August 15, 2023

by Meghna Dash

While we like to think that we are pretty rational, every decision we make — including evaluating technology solutions — is the result of cognitive biases and mental shortcuts. In technology sales, these biases shape how customers perceive value, how they evaluate products, and ultimately, how they decide whether to make a purchase. Recognizing these biases is crucial for sales professionals to navigate a deal cycle more successfully.

Let’s take a look at some of these:

Endowment Effect

Definition: The tendency of individuals to assign a higher value to things merely because they own them, and leading them to perceive the thing they own as more valuable than something equivalent they don’t own.

Impact: Imagine a salesperson offers two identical products – one from the customer's existing stack and one unfamiliar. The endowment effect suggests that the customer will instinctively place higher value on their current product, merely due to familiarity and ownership. This could create resistance to trying out new solutions, even if the unfamiliar product offers better features.

Hyperbolic Discounting

Definition: Tendency of individuals to consistently choose smaller, immediate rewards over larger, delayed rewards, even when the larger reward is more beneficial in the long-run.

Impact: A SaaS company might offer two payment plans: a smaller monthly fee or a significantly discounted annual fee. Due to hyperbolic discounting, many customers might lean towards the immediate savings of the monthly plan, even though the annual plan would save more money over time.

Social Proof

Definition: Tendency for individuals or organizations to assume the correctness of a certain behavior, action, or decision based on the fact that others are doing it

Impact: Ever seen the phrase "Trusted by over 10,000 businesses worldwide" on a product's website? That’s social proof in action. Companies understand that potential customers feel reassured when they see others, especially respected peers or competitors, using a particular product.

Loss Aversion