Tim Riesterer has built his career helping companies apply decision science to customer conversations.
This week I was lucky enough to hear him speak at JMI Equity's annual Go-to-Market Summit.
His talk centered on "status quo bias" and the role it plays in B2B customer acquisition and retention.
Simply stated, the 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 every week.
It's why we choose the same toothpaste over and over.
It's why we stay in dysfunctional relationships.
Status quo bias causes us to resist change for the following four reasons:
- We tend to like what we are already doing vs. trying something new. 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.
- And finally, 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 personal lives and in B2B SaaS.
When acquiring new customers, we must overcome status quo bias.
Sales execs have to convince prospects that change is necessary, and reasonable, and that the risk of maintaining the status quo is greater than the risks associated with change. They must help their prospects answer the all-important questions, "Why change?" and "Why now?"
It gets more interesting in the context of customer retention.
To help drive retention we should reinforce the customer's natural bias toward the status quo.
The status quo bias actually works in our favor.
That means we must ensure they remain convinced that the cost and risk of change is too high and that they can access incremental improvements faster by staying us than by starting over with a competitor's solution.
The question is, when and how do we make this case to our customers?
Reimagining the business review
As of late, there is a lot of talk amongst the customer success community regarding the death of the business review.
But rather than kill business reviews altogether, perhaps we need to return to the first principles of what we're trying to accomplish.
The goal of every customer success professional should be to reinforce their customer's natural inclination toward the status quo and claim the incumbent's advantage (see link on this below).
To this end, Riesterer outlines three elements of the relationship we need to communicate to our customers:
- A summary of 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.
Are you communicating all three of these to your customers?
How we document and deliver business reviews will evolve... but the ability to get this information into the hands of customer stakeholders is key to using use status quo bias to retain our customers longer.
Content I enjoyed this week:
- For more information on the above, check out B2B Decision Labs where Tim Riesterer and his team publish tons of research on the psychology of decision-making and B2B buying. Tim's talk this week inspired this week's post.
- The Incumbent's Advantage, HBR - https://hbr.org/2008/10/the-incumbents-advantage
- Cybertruck - Seth Godin's Akimbo podcast is one of my favorites. This is a great episode on the difference between those who envision the future and the operators that bring the future to everyone. My favorite part is when he refers to Elon Musk as an Internet troll.
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