it. Some salespeople seem to strive for this type of life, where they use social media to produce content that acts as a faint flickering light in a world of darkness, attracting buyers close enough that they can be swept right in to their sales funnels. It would sure make selling much easier if this strategy worked all the time.
The angler fish strategy may seem attractive to a salesperson, but remember, it only works on gullible bottom feeders. If that doesn’t describe your ideal prospect, you still have to go out and find them one at a time, the old-fashioned way.
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When buyers make a choice, especially about a high-value purchase, they balance three considerations: cost, benefit and risk. What will it cost me to buy this or do this? How will I benefit or what will I get in return? What risks am I taking?
As the author of Bottom-Line Selling, I know how effective ROI calculations can be in driving buying decisions, but even I have to acknowledge that, of those three questions, risk is by far the quirkiest and most slippery concept to get a grasp on psychologically, because there are so many factors at play, many of which simply can’t be precisely defined or measured.
At the risk of stating the obvious, every decision carries a risk, so if you want to sell a product or convince someone to approve an idea of yours, you need to understand how to deal with it, and even how to use the psychology of risk in your favor. Let’s examine how they think and feel about risk, how that affects the choices they make, and how that affects your approach to selling them on your idea or solution.
Why uncertainty is complicated
To be perfectly precise, risk is not the problem—uncertainty is. What’s the difference? Risk is generally known and quantifiable. It may be exact, as in a game of chance, or it may be inexact but reasonably well-known, such as by looking at historical performance. Uncertainty is about not knowing the odds, such as a completely new technology for which there is no known market. Most buying decisions contain some of each.
Even when the risks are exactly quantifiable, people may differ in how they interpret those risks. Some may have a higher appetite for risk because of their personality, or because their situation dictates it. When you’re playing with house money, you may be willing to take larger risks, or you may also may be willing to take larger risks at the opposite end, when you are completely desperate. Where you are in the corporate hierarchy may play a part: what may be a career-limiting wrong decision to a low-level buyer may be a rounding error to a senior-level decision maker.
And that’s when the risks are fairly well quantified. Imagine how much more difficult it becomes when you cross the line from risk to uncertainty. The human mind is not built to calculate the optimum risk/reward choice, even when it has complete information, which it almost never does. So buyers take shortcuts when they evaluate risk and uncertainty, and when you understand those shortcuts, you can jump ahead of them and use them to increase your chances of winning the sale—lower your risk of loss, in other words.
Some psychology – mental shortcuts that buyers take
There is so much more to the psychology of risk than I can cover in one post, but here are three of the most important.
Gain/loss framing
Appetite for risk is dependent on how the decision is framed. According to prospect theory, people are more willing to incur risk to avoid a loss than to reap a gain. For example, most people will not voluntarily accept a one-time coin flip in which they stand to lose as much as they can gain. Potentially losing $100 feels worse than the happiness of winning $100 on an even bet, so most people impose a ”loss aversion ratio” between 1.5 and 2.5.[1] That’s why you may need to spend less time touting your benefits and more effort in helping the buyer realize what they stand to lose if they don’t buy your solution.
In other words, don’t downplay risk, reverse the risk. Get them to think about what they may stand to lose if they go with an alternate choice.
Here’s one example: Suppose your buyer asks you to justify why your price is higher. The standard response is to answer their question directly, by explaining your differentiators and connecting them to benefits; in other words, by telling them what they get for the higher price. That may work, if your benefits are quantifiably better than the price differential, but because of prospect theory, you’re probably going to have to show them at least $2 in benefit for every $1 in price difference. (It’s probably more than that, because the higher cost is certain, and the expected benefit is never guaranteed.)
So, how do you counteract this tendency? You have to focus their mind on what they might be losing by giving up the promise of quality that a higher price brings. Instead of telling them why your price is justified, ask them why the competitor’s price is justified. In a free market, companies charge what the market is wiling to pay, so if they are competing on price, it must be because they know they are not offering the same benefits as higher-priced products. Simply by asking the question, you may get them to shift the focus from the financial risk of a higher price to the potentially greater operational risk of not getting what they need.
Numbers perceived differently depending on how they’re presented
How the numbers are presented has also been shown to affect how the risk is perceived by the decision-maker. Take a hypothetical situation, where your customer faces a problem that results in failures in 30.5% of cases, and is very costly when it happens. You show them historical data that proves that using your solution cuts that down to 26.4% of the time. Is it worth it for the buyer to incur the risk and cost to apply your solution? How would you present the data to improve the chances they will buy?
You could say your solution is 4.1% better.
You could also perfectly honestly say that your solution is 13.4% better. (4.1/30.5 = 13.4%)
When these descriptions were tested with highly educated professional decision makers, 56% chose to try the new solution when it was presented the first way, and 76% chose to try it when it was presented the second way. That may not sound too surprising, except that in the real world scenario in which the study was done the choices were actually between two medical procedures, the “failure” was patient death, and the decision makers were doctors, whom one would presume would know better. (The literature shows that there is little or no correlation between education and risk assessment.)[2]
Here’s another example: your solution is 99.9% reliable; theirs is 99.8% reliable. You can easily and honestly make a case that yours is twice as reliable! Your solution results in 10 failures per thousand, theirs fails 20 times. If the reliability measure is dropped cell phone calls, that may not be worth paying a premium for, but if it’s a measure of how often a critical machine might fail, it could be huge.[3]
It gets even stranger. The general rule is that the more abstract it is, the less impact, and vice versa. That means that if you want to play down the risks of something, talk about percentages. Next is frequency, or actual numbers: A disease that kills 1,286 out of 10,000 was judged worse than one that kills 24.14% of the population.
So, when describing the risks of competing alternatives, use actual numbers to describe theirs and percentages to describe yours.
Sometimes numbers may actually be irrelevant. It’s called denominator neglect. If you go swimming offshore, you may “know” that your chances of being bitten by a shark could be 1/1,000,000. But you don’t think of the million, you think of the one—because it’s you. On the positive side, I almost never buy lottery tickets, but every time I do, I don’t think of the odds; I envision what life would be like with a few extra million in my bank account. So, if you want to increase the perceived risk of a rare event, get them to imagine what it would be like for it to happen to them.
Imagination plays an important role – either dial it up or dial it down
That’s because imagination easily trumps statistical reasoning. One great example is, imagine a world in which smoking cigarettes was perfectly healthy, except that 1 in a million packs of cigarettes contained a cigarette loaded with dynamite. With 250 million packs sold a day, 250 people would have their heads blown off every single day. You could imagine how quickly the authorities would ban the sale of cigarettes! Yet in real life, cigarettes kill an estimated 3 million people per year worldwide, or more than 30x that, and the only thing we do about it is put warning labels on cigarette packs.[4]
The more easily we can envision something, the more real it seems. One way to make risk more salient in someone’s mind is to get them to imagine the consequences or costs of the risky event actually happening.
A close cousin of vividness is personification—make it personal. Imagine that was someone you know getting the unlucky cigarette. Ads showing a photo of a starving child get more donations than ads providing information about a thousand starving children—even more so than ads that feature both a picture and statistics!
To summarize, dealing with risk may be the most difficult part of your sales messaging, but precisely because it’s the most difficult is why you should pay close attention to it. What if you don’t and your competitor does?
[1] Daniel Kahneman, Thinking, Fast and Slow, p. 284.
[2] Adapted from an actual study reported in Calculated Risks, by Gerd Gigerenzer, p. 203.
[3] See also this example, about cancelled flights.
[4] Adapted from Intuition, by David G. Myers, p. 209.
