Nick Southgate is a philosopher who has worked in advertising for many years. For the last three years Nick has worked in marketing & advertising as a behavioural economist. By looking at things from a behavioural perspective it helps us to understand far better how to approach buyers from a sales and marketing point of view.
Nick also works for the ‘School of Life’, a school of “everyday philosophy”. Nick runs a class about ‘making better decisions’. This is a very popular course. In March next year Nick will be our guest speaker at the B2B Marketing Forum 2013 in Amsterdam. His keynote will be about the theme of the day ‘B2B buyers’.
What can you tell us about B2B buying behaviour?
“We are always limited in making good decisions by the fact that we are human. We have very efficient ways of making decisions, but it’s never 100% reliable.” Nick continues: “I find this fascinating as an efficient decision isn’t always the best decision. If you assume that people always make the best decision and you help them by offering some information, you can be wrong. The information you’re providing is not always the right information to help them in this process.”
In business many times we’re trying to influence group decisions. Sometimes we believe that groups make better decisions than individuals. This is not necessarily true according to Nick.
How can we have an impact on decisions as a marketer? The winner’s curse
Nick: “We would like to make decisions based on one criterion, simply because we like things simple and easy. E.g. if we were to buy a camera, it’s easier to just look at ‘the number of pixels’ as the main criterion. That’s easy.
In business when bids come in of something very complex, we would like to look at all the criteria. However actually most people rank all the bits on price and choose which one is cheapest. This tends to lead to the winner’s curse.”
Imagine three companies bidding for a project. One of the bidders is already running the business. Their advantage is that they know exactly what will be involved as they already work for the business. Their price will be a very accurate reflection of what it really costs. Two other bids may be a lot higher or lower, this doesn’t mean that they think it’s more expensive to do or less expensive. These bids may reveal that actually they don’t know how accurate their bid really is.
But because we tend to buy on price, we tend to choose the cheapest. If someone can do a job for x millions of Euros less, we think they must be brilliant. We don’t think, “They don’t know what they’re talking about”.
Result: the group chooses the cheapest; because at the end of the day saving money is always a good thing to do. The next thing you find out is that the supplier can’t do it within the budget. That’s what we call the winner’s curse.”
From a business perspective we have to guard against making decisions like that. From supplier’s perspective we have to understand that that’s what’s most likely going to happen.
How can a sales or marketing person gear up to do it right?
A good sales person will often try to frame a conversation by saying if you only think about one thing in this decision make it this thing. We know that many times a decision is also based on controlling as the alternative to price. Business people over estimate the extent to which they can make independent decisions. We all know that businesses tend to make conservative decisions based on what other businesses do. Look at how many businesses use the Blackberry phones. As Nick was working for Nokia for many years, he experienced the challenge where businesses simply say ‘no’ to a Nokia, because they believe that Blackberry was the only right choice. There was no real reason for this choice.
“The fact that ‘everyone else has it’ is a very powerful influencer”
If you challenge people in research at what are you looking for in a new device for the business, they will say: “We want it efficient, secure, etc.” They never say “We want to have exactly the same as everyone else because it makes us feel safe.” But this is actually what happens most of the time.”
Two consequences:
- If you are the de facto standard in business you want to remain the standard.
- If you’re trying to break in to a market, you need to re-define it, so that people feel that the standard decision is no longer wanted, that it’s old fashioned, out-of date.
We tend to believe that business buyers are very rational and that they would always make the right decision and over time become more capable to do. This is certainly not the case. The social forces are sometimes even stronger in business.
What can a marketer do to help in the buying process?
You should provide the best information. It is important to frame it correctly. Give people a way to think about the information. Many times it’s not about what they are buying but about how they are buying. You have to think of ways to make the decision process easier. People like making as few decisions as possible.
“People prefer any number of effortless decisions (which we might call small) to even a very small number of hard and effortful decisions (what we might call big decisions).”
It’s all about seeing whether you can help the buyer by explaining what he or she needs and why, you can make life easier for the buyer.
Think about complicated forms online, people don’t want that. So, no matter how good your product is, if the decision-making process is annoying, people end up not making the best decision for you. People want things to be easy and especially easy to buy.
Are you interested in the topic of B2B buyer behaviour or B2B marketing in general? Nick Southgate will be a keynote presenter at the B2B Marketing Forum Amsterdam on March 14th 2013.