Thursday Dec 30, 2021
Thursday Dec 30, 2021
Risk vs reward in sales and business
Google the words risk or reward and you will see exactly what they have to do with your sales presentation. As you meet with your buyers they are thinking about the risk they have of doing business with you, they just may not say it that way. The risk vs reward levers are used in purchases you make as well as your buyer.
- Risk - a situation involving exposure to danger
- Reward - a thing given in recognition of one's service, effort, or achievement.
“The juice has to be worth the squeeze in sales and business”
This is really the framework of offers, and or deals in business, marketing, and sales. One of the movies that explain this thought the best is Tommy Boy. At the end of the movie, Tommy needs to sell brake pads. He wants to show a superior product so he talks about guarantees. Some people, not all reduce their risk by wanting a guarantee. Here is the exchange from Tommy and Ted:
Tommy: Ted, why would somebody put a guarantee on a box? Hmmm, very interesting.
Ted Nelson: Go on, I'm listening.
Tommy: Here's the way I see it, Ted. Guy puts a fancy guarantee on a box 'cause he wants you to fell all warm and toasty inside.
Ted Nelson: Yeah, makes a man feel good.
Tommy: 'Course it does. Why shouldn't it? Ya figure you put that little box under your pillow at night, the Guarantee Fairy might come by and leave a quarter, am I right, Ted?
People buy on emotion and justify with logic
You will hear people buy on emotion and justify with logic. People are emotional creatures and do think about the emotions in the deal. People will outweigh what the risk is of purchase and compare it to the reward for what they are getting. Worrying about failure or risk is something people have issues for just about any purchase. Look to risk reversal to help understand how to help serve them.
How your own stories can reduce risk for buyers
People want to find comfort when they buy. Stories about your clients' successes and even failures will help you overcome objections you face. You can also reduce reactance and oscillation or the back and forth on a decision. Stories will come to play before you need them. You will want to have some well thought out stories of how you helped people. The stories can be based upon:
There is a risk to a low price in sales
Think through the reasons why risk vs reward is important. What are all of the risks when someone only buys on price? When people solely buy at a loser price their reward is the cheap price, their risk may be high but they are willing to take it. If someone goes with a full offer company the risk may be that they pay too much, the reward is the warranties and guarantees put in place.
Tough questions to ask yourself about risk vs reward in sales
Here are a few questions to think about when it comes to dealing with the reward of purchases as well as risk. These questions could be asked about your buyers:
- How many of the objections you have had over the last 90 days have happened because the buyer felt like they had more risk than reward?
- How much of your presentation deals with the risks alternative options have?
- How much of your presentations counters with the true rewards you have to offer that nobody else does?
- How many deals have you lost because your competition has better risk reversal and are not afraid to use it?
- What company takes your lunch money, not because of skill but because of expression of risk reversal?
- How many deals could you have sold for more if you had better risk reversal?
- What is the best risk reversal in your industry?
- Whats the best risk reversal you have ever heard of
You can close deals with outcomes
The objections you face may not be about “the money” it could be about the risk. There are image issues when someone makes a bad purchase. There are people who can be harmed in a company with a poor decision.
- Risk of implementing and failure
- Risk of using relational capital in meetings -
- Risk of going too fast
- Risk of shame in front of a team or owner for a bad decision
Rewards from making the right decision
Rewards on the other hand can be the dopamine rush people are looking for.
- Savings that come from the product or service
- Speed of implementation and fixes
- The ability to get someone out of a pickle
The fear in business is making a mistake, to be judged by others, or to be harmed. The truth is there isn’t 100% indemnity from mistakes. You have to be able to help your buyer explicitly see their risk vs reward:
- Guarantees – meant to help people reduce their risk
- Warranties – Meant to help people reduce their risk
- Reputation – Meant to help people reduce their risk
Nothing works 100% of the time. You have to be able to show your buyer why they are “safe” you may not be able to use that word, you can convey it.
You sell how you buy and risk vs reward in sales
Your personal life is part of your business life. You sell how you buy and if you need all sorts of risk reversal to make a purchase you will push this idea hard in the sales process. If you don't need risk reversal you may skip over it.
- In your own life look at how you evaluate your own risk and reward
- Look for places where you got upset about a deal or a struggle and map out why
- Look at other peoples offers
- Specifically, search for guarantees and warranties – look at where they are weak and where they are strong – how would you modify them
- Study strategies from others – read books about deals
How to understand risk vs reward to close more deals
If you really want to understand what your buyer faces you can map it out. There are 2 steps here to get you going. First, make a list of all of the risks your buyer faces when they make a purchase. Second, make a list of all of the ways you take care of those risk factors and fears.
- Keep track of the questions you get in presentations – if you are new ask a closer / pay a closer / role play with a closer
- List them out in order of priority
- You have to know them – you don’t have to put all of them in your presentation use the 80/20 rule
- You have to script out all of the concerns in order of what could be asked
- You may have to group source this and talk through it
- You may have to practice answering the questions / concerns / risks
- Practice in front of closers
- Take your script and have the most doubtful person try to poke holes in it
Questions to end on
You can do this short exercise in order to understand risk and reward better. There are a few questions about listening to this episode:
- What was the risk of listening to this episode
- What is the risk of not taking some action in your presentation
- How do you bridge the gap from what you heard to take action
How your competition can be left to deal with risk vs reward in sales
You can explicitly talk about risk vs reward with your buyers and put the onus of work on your competition. You can point out problems your competition has and explain the risk using the work "risk". You can get the buyer discussing their problems with the purchase to make it more powerful.
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