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Acquisition Does Not Equal Expansion
Sometimes we joke that people get into marketing, sales, or customer success to avoid science and math. Yet it turns out you need a lot of science (and, sadly, quite a bit of math) to truly understand how to influence people’s buying decisions.
There’s even an entire area of study devoted to the topic. It’s called “Decision Science,” and it explores the invisible forces that shape how human beings frame value and make choices. If you’ve read our previous books, Conversations That Win the Complex Sale and The Three Value Conversations, you learned how to use the power of neuroscience, social psychology, and behavioral economics to convince prospects to change and choose you. In this book, you’re going to see how you can harness those same hidden forces to convince prospects to expand their existing business with you.
But this time there’s a twist.
The principles of Decision Science still apply to renewal and expansion conversations. But new research conducted with our partners, Dr. Zakary Tormala and Dr. Nick Lee, proves that you need to approach these conversations in a radically different way.
This revelation will likely surprise everyone who’s bought into the hype around “provocation-based selling” that has dominated sales and marketing over the past decade. It certainly surprised us.
However, when we stepped back and reexamined the science, it made perfect sense.
STATUS QUO BIAS—DISRUPT OR DEFEND?
It all starts with a scientifically proven decision-making concept called “Status Quo Bias.” In our previous books, we shared the four reasons why people don’t change their minds—why they prefer to stick with their status quo.
Our research showed that you need to disrupt and defeat Status Quo Bias when you are attempting to poach a prospect from a competitor or do-it-yourselfer. However, our newest studies demonstrated that you must actually defend and reinforce Status Quo Bias when you are, well, the status quo.
That’s because prospects and customers are answering different questions in their mind. The prospects want to know why they need to change and do something different, and why they need to do it now, not later. Meanwhile, your existing customers are asking themselves different questions. They are trying to determine why they should stay with you, and possibly buy more from you.
In each environment the factors (“Context Effect”) are different. Meaning the psychology of your audience is different. The questions you must answer are different. That means the resulting stories and skills must be different (Figure 1.1).
Figure 1.1 Different context (customer psychology) requires different stories and different skills.
As reinforcement for those of you who read our previous books, and in preparation for those of you who are new to our work, here’s a quick refresher on Status Quo Bias and how you must disrupt it to answer the “Why Change” question for a prospect (Figure 1.2).
Figure 1.2 Status Quo Bias keeps people chained to their current state.
In his paper The Psychology of Doing Nothing, research psychologist Christopher J. Anderson detailed four causes, or “antecedents,” of Status Quo Bias: “Preference Stability,” “Perceived Cost of Change,” “Selection Difficulty,” and “Anticipated Regret and Blame.”* This is a useful starting point for anyone looking to understand how Status Quo Bias informs buying decisions, when it’s necessary to disrupt or defend it, and—most importantly—how to do so.
1. Preference Stability. People naturally dislike uncertainty. They made previous decisions that became their preferences. As a result, any new information that threatens those preferences and their stability must be resolved quickly. The typical words you may hear when a prospect is reestablishing Preference Stability are such comments as “This seems a lot like the way I’m already doing it.” Or “This seems a lot like what everyone else is saying.”
Hearing the word “like” might be a good thing in social media posts, but it’s a problem in selling. Introducing uncertainty about your prospects’ status quo is a prerequisite for change, but their natural reaction will be to avoid it, push back, and try to resolve it in their minds.
Even though they accept that their current approach might not be perfect, they will rationalize that it isn’t bad enough to take on the risk of a big change management project.
2. Perceived Cost of Change. Your prospects see their status quo as free. It’s viewed as just part of their operating budget and internal operating rhythm or cadence. They don’t have to think about it too much. If they were to consider a change, your prospects imagine all the new costs they might encounter.
Additional budget money may be needed to pay for the start-up costs that they already paid when they purchased the existing solution. Furthermore, there are the added costs associated with onboarding, training, and process changes required to accommodate any solution change-out. And then factor in the time and effort required to build consensus among all the decision makers and users.
Making the change looks like it will cost them money, time, and stomach lining. Again, while the existing approach may not be perfect, they think doing that new thing with that new provider is a hard, risky change management project not worth this added cost to them or their company.
3. Selection Difficulty. The amount of information your prospect must sift through and process to make a buying decision is overwhelming. Most marketers and sellers don’t help this situation when they keep piling on the messaging and content during a selling process. At some point the prospect shuts down and declares all providers the same, essentially shutting down the deal at the same time.
The decision-making part of the brain is very simple and doesn’t even contain the capacity for language. What it needs, and what it’s looking for, is clear contrast between what people are already doing today and what you are recommending. People won’t make a decision to change if they think they are getting something similar to their current approach.
Their thought process goes like this: “Change is so risky and costly, why would I go through all that just to get something that is more or less the same as what I already have?”
4. Anticipated Regret and Blame. The fourth cause of Status Quo Bias is very insidious. Deep down, your prospects may know their current approach isn’t perfect and even agree that on paper, your solution is better. But they worry about what will happen if the change doesn’t go well.
The subconscious thinking goes this way: “What we’re doing today isn’t perfect, but hey, at least I’m not dead yet! That change management project you are proposing and I’m sponsoring . . . that thing could kill me.”
Of course, they don’t mean this literally, but the brain’s natural survival mechanism kicks in at some point in the process and assesses the risk of making the change compared with the pains of staying the same. And the very real pressure of risk aversion threatens to stop all your progress.
The Myth of the Emotionless Executive
There’s a widespread assumption that seasoned business executives are rational decision makers. They assess risks and weigh rewards with a keen, calculating eye and make coldly logical choices based on hard numbers. They might use different criteria when weighing a personal decision, or so the thinking goes, but when it comes to business, it’s “just the facts, ma’am.”
We wondered how valid those assumptions are. After all, executives are human beings. Don’t their brains follow the same scientific rules as everyone else’s?
Since “selling to the C-suite” is near the top of all our clients’ wish lists, we decided to study how emotion, specifically humans’ natural loss aversion, affects decisions made at the highest level of an organization.
In partnership with Dr. Zakary Tormala, we constructed a research study with 113 executives from a cross section of industries around the world. We asked the executives to each imagine that they were an auto manufacturing executive whose business was experiencing hard times and needed to make a difficult decision about closing plants and eliminating jobs. With their current status quo, there was a risk of needing to close up to three plants and losing up to 6,000 jobs. While each executive had that same starting point, from there the executives were split into two groups. Both groups would hear very similar options for what they might do to improve the plant and job situation, but the options would be framed differently depending on which group the executive was in.
One group would have its status quo presented in a “gain” frame, and one group would have its status quo presented in a “loss” frame. We’ll show you how those frames were worded, so you can see what was different between the two.
The first group was told it had two options. Plan A would save one out of three plants and 2,000 jobs. Plan B was a riskier option. Plan B gave the executives a 33 percent chance of saving all three plants and 6,000 jobs, but there was also a 66 percent chance that it would actually save none of the plants or jobs (Figure 1.3).
Figure 1.3 In the gain frame, only 26 percent chose the riskier option to achieve a gain.
Presented with these two plans, 74 percent chose the option presented in Plan A—saving one plant and 2,000 jobs. Only 26 percent chose Plan B—the riskier option that had a 33 percent chance of saving all the jobs and plants but a 66 percent chance that it might save none of the jobs or plants.
The second group of executives was presented with the exact same situation, but this time with a loss frame. Note that the math was exactly the same. Only the words were changed (Figure 1.4).
Figure 1.4 In the loss frame, 45 percent chose the riskier option to avoid a loss.
This second group saw Plan A framed as a loss statement, “Two out of three plants would be lost along with 4,000 jobs.” And the same thing was changed about Plan B. The math for Plan B was the same for both groups, but in the second group the words were framed as a loss scenario: “A 66 percent chance of losing all three plants and 6,000 jobs. And a 33 percent chance of losing none of the plants and none of the jobs.”
What’s interesting is how the choices are different between the two groups. In this second group, when the status quo (Plan A) was framed as a loss, instead of 74 percent going with Plan A, now only 55 percent were willing to take that outcome. And look at the jump to Plan B! (See Figure 1.5.)
Figure 1.5 “Persuadability” increased more than 70 percent in the loss frame.
Now 45 percent were willing to take the riskier bet of Plan B, even though the math across both Plan Bs (and Plan As) is exactly the same. In other words, you see a more than 70 percent increase in the “persuadability” of executives just by changing the story, not the math. Logically and mathematically, you would expect the same number of executives on both sides to choose Plan A and the same number to choose Plan B, but instead you see a huge change in the willingness of the executives to take a risk or seek a risk simply because of the way the status quo was framed.
Here’s how to think about this: When you’re the incumbent vendor, you are the status quo. And even if a competitor is telling an executive that it can do more for the executive’s company than your company can, you’re still in a very powerful position. What you need to do is frame your contribution in terms of the gains your customer gets by sticking with you. And you need to position your competitor’s offering as possibly bringing some benefits but also a lot of risk. The psychological advantage with the executive is yours, if you can do that. From the other side, if you’re trying to unseat a competitor, you need to first take the step of framing the act of sticking with the competitor as a loss for the executive, before framing the gains that you can bring.
You’ll learn more about how to do that throughout this book. But suffice it to say that the next time someone tells you that executives make decisions purely rationally, “based on the math,” don’t let yourself be fooled. Even if it’s the executives themselves who are telling you that.
DEFEATING STATUS QUO BIAS
Suppose you want to get a prospect to make a difficult change and choose you, or you want to get a new customer to adopt and use your new solution. Both are situations where you need to purposefully develop and deliver a Why Change story. And doing this successfully requires you to deliberately disrupt and defeat the four causes of Status Quo Bias. To accomplish this—to disrupt and defeat (see Figure 1.6)—you’ll need to:
Figure 1.6. For an “acquisition” conversation, disrupt and defeat the Status Quo Bias.
1. Destabilize current preferences. The only way to overcome Preference Stability is to deliberately destabilize your prospect’s current preferences. Persuasion is only possible when prospects are uncertain about their current status quo. It’s your job to introduce what we call “Unconsidered Needs” that help them see their status quo as unsafe.
Unconsidered Needs can include problems, challenges, threats, or missed opportunities they weren’t aware or didn’t appreciate the significance of. “Voice of the Customer” research, probing questions, and discovery calls are good at getting prospects to admit pains they know, but those are not significant enough to get them to change. Urgency is created only by telling them something they don’t know about a situation they don’t know they have.
2. Show the cost of staying the same. Since the burden of cost is on the change, you need to introduce the cost of staying the same. In fact, the cost of staying the same has to be equal to or greater than the Perceived Cost of Change for people to believe their status quo is no longer acceptable.
Nobel Prize-winning research by Daniel Kahneman called “Prospect Theory” shows that people are two to three times more likely to make a change to avoid a loss than to get a potential gain. You must make sure that your story portrays the flaws and limitations in your prospect’s current approach that will make it unscalable, untenable, or otherwise unacceptable cost-wise or loss-wise to keep doing the same thing.
3. Introduce a clear contrasting alternative. The decision-making part of the brain craves contrast. The perception of value—and the motivation for change—lies in the perceived contrast between how your prospect is struggling today and how much better they’ll be doing with your solution in the future. No contrast, or not enough contrast, equals no perceived value for making the change.
The best way to communicate contrast is to show the clear risk associated with the prospect’s current-state approach compared with the resolution to that risk provided by your recommended future-state solution.
4. Demonstrate before and after proof. A client testimonial or case study is the best way to overcome Anticipated Regret and Blame. For prospects, seeing someone else like them and their company successfully navigating the change management process and succeeding is critical to invoking the most powerful form of persuasion—self-persuasion. The key, however, is that your testimonial must contain both a before and after story.
Too many case studies focus on just the successful outcomes. However, your prospects aren’t ready for or looking for proof your solution works. They first need to believe they have a problem. Prospects living in Status Quo Bias must be treated like “deniers.” They don’t even know they have a problem worth solving. As a result, your customer example must clearly document and communicate the situation they were in, so your prospects can see themselves in the story.
The result of understanding and addressing the four causes of Status Quo Bias is a tested and proven Why Change story framework that marketers and salespeople at companies like yours have been using to develop and deliver customer acquisition messages with great success over the last few years (Figure 1.7).
Figure 1.7 Use the Why Change message model to disrupt the status quo.
Our company has helped develop more than 1,000 Why Change messages for hundreds of companies, and we have trained more than 100,000 sellers on the skills necessary to tell a disruptive Why Change story in the most effective way.
In one of our most notable examples, a client company in the B2B payroll and benefits space identified 119 deals that had been marked “no decision” in its CRM system. The company retooled its story using the Why Change framework and relaunched it to its sales team. Within 90 days, the client had re-ignited 115 of those 119 deals and ended up closing millions of dollars of business that had once been considered lost.
Another company increased the “incident rate,” or what other companies call a “close rate,” by 40 percent by convincing 7 out of 10 new homeowners to purchase a fireplace when it had previously been 5 out of 10. The company was also able to increase the rate at which customers chose the premium fireplace option from 4 percent to 40 percent.
In both cases, the product didn’t change. The sales team didn’t change. The only thing that changed was the story, through the introduction of the Why Change message.
DON’T DISRUPT THE STATUS QUO WHEN YOU ARE THE STATUS QUO
The successful deployment of all this Why Change messaging raised a persistent follow-on question from our customers: “This is all very well and good. But should we use this approach when we’re trying to renew business with existing customers?”
For years, whenever our clients challenged us with this question, we weren’t sure how to answer. You can make a good, logical case that using the same provocative, insight-laden message with existing customers that you used with prospects ought to produce the same results. After all, a sales motion is a sales motion, whether it’s to a new prospect or to an existing customer, isn’t it? Also, you want your existing customers to continue to think of your company as a thought leader, so doesn’t that mean you should bring them that provocative thought leadership at the time of renewal? And after all, your customers’ world is always changing, so it seems logical to believe that a change message would always be the right one.
This was one set of thoughts going through our heads. But there was another countervailing narrative going through our heads at the same time. As disciples of the Decision Sciences, we knew that it’s all too easy to believe a narrative without doing real-world research to confirm whether or not your belief is correct. And we are committed to only giving recommendations based on things we’ve confirmed through rigorous testing, as opposed to simply offering our best guess. So the question we needed to answer was, is it just as effective to use the same message you used to sell to a new prospect when selling to an existing customer?
Our research proved otherwise. And of course made us glad that we don’t make it a practice to offer opinions in the absence of data.
As our scientist partners put it, after multiple tests to make sure the findings were right, “It’s called Status Quo Bias for a reason.” It’s real. It’s powerful. So when you are the status quo, lean into it, reinforce it, and deliberately leverage it to your advantage (Figure 1.8).
Figure 1.8 For an “expansion” conversation, reinforce Status Quo Bias.
Here’s a quick overview of how you need to reinforce the four causes of Status Quo Bias to deliver a compelling retention message:
1. Preference Stability. Make a point of reminding customers of the long, hard process they went through to make their original buying decision. This will reinforce their natural tendency to keep their previous decisions and preferences stable.
2. Perceived Cost of Change. Walk customers through the start-up costs that have now been returned through improved performance and are now “sunk” and functionally part of the ongoing operating budget. People tend to believe change costs more than staying the same—confirm that.
3. Selection Difficulty. Willingly admit that most other solutions on the market provide a similar set of capabilities, that the offerings haven’t changed significantly since their original decision, and that you’ve kept both your customers and your solutions updated throughout your journey together. People are less likely to consider change if they don’t discern contrast between the alternatives.
4. Anticipated Regret and Blame. Remind customers of the time and resources it’s taken to ramp up the solution they purchased, onboard all their people, manage the changes, and get the implementation running smoothly. Making another change exposes them to all these potential failure points again, which they could get blamed for.
You’ll find more specific story-building and storytelling techniques in the following chapters as you learn the frameworks for the four must-win commercial moments in customer expansion.
* Christopher Anderson, “The Psychology of Doing Nothing: Forms of Decision Avoidance Result from Reason and Emotion,” Psychological Bulletin, 129 (2003):139-167. 10.1037//0033-2909.129.1.139.