Tim Riesterer understands human behavior when it comes to making purchase decisions.
Tim’s the Chief Strategy and Research Officer at Corporate Visions. He’s built his career on helping companies apply decision science to customer relationships.
Nearly a year ago I was lucky enough to hear Tim speak at a private equity round table for go-to-market professionals.
The talk centered on "status quo bias" and the role it plays in B2B customer acquisition and retention.
Simply stated, status quo bias refers to our preference as humans for the current state of affairs.
It's why we go to the same grocery store each week.
It's why we choose the same toothpaste time and time again.
It's why we stay in dysfunctional relationships.
Status quo bias causes us to resist change for four reasons:
- We tend to like what we are already doing vs. trying new things. This is known as preference stability.
- We know that new projects involve upfront costs and change management, while what we have today is "free" by comparison. The perceived cost of change is high.
- There are so many choices and information available that it becomes difficult to choose. The differences between products are lost; they all look similar. This causes selection difficulty.
- We worry that a wrong decision will negatively impact our job and career progress. This results in anticipated regret and blame.
Status quo bias is a powerful force that works for and against us in our both our personal lives and in B2B SaaS customer relationship management.
When acquiring new customers, we must overcome status quo bias.
Sales execs have to convince prospects that change is necessary and reasonable.
That the risk of maintaining the status quo is greater than the risks associated with change. They must help their prospects answer the questions, "Why change?" and "Why now?"
It gets more interesting in the context of customer retention. The status quo bias works in our favor. And it’s our job to invoke it.
Riesterer recommends communicating three items to trigger our a customers’ bias toward the current state:
- The investment to date (aka, sunk costs). Another bias we humans have is toward sunk costs. We tend to continue an initiative once we invest money, time, or effort. So, we must remind our customers how we got to this point. It's especially important to show new stakeholders the business's cumulative investment in the partnership.
- Business impact as measured in three ways: 1) impact on the project, 2) impact on the business unit/department, and 3) impact on corporate strategic initiatives. Impacts are measured in direct (financial) returns, indirect (qualitative) returns, or strategic returns which enable the company to pursue its strategic initiatives.
- Evolving trends and opportunities. We get to work with hundreds of companies in our industry, and as a result, we can formulate benchmarks, and best practices, and identify trends to share with our customers. Customers are hungry to see what's happening outside of their narrow view of the world, and we become trusted advisors by sharing unique insights that only we could have because of our deep, day-to-day exposure to our customers.
How we deliver thees items to customers depends on the scale, cost, and complexity of the product you sell.
Whether by one-to-one customer interactions, transactional customer lifecycle messaging, or customer marketing and community efforts we must tell our customers these stories.
Repeatedly and consistently.