How Risk Impacts Your Sales Success

There are many things buyers evaluate when making a purchasing decision, but none of them is more important than risk. When you understand the impact of risk, you can tailor your sales process to minimize or even eliminate it and help drive yours sales through the roof.

The calculation is very simple: the lower the risk of making a purchasing decision, the easier it is for the prospect to say “yes”. The higher the risk of making a purchasing decision, the more difficult it is for the prospect to say “yes”.

Therefore, when the risk is high consumers search for any way they can to minimize it. It may manifest itself as wanting better warranties or a better price or a better company. But however it shows up it’s all about minimizing the risk of making the wrong purchasing decision.

Think about this. Suppose you are on vacation with your kids and they want to eat. You are obligated under the law to feed them so you pull randomly pull into Joe’s Hamburger Shack to buy 3 hamburgers. You’ve never been to Joe’s before, but you take a shot in the dark. You approach the counter to order your three burgers and see that they are only 39 cents each. Do you have to negotiate price? Do you have to evaluate competitive offers? Do you have to think about it until Tuesday?

Of course not, because there is so little risk in making the wrong purchasing decision. Even if the hamburgers are lousy you just throw them away and stop at McDonald’s a few miles down the road. When the risk of making the wrong purchasing decision is low, it’s easy to say “yes”.

Now imagine you are going to spend a significant portion of your hard-earned money on insurance or a new car or new windows for your home. What are the consequences of making the wrong purchasing decision? What if you are choosing a realtor to sell your home? How high is the risk? It’s very high, isn’t it? If you choose the wrong company or the wrong brand you could lose a lot of money, couldn’t you?

Of course you could. So what do you do? You negotiate a lower price to effectively lower the risk. You evaluate multiple competitive offerings. You postpone the high-risk decision until Tuesday (or even longer if you can). You think, think, think, about the various options. This is a BIG decision and the risk of making the wrong purchasing decision very high. Oh my! Whatever will you do?

But imagine if there was NO risk in the purchasing decision. The purchasing decision is much easier, isn’t it? The lower the risk, the easier it is to say “yes”.
Retailers, of course, have known this for many years and have minimized risk for their customers by offering liberal return policies. If a consumer is standing in the aisle contemplating the purchase of a new pair of jeans they are more likely to say “yes” because they know that if they get home and don’t like the jeans they can return them. There is no risk of making the wrong purchasing decision so it’s easier to say “yes”

We all expect to be able to return a hammer to The Home Depot, a television to Sears or a pair of jeans to Wal-Mart. But what about other products and services that are not traditionally offered with a “risk-reversal” guarantee?

One of the first examples of a risk-reversal guarantee goes back nearly 150 years. In 1864, the founder of the Kulm Hotel in St. Moritz, Johannes Badrutt, was faced with attracting visitors to the Swiss Alps long before the area became famous for winter sports. To overcome skepticism about the cold, damp winters, Badrutt offered free lodging if guests did not enjoy their stay. Because there was no risk, Europeans flocked to the Swiss Alps. The rest, as they say, is history.

Risk-reversal guarantees and risk-minimizing guarantees are powerful ways to drive sales through the roof. And even if you company doesn’t offer such guarantees, the sales professional can expertly minimize the risk for the prospect by earning his trust and putting his personal credibility on the line.