Sales and Psychology Go Hand-in-Hand
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Virtually every organization sells something. Businesses sell an asset, product or service. Non-profits or not-for-profits sell an idea or benefit. Even governments sell protection, regulation of actions, and services in exchange for taxes. There is an element of sales — the trade of a product, commodity, idea or service for money or time — in every human exchange. And all sales require an understanding of human behavior. So sales and psychology go hand-in-hand. But how does a business owner use psychology to benefit his bottom line?
Virtually every organization sells something. Businesses sell an asset, product or service. Non-profits or not-for-profits sell an idea or benefit, such as Goodwill which sells the idea of donations in order to provide jobs and job training or Red Cross which sells the idea of immediate disaster assistance to people who donate money to their cause or volunteer their time. Governments also sell… they sell protection, regulation of actions, services and the preservation of good relations between itself and other governments in exchange for taxes. Even major intergovernmental organizations, such as the United Nations, is selling something. The UN sells the idea of international peace, security and cooperation and the development of friendly relations and harmony among nations in exchange for funding by nations so it can do its work. There is an element of sales — the trade of a product, commodity, idea or service for money or time — in every human exchange. Sales is essential and ubiquitous.
And all sales require an understanding of human behavior, which is the definition of psychology. Psychologists study how people think, feel, and behave. This knowledge can be applied to sales in order to understand what motivates customers to buy, how they make decisions, and what kind of sales pitch is most likely to be effective. So psychology goes hand-in-hand with sales.
Indeed, a solid understanding of psychology can help salespeople build rapport with customers. By understanding the customer’s needs and wants, salespeople can create a more personal connection and build trust. This can make it more likely that the customer will buy from them. Psychology also helps salespeople overcome objections. When a customer raises an objection, it’s often because they have a fear or concern. Psychology can help salespeople understand these fears and concerns and develop strategies for addressing them. And, psychology can help salespeople create persuasive marketing materials. Everything from the color of a website to the words used in a sales pitch can have a psychological impact on the customer. By understanding these effects, salespeople can create marketing materials that are more likely to persuade customers to buy. In short, psychology helps salespeople understand what makes customers tick and how to influence their behavior. This knowledge can be used to improve every aspect of the sales process, from building relationships with customers to closing deals. And it can help them not lose sales because of a failure to understand what the customer needs and values.
Here are some examples of how psychology can be used in sales:
1. Reciprocity – People are more likely to do something for you if you do something for them first. This is why salespeople often offer help, free advice, introductions, seminars, free samples or discounts as a way of getting customers to try their product or service.
2. Scarcity – People are more likely to want something if they think it’s scarce, rare or unique. This is why businesses often create a sense of urgency by telling customers that only a small number of the product will be made or that a product is available for a limited time (FOMO – fear of missing out). Or they might indicate that there are only a few items left in stock to create the illusion that a product is in limited supply. For example, a retailer might display a “Close-Out” sign on a product to say that there are only a few items left in stock.
3. Social Proof – People are more likely to do something if they see other people doing it or that other people endorse it. This is why companies use testimonials from satisfied customers to validate that their service is worth buying. Retailers use the opinions of other shoppers to influence the buying decisions of potential shoppers. Amazon displays customer reviews on its website in order to encourage shoppers to compare products and vendors. And businesses might even offer a discount in exchange for a good rating and review.
4. Discounts or promotions – Retailers often offer discounts or promotions on related products in order to encourage shoppers to buy more. For example, a retailer might offer a discount on a printer if the shopper also buys ink cartridges.
5. Product Placement – Changing the location of items in a store means that customers are exposed to different items as they wander around searching for the things they need. This can significantly increase spending through cross-selling and upselling. For example, grocery stores use end-caps (the displays at the end of an aisle) and free-standing displays to grab shoppers’ attention. And products placed in the middle rows are seen and purchased more than products on the lowest or highest shelves. Likewise, placing complementary products near each other makes it easy for shoppers to see them and consider buying them. For example, a retailer might place coffee mugs near coffee makers in order to encourage shoppers to buy both items.
6. Suggestive selling – Suggestive selling is a technique where retailers make suggestions to shoppers about other products that they might be interested in. For example, a salesperson might suggest a warranty or extended protection plan when a shopper is buying a new appliance.
7. Comparison effect – This is the practice of comparing the price of a product to the price of a similar product. This can make the price of the first product seem more affordable, even if it is actually more expensive.
8. Commitment and consistency – Once people make a decision, they are more likely to stick with it. This is why salespeople often ask customers to make small commitments early on, such as agreeing to a free consultation or providing their contact information. With each additional commitment, they are less likely to go elsewhere. That is also the reason that companies offer credit cards. In addition to offering a payment system, a store credit card is a tacit commitment to shop at that store first for the products they sell. The psychology here is that it is easier to keep an existing customer than sell to a new customer.
9. The Foot-in-the-Door Technique – This strategy involves making a small request that is likely to be granted, and then following up with a larger request. For example, a salesperson might ask a customer to sign up for a free trial of their product, and then follow up with a request to buy the full product. Netflix used this exact strategy when they launched their subscription model. They offered unlimited video rentals for $15 per month… with the first month free. While this was extremely expensive to them as a startup, customers overwhelmingly continued as customers after the first month.
10. The Door-in-the-Face Technique – This technique involves making a large request that is likely to be rejected, and then following up with a smaller request. For example, a fundraiser for a charity might ask a prospect to donate $100 to their cause, and when that is rejected, follow up with a request for a $20 donation.
11. Authority – People are more likely to be persuaded by someone they perceive as being in a position of authority than by someone who has no authority. This is why salespeople often have titles that denote status, such as Vice President of Sales or Regional Sales Manager. They also typically dress professionally and will craft their brand to denote authority, such as driving an upscale vehicle and posting photos with celebrities.
12. Know-Like-Trust – People are more likely to do business with people they know (personally), like and trust. This is why salespeople often try to build rapport with potential customers by finding common ground and showing genuine interest in them. There is nothing more effective than connection, camaraderie and fellowship to create bonds between a salesperson and a prospective customer. It is time-consuming but it is also the most lasting way to generate sales.
By understanding and using psychological principles such as these, businesses can create more effective sales pitches and marketing materials as well as develop sales strategies that speak to prospective customers. The next time your organization is trying to ‘sell’ something, consider ways to incorporate these psychological tactics. In all likelihood, this will lead to increased sales and more success. Happy selling.
Quote of the Week
“The rule is that people decide emotionally and then justify logically.” Brian Tracy
© 2023, Keren Peters-Atkinson. All rights reserved.
