Bounded Rationality: Balancing Logic And Emotion In The Sale
Although organizations are increasingly structured and sophisticated in their buying, for as long as people are involved in making decisions there will inevitably be an element of human fallibility in terms of how decisions are made.
This is the age of the Utilitarian or Economic buyer and the Cost-Benefit Analysis. Where decisions are made by weighing up the alternatives to determine the best outcome or deal. It is all very rational – or is it?
For each of your top prospects, just how logical or rational is the buyer?
How Rational Is Your Prospect?
Buyers are often less rational and analytical than their procurement policies and procedures suggest. Indeed research shows that the 100% rational – analytical buyer is an illusion. But let’s leave the science of decision making aside for a moment and relate this to our every day sales experience.
Have you heard a customer, or prospect saying something like the following before deciding to buy:
- It feels right…
- There is a good fit…
- It all adds up…
- The time is right….
- It makes sense…
- I trust what the seller is saying…
- I can see it working…
Are such statements based on rational argument or are they based on a more intuitive feeling? Well often times it is both.
Yet confronted by increasingly hard-nosed buyers we can be tempted to overlook the role of buyer attitudes and instincts and get straight down to the cost-benefit analysis. That means we risk overlooking key buyer motivations and to maximize our emotional leverage on the sale.
The Illusion Of The 100% Analytical Buyer
We all think we are logical rational and analytical in how we behave. After all as adults we are both educated and intelligent. As trained and experienced managers we are especially logical when it comes to our business decisions. Psychologists would however disagree and point to a whole lot of research to back up their argument.
Procurement professionals in particular would argue that they are purely logical and rational in their decision making. They lay claim to being the Mr. Spock of organizational decision making, making decisions that are unaffected by emotions or prejudices.
They will argue that procurement is the science of removing the bias from decision making. Not only are professional buyers trained to make rational buying decisions, they have the procurement systems policies and procedures to guard against the decisions making weaknesses of their colleagues.
However, some of that could be hubris on the part of the professional buyer, because according to scientists the perfectly rational decision is an illusion.
Buying Like Mr. Spock
Just as few buyers have pointed ears (like Mr. Spock), few are entirely logical in their decision making.
Although many buyers would like to deny it, their decisions are rarely 100% rational, or analytical. Indeed, bounded rationality is the term used by scientists to describe the real complexity of human decision making.
What prejudices does your buyer have in respect of the decision?
This has implications for selling – it is not just about the spreadsheet, the cost-benefit analysis or the business rationale for buying. The nature of decision making requires that the seller uses a mix of analysis and emotion in the approach to even the most hard nosed buyer.
Buying And The Foibles Of Human Decision Making
Buying decisions are made by people not computers (although procurement systems are increasingly playing a role). That means, like any other decisions, buying decisions are subject to the foibles of human decision making.
So, while most managers would scoff at the suggestion that he or she was in any swayed by emotion, it is a simple matter of brain chemistry, that thinking cannot be divorced from feeling.
What are the buyer’s top 5 emotions related to the purchase? How do you connect with them?
Our brains are hard-wired for emotion. Indeed those areas of the brain concerned with emotion pre-date the thinking parts of the brain by thousands of years. Quite simply that means that your buyer’s decisions are nor entirely analytical, or rational.
The buyer attitudes and beliefs influence that impact on the buying decision – that means they matter to the salesperson.
How Attitudes & Beliefs Shape Decisions
Our attitudes and beliefs are well worn mental short cuts. They are often hidden or subconscious, but always present and highly influential. This is true in the realms of business, as well as personal decisions.
What are the buyer’s pre-set attitudes and beliefs regarding their needs, or your solutions?
Emotions go hand in hand with attitudes and beliefs to form much of the everyday operating software of our decision making. They work in many ways:
- Our attitudes and beliefs will influence the information sources that we chose and then how we interpret that information. They are the filters of our perception acting as a barrier to information or ideas that are incompatible with our existing attitudes or beliefs.
What information is your buyer likely to screen out?
- Our attitudes and beliefs also mean that we will sometimes take the easy route and skip the fact gathering altogether. We may prefer to work from what feels right, or on assumptions based on our past experiences, many of which may be sub-conscious.
Is your buyer taking any shortcuts in the analysis of requirements or defining the ideal solution?
- In the background, outside of our consciousness, our brain processes large volumes of information about our environment. Including the split second instinct as to whether we trust a sales person, or a particular situation ‘feels right’.
These are just some of the ways in which buying decisions can fall short of being 100% rational or analytical. They explain why the term ‘bounded rationality’ describes buying as well as other forms of human decision making.
Bounded Rationality In Buying
It is not a question of whether buying decisions are 100% rationale, or analytical, but whether they are 90%, 95% or 99% rational/analytical and 1%, 5% or 10% emotional, intuitive, or impulsive. That is bounded rationality. Management training designed to make us better at making business decisions can never be 100% successful.
Bounded rationality is likely to be more in evidence when buyer is:
- In a hurry or under stress.
- There is a high level of risk associated with decision and others looking on.
- The buyer feels threatened or insecure.
- The decision is familiar and routine – affected by inertia.
- There is hubris, brashness over confidence on the part of the buyer.
- The decision is taking place in an environment that is politically charged.
You can think of bounded rationality as buying at the edge of reason – it is the point where reasoned analysis stops and impulse and emotion begin. Salespeople know only too well that it can be difficult to change a buyer’s fundamental beliefs. They also know that even in the analysis of facts there is interpretation on the part of the buyer.
Bounded rationality, although you won’t see it mentioned in any corporate procurement strategy document, is one of the key reasons why organizations have taken back control over how important buying decisions are made.
When it comes to getting best value for money, or optimizing the supply chain, organizations want unbounded rather than bounded rationality. The procurement policies and procedures that today govern so much of spending are designed to maximize the logic analysis and rationale of buying decisions. They are also designed to marginalize the role of impulsive, emotive or lazy buying.
It Has To Feel Right For The Buyer
Confident buying decisions must intuitively feel right for the buyer. It is not enough that the cost-benefit analysis throws out the right number and all the information has been gathered and evaluated thoroughly. Unless it ‘feels right’ a confident decision won’t materialize and the buyer is at risk of prevarication
The buyer may not be able to explain, or rationalize it fully – it is not because all the information is not in, or there is a gap in the logic, but because quite simply ‘it does not feel right’. Even though the analysis says ‘yes’, the buyer’s instinct or intuition says ‘no’.
How does the buyer feel about the decision?
Salespeople know that risk and politics, for example, introduce an element of uncertainty and complexity into the sale. It is no coincidence that these variables are heavily informed by intuition, instinct and feeling.
A political consideration will rarely be mapped in a spreadsheet, yet it may be intuitively inputed to the decision with all the ‘what ifs’. The buyer may not have completed a risk register or computed numbers regarding probabilities of various risk, yet instinctively risk will enter the equation.
The best way to handle an instinctive or emotive variable in the decision is not necessarily with more detailed information, or more thorough analysis. That is important, however it goes deeper than that. The salesperson must address both the emotional and the logical elements of the purchase. That is something we will explore further in our next insights.