Why People Buy
,Sheena S. Iyengar of Columbia University and Mark R. Lepper of Stanford University conducted a study of jam shopping at an upscale grocery store in California. They set up a jam tasting booth that displayed either 6 or 24 varieties of jam to see what consumers were more attracted to and if there was a difference in purchasing behavior. Shoppers were 62 percent female and 38 percent male. The 24 jams included exotic flavors and did not include traditionally popular flavors such as strawberry. To be sure that the 6 jams weren’t jams that people would prefer and skew the results, the researchers did a survey of Stanford students beforehand and asked them to rate the 24 jams from most to least preferred. They selected two of the most preferred (kiwi and peach), two moderately preferred (black cherry and three-fruits), and two least-preferred (lemon curd and red currant). This process ensured that the 24- and 6-jam displays included jams of equal preference level.
Shoppers encountered one of the displays (they were rotated hourly) and were advised to try as many jams as they’d like. They received a $1 off coupon that could be used for one week and could purchase by going to the jam shelf, selecting the jam, and paying for it at the register with their groceries. Purchases were measured by a code on the coupon (disguised as a scanning code), which indicated whether the person had encountered 6 or 24 jams.
Initial attraction was measured by observing how many people stopped at the display. For the display of 24 jams, 242 people encountered the display and 145 people (60 percent) stopped. For the display of 6 jams, 260 people encountered the display and 104 (40 percent) stopped. People were more attracted to the extensive display of 24 jams than the display of only 6 jams. There was no significant difference in the number of jams people sampled at the 6- or 24-jam displays; on average, people sampled two jams. So what did people buy? The results were striking: 31 people (30 percent) who encountered the 6 jams purchased, whereas only 4 people (3 percent) of those who encountered 24 jams purchased a jar of jam. The 24 jams were more attractive and aroused more curiosity, but perhaps the people who stopped at the display of 6 were different in some way than those who stopped at 24.
When my husband and I were selling our condo, I got really into staging it for the open house. I hired cleaners, bought flowers, set the table, the works. My real estate agent cautioned me not to get my hopes up too high, though, because she said that few homes are sold on the basis of an open house. Why might this be? Often people who attend open houses are like those who are attracted to the table of 24 jams. They drive by and see a sign and have a few minutes, so they stop in. They scroll through dozens of houses online and see that one has an open house, so they stop by. Curiosity-seekers, they are sometimes called. What about the serious house hunters? They may be more like the people who stop at the display of 6 jams—more ready to purchase. They have an agent, they’ve met criteria, and they are ready to purchase. What does this mean for your business? Two things:
• Get specific and limit the options.
• Find the people who are ready to purchase.
Get specific and limit the options
The results of the jam study indicate that too many choices leads to inaction. In this case, 6 choices was far superior to 24 choices. Much of the previous psychological research on choice found that choice can be a good thing. In these studies, participants typically had two to six options from which to choose. We can infer from all of this that six or fewer options is ideal. So how do you limit your clients’ choices? Here are some examples to get you thinking:
• A coach can offer three specific programs from which a client can choose.
• A salesperson can present one particular new product at a time.
• A speaker or trainer can have one signature program that is offered in three formats: one hour, four hours (half day), eight hours (full day).
• A consultant can offer two outcome-based programs, such as one for teambuilding and one for a leader’s emotional intelligence.
• A psychologist can offer treatment for three particular disorders.
• A real estate agent can specialize in two neighborhoods.
• A financial advisor can present two strategic options to her clients.
• An attorney can offer four services; for example, an intellectual property attorney can offer copyright consultation, trademarks, service marks, and patents.
• A massage therapist can offer three types of services: carpal tunnel therapy, deep tissue massage, and sports massage.
• An accountant can offer three fee-capped packages: one for an individual who has a job, one for small business owners, and one for married couples (clients could be charged less than the fee cap if their needs are less).
What can you do to simplify and limit the service offerings that you provide?
If it’s possible with your line of work, another tool to simplify your services and enhance the perception of value is to package them. Ideally, package them based on the end result that people will receive. For example, one of my clients, an accountant and financial consultant to small businesses, and I packaged his programs into:
• Shave 20 percent or more off your overhead expenses.
• Get paid on time and do away with your account receivables.
• Make the most of your tax deductions.
As you can imagine, new clients were more likely to sign up for a program with a specific benefit than to receive an intangible, general benefit such as “financial consulting.” Additionally, clients were willing to pay more to receive one of these benefits because they could quickly mentally calculate the return on investment of saving 20 percent off overhead versus the investment in consulting. They felt the pain of not being paid on time and were happy to hire someone who can alleviate this pain. And they disliked that uneasy and unsure feeling about whether they were doing the best they could with their tax deductions and were eager to resolve that issue.
Professionals sometimes say that they’re concerned to package their services together because a big number is more threatening to prospective clients than a small number. For example, a $2,000 program is more distasteful than $200 per hour. This can be true, but there are several key factors to consider:
• The fear of the unknown. For most people, the unknown holds more fear than the known. This is why people stay in bad jobs, relationships, and so on. I would prefer to know that I would need to spend $2,000 and budget for that than to worry that invoices for $200 per hour would pile up to an unknown amount.
• Conflict of interest. Prospective clients sometimes worry about paying someone by the hour. An inherent conflict of interest arises because the service provider gets paid more the slower he or she goes. Most ethical professionals work as quickly as possible in spite of this, but this conflict of interest can be real or at least real in the minds of clients.
• How much your client earns per hour. If your client also provides fee-for-service hourly services, she will mentally calculate the difference, and if you charge more than she does, this will be unsettling to her. It feels like a loss of money. There is an economic theory called loss aversion put forth by Amos Tversky and Daniel Kahneman that shows that people strongly prefer to avoid losing money over the potential of gaining money. If you charge more than your clients, help them not experience loss aversion by packaging your services. This creates an apples to oranges comparison rather than apples to apples, which makes them feel that they are losing money.
• Lead with the benefit. Packaging your services allows you to promote the benefit rather than the service. Clients hire you to receive a benefit. They don’t necessarily care about the process or how they will get there. A couple goes to a marriage counselor because they want a better marriage. A client goes to an accountant because she can’t stand doing her accounting and wants to be sure everything is done correctly. A patient goes to a chiropractor because he wants his neck pain to go away. A client goes to a wellness coach because she wants to lose weight, gain energy, and have more balance in her life. A client hires a virtual assistant to help make her e-mail marketing more effective by managing her e-mail list and creating her e-zines. A client goes to a social media consultant because he doesn’t want to waste his time in social media and wants to attract new business. A couple hires an interior designer to create a beautiful, warm, and inviting living space for their family … You get the idea. Clients hire service professionals for the benefits that they will receive.
• People buy specific and ponder general. Putting your services into programs makes your services more specific. Think about this: When was the last time you bought a shirt? Truth is, you never really purchased a generic “shirt.” You’ve bought a great striped non-iron button-down that you can throw on and be out of the door to meet with a client in five minutes. You’ve bought a beautiful bright blue shirt that brings out the color of your eyes. You’ve bought a great lightweight white shirt to wear outside when it’s hot. You’ve bought a tee with the name of your alma mater broadly displayed on the front. But you’ve never bought just a shirt. If you were to think of buying a shirt, you would deliberate. What color? What material? What purpose? What style? If, however, you were to think about buying a new white dress shirt to go under your pinstriped suit, you’d know exactly what to do and would buy it when you found it.
Is it possible to group your services together into packages? If so, great, go for it! Just keep the packages to six or fewer. If not, you can create crystal clear benefits about your services so that people know exactly what they’re getting and will be ready to buy.
Find the people who are ready to purchase
Referral relationships are my favorite marketing strategy because your referral sources will be in contact with people who are ready to purchase. You go to the doctor and she recommends that you go to physical therapy. You agree and ask her who she recommends. She provides a couple referrals, you select one, and you go. When a prospective client asks for a referral, you are in a position of filling a need. This is like the house hunters who have narrowed down their target neighborhood, received mortgage approval, found a real estate agent, and would like to move within two months, versus the people who attended an open house because they drove by, saw a sign, and were curious what the house looked like on the inside.
How can you help your referral providers find the right clients for you? One of the most important things you can do is to paint a crystal clear picture of the types of clients you help. This way you will be the person who comes to mind when they have that type of client or patient. When you meet with referral sources, say things like:
• “My clients are new technology businesses who need to set themselves apart with their visual brand.”
• “People hire me to help them during the critical first month that their new dog is home, to ensure the dog is well trained and never aggressive with their young children.”
• “The children I work with are bright and may have compensated for their attention or learning difficulty for some time, but as they enter middle school and the work gets harder, they find that they need new learning tools to succeed in school.”
Can you see how the picture of the client is painted? Your expertise is also highlighted.
Another thing you will need to do is to say no to referrals that are not your ideal clients. This may be hard because you want new clients, but it is necessary. Saying no defines your target client market, showcases your specialty, and communicates your professional ethics because you do not work with people outside of your expertise. It also ensures that you are providing the best possible service to those who you’re most qualified to help and enhances your work satisfaction since you’ll be working with only your ideal clients. Earlier we discussed the importance of having a referral database. You can then refer your referral source to one of these professionals. Do not be afraid that they will not come back to you again in the future—they will, with your ideal client.
If you happen to get a new client and can tell you are not the best one to help her, refer out immediately. Do not worry that you are losing a client; referring out will actually help you grow your business. In gardening, it is necessary to “deadhead” plants. This means that you remove the flowers that are dead. It helps the plant to grow and flower much better. Similarly, you need to remove any clients who drain you or for whom you are not the best fit. They will be better served elsewhere, and you and your business will flourish.