Integrate Risk Lowering Strategies In Your Marketing
People, on average, don’t want the lowest price. You can verify this fact by noticing that not everyone drives a Ford Focus or a Hyundai. Did you know that in a given supermarket, Coke and Pepsi combined outsell the store brand cola by a margin of about 12 to 1? And unlike cars, there just isn’t that much difference between a Coke and a Big K Cola. No, people don’t want low price – they want low risk. Let’s say you take a road trip and you want to stop to eat lunch. You come to an exit in the middle of nowhere with a Bob’s Burger Barn on the right side and a McDonald’s on the left. Where do you go? If you’re like most people, you go left to the McDonald’s. Why? Because even if you don’t like McDonald’s, at least you know what to expect. It’s very low risk.
What about store brand soft drinks? They might be really good, they might be terrible. It doesn’t matter – it’s only 85 cents more to get the national brand, and you know you like the national brand. Besides, what if your friends laugh at you? Come on, what’s High-Top lemon-lime soda? Where’s the Sprite? Sprite! What a bargain at only 85 cents more. Here’s a little secret – You’re more likely to be the Bob’s Burger Barn of your industry than the McDonald’s. But, don’t take that as an insult, because you might actually be much better – i.e. have a better Inside Reality – than the McDonald’s in your industry.
But The Problem Is, the customer doesn’t know. So it’s a high-risk situation for him to try you out. But, maybe you feel you’re the recognized leader in your industry – that you’re the McDonald’s. If so – Do you have all the business you want, or is there just more to be had? There’s always someone out there who thinks one of your competitors is better than you are. But what’s really interesting is that most businesses, just like Bob’s Burger Barn, figure that by just sticking their sign up on the side of the road with combo meal specials on the marquis, so to speak, that they ought to get their fair share of the business.
Here’s an example – I was recently in the market for a new phone system for my office. I did my research and found a company that sold a product I felt comfortable with, and even though it cost what seemed to be a lot of money for a phone system, it was still within my budget. If you’ve ever bought a sophisticated business phone system, then you know it’s not something you just call up and order out of a catalog. There’s a fair amount of planning that goes into getting everything squared away and ready to install. So I had gone through the process of negotiating, evaluating, and planning…and finally had just about all the details worked out and was ready to go ahead with the purchase.
Right at that point, a guy from another company called and asked if he could give a quote on a phone system. Having never met the guy, I agreed to let him stop by and introduce himself. When he got to the office, I was shocked. The guy looked like the missing identical twin of Rodney Dangerfield. He had the same goofy look on his face as Rodney, plus the wide collar Hawaiian shirt and gold chain necklace to complete the look.
I thought, “Wow, this guy sells phone systems?” He told me that he appreciated the chance to bid on the phone system, and that if he couldn’t beat the other company’s price by at least 30% that I shouldn’t even consider doing business with him. Out of politeness, I consented to his e mailing a proposal over the next day. Sure enough, the next day the e mail came over with a quote for a different brand, and was about 30% less than the original vendor’s. So who do you think I ended up buying the phone from? The Rodney Dangerfield look-a-like? Not on your life. I went with the original system that cost 30% more – or in this case, several thousands dollars more.
Why? The risk was too high. Don’t you wonder about a system that’s 30% less expensive than what everyone else is selling? Wouldn’t that make you a little nervous? Do you really want something as critical as your business telephone system to be supplied by some weirdo selling off-brand stuff? Of course not.
Now you’re probably not a weirdo selling off brand stuff. But the story makes a point about people’s aversion to risk. Realize this – because of the Confidence Gap, any time a customer does business with you, particularly for the first time, there’s a certain amount of risk involved. In your business and in your advertising, the best way to lower the risk is to…well, lower the risk.
For example, there was a company that sold a non-insurance health benefit card that allowed a person to receive substantial discounts on dental, vision, and prescription services. You’re probably familiar with this type of product. They sold the card for something like $13 a month, or $150 for the year, but hardly anyone bought it. The sales agents complained and complained about how nobody wanted to buy the card, and their advertisements got almost no response. Well, the card was actually a really good deal…if people would use it. A person could save about $300 to $800 a year depending on their use. But think about it – how excited would you be to listen to a guy try to sell you some health benefit card for 15 minutes? The company considered giving the card away so that a person could use it FREE for 30 days from the first time it was used. Note – there was no way a person would save less than $25 or $30 when using the card, and they could potentially save over $100 on their very first use. Either way, they’d more than pay for the card, for at least a couple months, if they just used the FREE trial. Unfortunately, company executives resisted and came up with all the reasons why financially it wouldn’t work and they just couldn’t do it.
Those who can solve problems get paid really well. While those who recite all the reason things won’t work are generally broke.
Well, shortly after that the company quit the business, and we saw one of their competitors giving away the card FREE for a month. So we called them and snooped around a little, and discovered that sure enough, they were selling tens of thousands of new cards a month. It was low risk.
So let’s evaluate your situation: First, put yourself in your prospect’s shoes, a prospect who’s never even heard of you, and take a quick look at your advertisements.
1. What is the risk in calling you?
2. What’s the risk in doing business with you?
3. Are they afraid you’ll send salesmen calling all the time?
4. What can you do to lower the risk?
5. Can you guarantee or warrantee the work?
6. Can you extend the guarantee for even longer than you do now?
7. Can you give prospects an experience of your product or service before
committing to buy?
8. Is there more info you can give ahead of time to help prospects make an
9. Can you give prospects guidelines as to what to look out for when buying in your industry…regardless of whether they buy from you or not?
The Point Is This: Lowering the risk factor is an absolute MUST if you want to engender confidence with your prospects. And if you can solve the risk factor, you’ll get paid really well for it.
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