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Behavioral Bites
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Behavioral Bites

Posted By Warren Cormier, Monday, December 10, 2018

Warren Cormier

 

by Warren Cormier
Executive Director
DCIIA Retirement Research Center

“Behavioral Bites” is a series of brief, thought-provoking behavioral economics ideas.

The Decision Path to Your Sales Success

In my years of observing the decision-making process among plan sponsors as they purchase retirement plan products and services, I have seen a startlingly consistent decision path:

  1. A strong brand will get you invited to a sales battle.
  2. Competitive product bells and whistles and marketplace experience will get you a ticket to the finals.
  3. How the prospect feels about you -- how much they trust you to do a great job, be honest with them, and put their needs first -- will get you into the winners' circle.

If you don't meet all three of these conditions, you will find selling very difficult. Keep in mind, the prospect often does not have the technical tools to assess the things you’re telling them and has to fall back on their sense of confidence in you -- much the same as when you are speaking with a surgeon or an auto mechanic. At some point, you decide whether you're going to trust them or not.


What Is Thought Leadership?

We hear the term “thought leadership” used frequently -- and most of the time it is used improperly. Simply providing new data is not necessarily true thought leadership. Behavioral economists such as Stanford's Chip Heath offer up a definition that I believe captures its essence: Thought leadership makes people think differently about a familiar topic; secondly, and more importantly, it causes people to change behavior.

Thought leaders from history include Nikola Tesla, Nicolaus Copernicus, and Charles Darwin. How many thought leaders or examples of thought leadership can you name that have come from the retirement industry in the past 10 years?


Do We Overestimate How Good We Are?

If you’re selling products and services in the highly commoditized retirement industry (yes, I said it), it is likely you’re going to have to take over another provider’s turf in order to grow. You should know that “relational inertia” can be extremely strong. That is, even if a client knows that they could get a better deal elsewhere, they may well stay with an existing provider much longer than makes sense on paper.

Consequently, you need a great value proposition to upset this equilibrium -- but be realistic about what you’re offering. Buyers tend to underweight your differentiation while sellers are notorious for overweighting it. Something really dramatic may be required in order to shake the business loose.


Are You Playing to Win -- or Not to Lose?

In general, people hate to lose. In fact, they hate to lose more than they love to win. Why is this important?

When plan sponsors pick a new provider such as a recordkeeper or an advisor/consultant, they often are playing not to lose (i.e., have a disappointing outcome – people hate to feel regret), rather than to hit a home run (i.e., find a new provider with new ideas that produce results).

Essentially, many people may not be trying to find the provider that is the optimal solution, but rather they're trying to find a safe solution that they can count on to do a good job. Perhaps unfortunately, working to engender confidence and a sense of safety may be more important than innovation.


Have You Commoditized Yourself?

When thinking about how unique you are as a provider, ask yourself this one simple behavioral question: What would the market you compete in be missing if you didn’t exist tomorrow?

If you are painfully honest, the answer is hard to find. In fact, very few people I have asked that question can come up with an answer. Arriving at a solid response would seem to be marketing's number-one job.

Hint: the best answers very often have nothing to do with product features but rather the human element.

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