Have you ever wondered why it’s so hard to win a new account from an incumbent, even when you have a better solution? Some of the reasons are obvious: the existing account holder is a known entity, with first-hand knowledge of the client and a solution in place; that’s understandable.

What’s perplexing is why a client will stick with an existing provider even when the relationship and the solution aren’t particularly good. As a sales person trying to crack the account, it’s incredibly frustrating, looking from the outside in, when you know that you can do a better job for the client.

So what do we do? One answer lies in understanding the underlying influences affecting a client’s decision-making process. Developing an understanding of neuroscience can help you do just that.

The Fear of Loss

Sometimes the fear of losing something is much stronger than the practical benefits of gaining something new. Loss aversion is innate in all of us, but it is strongly influenced by culture and environment.

Recently, I was standing in the security line at an airport in a part of the world where loss aversion is particularly strong. A gentleman in front of me, obviously not a frequent traveler, was trying to bring a six pack of Coke through security. He looked as if he had been asked to hand over his first born when the security agent told him to throw it away. The idea of losing that six pack was inconceivable, so he stood aside and systematically chugged down every single can. His fear of loss was so strong that he was willing to make himself miserable to avoid it.

Think about that in a competitive context. Our prospects may very well be willing to go through a substantial amount of inconvenience and pain before giving up on a mediocre relationship and solution. It means that our value proposition needs to be significantly stronger than that of the incumbent if we hope to win the business.

So why is our fear of loss so strong? The simple explanation is that we overvalue what we already own. We call it sentimental value; science calls it the endowment effect.

According to research by Kahneman, Knetsch, & Thaler, the endowment effect occurs when we are unwilling to sell something for its cash equivalent because of the significance that we irrationally attach to it. Buyers often have the tendency to become attached through experience; experience good or bad, with a product, service or company.  The thought of relinquishing the assumed benefits of that experience can sometimes make buyers feel anxious.  

According to research by Arkes & Blumer, the sunk cost fallacy is another important principle impacting buyers. Individuals commit the sunk cost fallacy when they continue a behavior or endeavor as a result of previously invested resources, including time, money, or effort (Arkes & Blumer, 1985).

Our friend at the airport is a perfect example, but let’s not judge him too harshly. Have you ever overeaten at a buffet? You probably weren’t thinking about it, but you just wanted to get your money’s worth, and the sunk cost fallacy was at work. According to Thaler, when the cost of owning something (such as inconvenience, time, or even money) is higher than the value it brings, we tend to put those costs in a “different mental account” and do not rationally weigh them against the benefits. As a challenger, it’s an important concept to understand.

Winning the Business

With a clear understanding of the challenges a seller has to overcome due to loss aversion; what can a challenger do to win new business over an incumbent competitor? These three approaches might help:

1. Emphasize the loss the client will incur by staying with their existing provider.

Focus on new technology and product features that have evolved in the market since the prospect has started working with their current provider highlighting the unrealized benefits they are missing out on in their complacency.

2. Re-frame implementation costs.

Help your prospect understand that the cost of implementation is less than the cost of missed opportunities or continuing a sub-par relationship with an existing provider.

3. Identify other influencers who are not as invested in the current business relationship.

In many cases, decisions are made by consensus, which means that the prospect that is heavily invested in the existing provider is not your only opportunity. When you encounter a prospect who is reluctant to leave their current provider, seek out other individuals involved in the decision-making process who might be more receptive to entertaining a new provider.

As much as humans want to consider themselves rational decision makers, Neuroscience tells us that this is not always the case. Understanding the irrational factors that influence buyer’s decision making can be a powerful tool that helps you win more business.