- Blog post
In the buying decision, how do you manage the risk?
Imagine that you’ve been given the responsibility to make a new purchase for your company. Your choices: Option A or Option B.
If Option A proves successful, the company will reap a huge windfall and you’ll be a hero. But if it flops, you’ll be blamed and could lose your job.
If Option B is successful, the results will be quite modest. You’ll meet your boss’s expectations but won’t exceed them. On the other hand, if it fails, it won’t cost you your job.
You calculate that both options have an 80% chance of succeeding. Which option would you choose?
Bet your job?
Most buyers would go with Option B. Few people would be willing to bet their jobs on the outcome, even with the odds in their favor.
For most buyers the downside risks are far more important than the upside potential. And yet many sellers continue to focus on the upside and don’t pay enough attention to the buyer’s risks – real or perceived.
Here’s one reason why risk looms so large: The buyer’s boss expects her to make a good purchase decision. So when a buyer makes a bad decision, the downside can be enormous. It could cost the buyer a bonus, a promotion or even a job.
The same goes for personal purchases. Nobody wants to be the guy who has to explain to his spouse and friends why he bought a lemon. So often buyers will prefer a “good enough” purchase if it comes with low perceived risk.
Here are four strategies that have been proven to reduce customers’ fear of risk. You probably use them to some extent already.
But given the importance of risk in the buying decision, it’s worth giving them extra focus, especially as the size of the sale (and the stakes) increase:
1. Spread the risk around
Perceived risk is reduced if it’s shared. If others are involved in the decision-making process, the buyer has less to fear. Have you done enough to reach outward and upward to your contacts’ colleagues and managers? Sure, getting others involved in a buying decision can complicate the process. But it can give buyers the confidence to move forward.
2. Use third-party endorsements
You can never provide too many testimonials, independent studies and case histories. Your buyers may not study them all, but a thick package gives customers overwhelming evidence that others have been satisfied with your service and reduces the perceived risk of making the wrong decision.
Of course, it’s up to you to highlight the ones that are most relevant to their business or industry. That’s another benefit of having lots of third-party backup; you’re likely to find something that’s a perfect fit for your buyer.
3. Increase involvement
The more your customers can see and feel what you’re selling, the less risky it will seem. If you’re selling a piece of equipment, concentrate your efforts on getting the customer physically involved with it. Work on bringing it in for a trial – or at least getting the customer to visit another company where that equipment is being used. If you sell a service, be alert for opportunities to have your buyers experience it in a low-risk environment. Offer a trial period, or invite them to observe how you work with another customer.
4. Insure the risk
Money-back guarantees, delayed billing, warranties, service desks – all of these reduce your customers’ perception of risk. Some may be in the domains of other departments. But consider what you can do personally to reduce perceived risk. Let the buyer know that you take personal responsibility for their satisfaction. Then look for ways to prove it. For example, provide buyers with your personal phone number and invite them to call you, day or night, if there’s an emergency. Few buyers will actually call, but all will get an added level of comfort just knowing that they can reach you if they need to.