Delight customers and achieve your goals while saving up to 30% off the entire Insightly platform.
Best value– save up to 30%
B2B Marketing Strategist and Consultant | Researcher | Former Finance & Sales Leader
You’ve heard the saying, “No one ever got fired for buying IBM,” but do you know the psychology behind it?
B2B sales reps often focus on how their solution is different, better, and has the latest features and functions. Buyers, meanwhile, are often fundamentally averse to anything revolutionary or innovative.
Their professional reputation is on the line with every purchase they make – especially the big ones. In many cases, the secret to building confidence in your solution is to de-risk the purchase process for your buyers.
Dale Harrison, a B2B marketing strategist, joins Closing Time to explain the difference between a buyer’s perception of “value” vs. “risk-adjusted value,” and why today’s buyers suffer from FOFU (Fear of F***ing Up). Wondering how you can help buyers overcome that fear? Find out how in this episode.
Dale Harrison has an intriguing perspective on how B2B buyers handle risk, which he terms “FOFU” – Fear of F-ing Up. This concept highlights a prevalent anxiety among decision-makers about making poor choices, especially in large enterprises.
Harrison points out that despite the emphasis on value propositions in sales and marketing, a significant number of purchase decisions in B2B environments, ranging from 40 to 60%, end with no decision – the status quo prevails. This is strange because existing products or services often provide less value compared to newer options. The reason for this, according to Harrison, lies in the perceived risk associated with making a new decision.
The status quo represents the lowest risk option. In large corporations, decision-makers are cautious. The current product, no matter how inefficient, wasn’t their choice, thus posing no threat to their reputation. However, choosing a new, underperforming option can have career-damaging consequences. This fear of making a mistake, or ‘FOFU,’ greatly influences decisions and often overshadows the potential value of a new product.
In these environments, decision-making is typically a group effort, involving committees. This setup diffuses responsibility, reducing the risk for any single individual. Consequently, there’s a tendency for buyers to lean towards market leaders, even if those products are subpar.
For example, a CRM like Salesforce is often chosen for its perceived safety (low-risk), not necessarily for its quality. Hence, “no one was ever fired for buying Salesforce.” Other market leaders like IBM and Microsoft are no different.
Dale Harrison delves deeper into the concept of risk-adjusted value in B2B buying decisions, explaining how buyers weigh the benefits of a product against its potential risks.
In B2B purchasing, the most straightforward choice often seems to be sticking with the status quo. While alternative options might offer more value in solving a problem, they also bring varying levels of risk. This risk is like a negative value, detracting from the overall benefit of the product (see graph below). Buyers, therefore, consider what Harrison calls ‘risk-adjusted value‘ – the net benefit of an option after accounting for its associated risks.
Intriguingly, when this risk-adjusted perspective is applied, the status quo often appears to have the highest value, mainly because it carries the least risk.
Harrison suggests that companies should focus equally on demonstrating they are a low-risk option, not just a high-value one.
This task falls predominantly on marketing rather than sales. The messaging that reaches buyers before any sales interaction can significantly influence their perception of risk. By addressing potential risks (like implementation and performance) in marketing materials and highlighting the safety and reliability of a product, companies can shape buyer perceptions early on.
Instead of emphasizing how revolutionary or unique a product is, it’s more effective to reassure potential buyers about its reliability and low risk.
The real risk in B2B purchases often lies not with the company, but with the individual decision-makers. A decision that leads to failure, even due to factors beyond their control, can have severe repercussions on their career. Therefore, sellers need to understand the different pathways through which a deal could potentially fail after the purchase is made.
Harrison’s experience as a consultant for a Fortune 10 global procurement group revealed that discussions within buying groups often center on the potential risks and political dynamics involved in the decision-making process. These conversations are not about the product’s value but about protecting themselves from future risks and navigating internal politics.
For sellers, it’s crucial to address these concerns directly. One effective strategy Harrison suggests is to engage retired executives from the client’s organization as consultants. These individuals understand the unique political ecosystem of the company and can provide invaluable insights into the decision-making process. They can also facilitate off-the-record conversations with current decision-makers, helping sellers tailor their approach to the specific concerns and dynamics of the organization.
This approach is particularly beneficial for high-value sales. While it may be costly to hire such consultants, the investment is often worth it for the deeper understanding and strategic advantage it provides. The ultimate goal is for sellers to align their offerings, not just with the company’s needs, but also with the intricate web of personal and political considerations that drive B2B purchase decisions.
Have you ever heard the phrase. No one ever get fired for buying IBM?
Let’s talk about the psychology behind it in this episode
of Closing Time.
Thanks for tuning in to Closing Time the show for go to market leaders.
I’m Val Riley, head of content and digital marketing at Insightly CRM.
Today, I’m joined by Dale Harrison.
He is a consultant and strategist in B2B marketing.
Welcome to the show, Dale.
Glad to be here.
Dale, your work about how buyers feel about risk
caught our eye and that’s why we asked you to be on the show.
You talk about an acronym that a little bit colorful.
It’s FOFU, which is candidly quite funny and very true.
Can you talk us through it?
Yes. The fear of f-ing up.
You know, I think one of the things that a lot of both sales and marketing
people in B2B focus on is what’s their value proposition?
What’s the value that their product brings?
There’s a lot of talk, especially in the sales side, around,
you know, having to show that you have greater value than the status quo
and then whatever the incumbent product that’s already in place is.
And yet, if you look at the the high level statistics
in the B2B world, that certainly in larger enterprise companies
that are making buying decisions somewhere between 40 and 60% of
purchase decisions end in the no decision, which means that
the status quo product
every other available option and in almost every case,
the status quo option is bringing the least amount of value to the table.
So why does it have the highest value in the final decision?
And this goes back to this idea of this fear of f-ing up
that every potential purchase option
has both a positive value that it brings to the table.
It also has a negative value that’s associated with the risk
of making that choice.
And so one of the things about the status
quo is it is always the lowest risk option.
That basically, especially if you’re in a large corporation,
whoever bought that thing, no matter how terrible it is,
wasn’t you and, you know, and it’s in the past.
And if you simply do nothing until you get,
you know, transferred to your next position, no one is going to
is going to point a finger at you for having made a mistake.
But if you make a purchase decision and you replace this with something that
doesn’t work as well, then they’re going to hunt you down
and your career is definitely going to be dinged.
And so there’s an enormous amount of reputational risk
among the decision makers.
And you see this within the structure
of the buying committees, you know, within larger B2B companies.
You know, that there are no single decision makers.
It’s always a complex,
five, six, seven people on the buying committee.
And part of what they’re doing is they’re spreading the risk.
If, you know, if everyone makes the decision, then
no one is going to take the majority of the blame if things go wrong.
You know, the other thing that happens is that there is a strong tendency
to choose the market leader, no matter how awful the market leader is.
You know, it’s baffling to me that something like Salesforce
is still closing,. You know, roughly one third of the deals.
You know, it is a terrible piece of software,
especially compared to the alternatives that are out there on the market.
And yet, you know, it’s chosen not because it’s great, but because it’s safe
and because, you know, if a year
down the road, you know, that installation,
completely goes to hell, then, you know,
no one can really blame you because, you know, after all,
you know, we bought IBM, we bought Microsoft, we bought Salesforce.
You know, if you start to look at kind of the
the macro level outcomes of these buying decisions,
what you really see is that value is a fairly minor component
that this sort of personal reputational risk associated with being
with being tied to that buying decision tends to dominate.
You know, and so what this translates into is a need to really understand what
the risk profile of the various purchase options are
and how your product is viewed
from the standpoint of the risks that it brings
to the final buying decision.
Let’s talk a little bit because if it’s not value
and it’s not differentiation, you know, it’s about de-risking.
Dale, you have a graphic and we’re going to share it on the screen
where you talk through risk adjusted value.
And for those listening to the episode,
I encourage you to check out the YouTube link
so you can see what we’re referring to.
But Dale, this graphic. I think we felt was especially compelling.
Can you talk us through it? Sure.
So what I really have here is the status quo and then a set of purchase options.
If you look at the value to the company of the various options, the status
quo is clearly the lowest value option.
So all of the potential purchase options are have will
bring higher value to solving the problem than the status quo will.
Each of these options have various levels of risk associated with it,
and that risk is essentially negative value,
it’s subtracting from the value that the product brings
and that what people are doing, what the buyers are doing
is that they’re not looking at the value, they’re looking at the so-called risk
adjusted value, the value that will accrue to the company.
If you take this option minus the risk associated with making the
making that selection, and when you subtract these away,
what you get is a second graph that basically shows that the status
quo ends up having the highest risk adjusted value of any of the options.
And again, we know this is the case in,
you know, roughly half of all instances,
you know, because we have very good data from Gartner
that in the range of 40 to 60% of enterprise B2B
purchase decisions result in a no decision, which basically is
the same thing as saying
that the status quo option was the best option available to us,
better than literally the entire range of options available within the category.
So when you’re looking at this graphic, you see that when you take into account
the risk, right, that the options
don’t look as appealing as they would just to stay with what you have.
And what this also says is that there should be
at least as much effort spent on establishing
the fact that you’re the low risk option
as you spend establishing that you’re the high value option
in this go, and this is really much more of a marketing task
than a sales task because much of the language
that has already been used to describe the product, you know,
has already reached that buyer well before the salesperson has a conversation.
So by the time the salesperson walks in,
you know, a lot of this risk perception is very much locked into place.
And, you know, they can fight against it.
But it’s a fight.
Where if you can go back into your marketing and you can,
you know, from the very first contact you have with the prospect,
you highlight the fact that this is the low risk option
and you have to consciously be aware of how the risks are perceived.
I mean, there’s implementation risk, there’s performance risk.
You know, there’s a variety of different types of risk associated with
any one company’s product.
If the language within your marketing
is directly addressing these risk issues and directly,
you know, one, not trying to inflame the issue
because again, there is this tendency to, you know,
for people to be overly impressed with the product they’ve created.
This is the most amazing thing.
This is, no one has ever done anything like this.
This is the most revolutionary thing that’s ever been produced.
And the deal is nobody wants revolutionary.
What they want is, is the thing that works without me having to worry about it.
The words you use in your marketing
can go a long ways to either, you know, greatly
enhancing the perceived risk or greatly reducing the perceived risk.
But the time to make, you know, the time to have those conversations with
the customer is in the early stages when they’re starting to form
their initial formative opinions around the product.
have to be seen as the safe option, especially in the corporate environment.
Mm hmm. Yeah.
It brings to mind that classic graph of diffusion of innovations, right?
Where, you know, there are people that are in the market for something
that might be a little risky and might be revolutionary and early stage.
But those are the early adopters and there’s not enough of them
really to have a really profitable company.
And even the early adopters still need some de-risking.
You know, you gave us some tips already in terms of marketing at de-risking a deal.
Let’s say you’re a seller and you’ve gotten
to the point where you’re on a call with someone.
Are there any tactics that come to mind that can help like phrases or approaches
that salespeople can use to really pull the risk out of a decision?
I think one of the things that’s important to understand is where the risk lies.
And to a large extent, the risk does not lie with the company.
The risk lies with the individual decision maker.
Because what happens is if you’re associated with a failed,
you know, with what’s perceived internally to be a failed decision,
you know, and those failures can have can be completely outside your control.
So, for instance, you make the decision, you move on to other things.
The implementation team that comes in to implement the solution screws it up.
still be perceived as a failed buying decision.
People are not going to be nuanced about how it failed.
And so you’ve got a lot of things
that are already outside your control that are risk factors.
I think that from a sales standpoint, what’s important is to sort of understand,
you know, what is perceived
as the risk pathways, the different ways
that this deal can go south after they make the purchase.
Because, again, what happens before they make the purchase
isn’t going to have any impact on them.
But once they make that purchase,
you know, that decision is going to go with them often in the future.
So a number of years ago, I actually did.
I worked as a consultant to a Fortune ten global procurement group,
and I was involved with them for a little over a year.
And one of the aspects of
that engagement was sitting in on
a couple of dozen of these buying groups as they’re making the decision.
And I can tell you the discussions behind closed doors
is very much about all the ways it can go wrong.
Now, they’ll never say that out loud and it doesn’t show up in,
you know, sort of in the final language of the decision.
But behind closed doors, you know, the language is very much about
how things can go wrong and how we can protect ourselves if it goes wrong,
coupled with, you know, who’s giving us pushback
and what are the you know, what sort of horse trading can we do with
with these other political constituents that are pushing back on this choice?
So we’re going to trade them, you know, some future favor,
you know, if they will allow us to move ahead with this decision.
So it’s a very, very complex decision making process that often has very little
to do with the products and very little to do with the value they bring
and everything to
do with working within the political environment,
the horse trading, and then constantly trying
to protect themselves from future risk.
As a seller.
Would it behoove of you to speak candidly with the point of contact
at an organization and say, you know, as we’re moving forward
towards possibly signing this deal, can you help me brainstorm
ways in which, you know, it might go south and so we can get ahead of those
and then use that as a way
to make the buyer more comfortable with choosing your option.
I think so,
but I think it’s a challenge to get the buyer
to have those conversations
because the buyer doesn’t want to openly admit
that this is what’s driving the decision, because officially,
you know, we rationally and objectively evaluated
the value that each of these options bring to the table.
And, you know, we made the decision based purely
on, you know, what was the logical choice among these options.
So, you know, there’s I think, a lot of reluctance to have that conversation.
One of the things that I have done in the past that’s been highly productive
is especially for a very high value sale.
You know, if we’re talking about a seven figure
or greater engagement
to basically identify a recently retired executive,
ideally someone that’s relatively close to the group
that you’re trying to sell into that’s retired
within, say, the last four or five years and hire them as a consultant.
They’ll be expensive.
You know, you’ll pay them, you know, two, $300 an hour.
It’ll be the cheapest money you ever spent because one,
they’re going to thoroughly understand how the decision making is really done
as opposed to how the company officially tells you it’s done.
And they’re going
to thoroughly understand how to think
these issues in the mindset of the buyers within the company.
And they likely will know these people and be able to have,
you know, one on one sort of off the record conversations with them.
They’re not going to sell the product for you.
But what they’ll do is they’ll give you, you know, they’ll know
how to pick up the phone and call the right person
and say the right thing to them.
And they’ll give you good intuition about how these decisions are thought about,
because every company is a very, very unique political ecosystem.
And I think it’s almost impossible as an outsider
to really grasp how these decisions are being made and the ability to
to bring an insider along with you on your team becomes very valuable.
And, you know,
I think this is a very underutilized technique
and it’s a technique that really allows you to get a deeper understanding
of how decisions are really made and how the risk components around
that decision are thought about uniquely within that organization.
So really great tips, Dale, about, you know, insight
into for those enterprise sales representatives out there.
I think they must have learned a lot from our talk today.
That’s all the time we have, though.
Thanks so much for your insights and for being on the show.
Thank you. This has been great.. I really appreciate it.
And thanks to all of you for tuning in to Closing Time.
Remember, subscribe to the channel.
Ring the bell for notifications, like this video so you won’t miss an episode.
We’ll see you next week.