There are two basic ways to sell something. Either a product gives the buyer something he wants — satisfaction, comfort or money — or it prevents the buyer from getting something he doesn’t want: assault, fraud, burglaries or terrorist attacks.
It’s a truism in sales that it’s easier to sell someone something he wants than something he wants to avoid. People are reluctant to buy insurance, or home security devices, or computer security anything. It’s not they don’t ever buy these things, but it’s an uphill struggle.
The reason is psychological. And it’s the same dynamic when it’s a security vendor trying to sell its products or services, a CIO trying to convince senior management to invest in security or a security officer trying to implement a security policy with her company’s employees.
It’s also true that the better you understand your buyer, the better you can sell.
Why People Are Willing to Take Risks
First, a bit about Prospect Theory, the underlying theory behind the newly popular field of behavioural economics. Prospect Theory was developed by Daniel Kahneman and Amos Tversky in 1979 (Kahneman went on to win a Nobel Prize for this) to explain how people make trade-offs that involve risk. Before this work, economists had a model of “economic man”, a rational being who makes trade-offs based on some logical calculation. Kahneman and Tversky showed that real people are far more subtle and ornery.
Here’s an experiment that illustrates Prospect Theory. Take a roomful of subjects and divide them into two groups. Ask one group to choose between these two alternatives: a sure gain of $500 and 50 per cent chance of gaining $1000. Ask the other group to choose between these two alternatives: a sure loss of $500 and a 50 per cent chance of losing $1000.
These two trade-offs are very similar, and traditional economics predicts that the whether you’re contemplating a gain or a loss doesn’t make a difference: People make trade-offs based on a straightforward calculation of the relative outcome. Some people prefer sure things and others prefer to take chances. Whether the outcome is a gain or a loss doesn’t affect the mathematics and therefore shouldn’t affect the results. This is traditional economics, and it’s called Utility Theory.
But Kahneman’s and Tversky’s experiments contradicted Utility Theory. When faced with a gain, about 85 per cent of people chose the sure smaller gain over the risky larger gain. But when faced with a loss, about 70 per cent chose the risky larger loss over the sure smaller loss.
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