Fear of Loss

When people do a customer analysis, they have a tendency to think only about the positive impact a product’s features and benefits have on customers. But that is often less than half the story. The selling tactics of one of the most successful salespeople I’ve known were formulated on his theory that “fear of loss is a much greater motivator than opportunity for gain.”

A good example of this was my marketing team’s selection of a market research consultant. One firm’s pitch was that its findings could increase our sales 25 to 100 percent. Another firm told us that in over 25 percent of its studies, it recommended canceling a product’s introduction. We went with the second company.

Marketers don’t like to talk about fear of loss marketing because it has the negative image of being very manipulative. Designer jeans are certainly an example of manipulative marketing using fear of loss. The reason some people pay double the price of an ordinary pair of jeans is that they are afraid that without designer jeans they will look out of step with the latest fashions.

Fear of loss goes far beyond that narrow definition. Every time a person considers buying your product, he or she evaluates not only what can be gained, but also what can be lost by the purchase. You must understand what aspects of your product will be negatively perceived. One negative feature can cancel out five to ten positive features. I talked to someone just home from a cruise who will never board that ship again because its restaurant had tattered menus. The state of the menu convinced the person that the ship owners did everything possible to cut costs. As you read this chapter, think of issues that either positively or negatively influence your customers.

What Type of Business Are You In?

Answer this question by describing your business as more than just a retail, service, or manufacturing business.

Consider gas stations. Some stations are still the traditional full-service stations; they are in the business of taking care of your car. Other stations have just an express island and are in the business of selling gas. Some gas stations offer sodas, beer, and a few other items; they are in the business of providing someone needs when stopping for gas on a trip. Other stations are really full-service convenience stores.

Another example is manufacturers who sell test equipment. One manufacturer may have one measurement that the company will sell to any industry. This company’s customers might have to buy equipment from other suppliers to complete a measurement system. Another manufacturer might sell total measurement systems, including the test product the first company sells. Still another manufacturer might sell a measurement system designed for only one industry.

Once you have decided what business you are in, decide if this is the business you want. For example, if you are product oriented, selling only one product, you may decide you want to be in the systems business. You also should evaluate how close your actual business is to your desired business. For example, if you are in the business of selling test systems and you only provide 90% of the required, you’ve found a major problem area.

Often businesses get settled in their operation without realizing they’re not doing everything necessary for business. An example is the American car industry. General Motors, Ford, and Chrysler are in the business of supplying cars for the entire population. In the late 1970s and early 1980s, car manufacturers moved to simplify manufacturing. The result was that their upscale cars became variations of their mid-range cars. That didn’t satisfy the public’s desire for a highly differentiated car as a status symbol. The result is that now Audis, Saabs, BMWs, and others have significant sales in this profitable market formerly dominated by Buicks, Oldsmobiles, and Mercurys.

Will You Be in Business Forever?

Customers are risk averse when making a purchase. They want to be sure you’re going to stay in business. For example, a mattress shop opened up in a nearby shopping center. It was a small store without much inventory, and it closed after three months. At the same time, another much larger mattress store opened. It appeared well financed and successful to customers.

I constantly see similar examples in retail stores, professional practices, and manufacturing companies. A business can’t build momentum if people are worried about its future. I remember one time my wife and I went to a store to look at a new suit. I didn’t buy there because the store had a handmade sign in the window announcing a sale. I wasn’t about to buy a suit from a store that could afford only handmade sings.

Remember that every little detail of your business reflects an attitude to your customers. Make sure your business projects a successful image.