Managing Business Through Human Psychology - “A Handbook for Entrepreneur” by Ashish Bhagoria - HTML preview

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Sales and Customer Psychology

In sales, understanding of Psychology is helpful and beneficial. Generally, when selling a product we are able to develop the interest of the customer, but find it difficult to close the deal. So in this topic we will discuss how we can close the deal easily and also how psychology plays an important role in selling a product or closing the deal. Mainly there are five steps involved in sales and to become a successful sales person we need to know these 5 steps thoroughly. These steps are Identifying Problem, Creating Need, Finding Solution, Introducing Brand and Closing the deal or sale. Let’s discuss each step in details.

1. Identifying Problem

If we try to find why people buy product or service, the common response would be because there is a need for service or product. If there is a need for particular product or service and we have it then we will have customers. So the first response is need. Need is an essential factor but people generally forget that before need there is another factor that creates need. Since people tend to forget the factor that creates the need, they are not able to close the deal or sale. To sell anything, a need for the particular product is there but how is that need created.

A need is created when there is a problem, without a problem there cannot be a need. If we are facing a problem in any area of life, we immediately look out for the solutions. So basically these solutions become our need. Therefore, the very first factor in sales is to identify the problem, if a problem is not there then we have to make our customers realize the problem in the absence of a solution that we are going to sell. If the problem is bigger the need would be immediate and if the problem is small the need can be delayed. So, the first step in sales is to identify the problem or like a smart salesperson, create a problem.

Let’s say we sell invertors and everyone knows that hospitals need invertors since they face the problem of power cuts. But if the management feels that the power cut does not affect the hospital much, then the need for invertors can be delayed as the problem is not major and things can be managed. However, if we tell the management of that hospital that whenever there is a power cut in the hospital the life support systems do not work. The emergency services for the critical patients and Intensive Care Units will not function properly. In case of emergency or a serious patient, the patient could die due to lack of facilities. It will bring bad name to the hospital that they don’t have sufficient services or facilities and the patient are dying in the hospital. Because of the bad publicity no one would come to the hospital for treatment. In long run due to lack of facilities and services the hospital will incur heavy losses in terms of money and reputation.

With this explanation the management of the hospital will be forced to think that they have invested a lot of money in the hospital and just because they don’t have power backup the hospital will have to incur heavy losses. Now the problem seems bigger and the sales person has made it look bigger.

2. Creating Need

Need is for some solution or product. It is an essential factor for every sale, but it depends if the need is immediate or delayed. A smart sales person makes every need an immediate need by inflating the problem. So that the buyer feels that the need is immediate.

 If we go back to the previous example the need was made immediate and urgent. In this situation the need was there but it was delayed. The management was delaying the need to install invertors but when they saw the bigger problem that they could lose patients and reputation, they felt the immediate need for a power backup solution.

3. Finding Solution

After identifying a problem and creating need, comes the third step, solution of the problem. It is not necessary that a product is always the solution for a problem; a service can also be a solution to the problem. In the third step we introduce the solution, which is a product or service, to the customer.

Generally people make a common mistake that instead of talking about the solution they start talking about the brand. Like, we have come from ABC Company and we have xyz products. Most customers are already aware what products the company is dealing in. The sales people do not go through the above steps or the process of sales. Process of sales involves lot of psychology handling if we tell somebody in the beginning that we have come from an Insurance company that person will immediately send us out of their office. They will not entertain us because they know that we have come with a purpose to sell insurance policies.

So, rather than telling them that we have come from an insurance company, we should sell insurance to them. We should create a problem. We can talk about their financial problems and insecurities in life. When they are convinced with the problem they will feel the need solution to protect and for immediate secure their family’s future. There we should offer them the solution and the solution will be our product or plan. We can guide them that they can invest in a certain plan or product. When they will ask which company is offering this plan or product, we can suggest our company to them.

In the example of the hospital, the solution could be an inverter or generator, the management of the hospital will ask which company is providing good invertors and we can suggest our company.

4. Introducing Brand

The fourth step is, introducing our brand. When the customer understands the solution and what they need to get out of the problem. There we inform that the solution is available with our company, ABC limited. This will develop interest of the customer and they will ask what kind of products we have. They would also want to know, the price of the product, its features, the terms and condition and many more queries would be there.

 For this part of sales, we need must have thorough knowledge about our brand and the competition. If we know and talk about only our brand and know nothing about other brands in the market then the customer will be dissatisfied. We have to give the comparison of all the brands available in the market and we have to prove that our brand is the best available in the market. We need to make sure that we talk not only about our brand but also about other brands.

5. Closing the Sale

The final step, where all sellers always face problem is closing the deal. Let’s take an example where the customer is convinced and they want to buy our product but they need a week’s time and then they will buy our product. From experience we have seen that when we approach the customer after a week we find that the customer has already purchased a similar product but from some other company. After doing all the hard work and reaching this step most people are not able to close their deal or the sale. This is a very common problem in the industry that most of the deals remain open ended.

Now the question arises, why do customers buy the other brand, when they are convinced with our product? The reason in this situation is Psychology. Let’s understand this better with an example, suppose we have to sell some high-end mobile phone to a customer who is not technically sound and uses mobile phone just to make and receive calls and for text messaging. The customer is a layman and does not know much about updated technology. Now we take them through the above discussed four steps and convince them to buy a high end phone. We explain to them that the mobile phone has latest operating system of a particular make with higher storage capacity in bits and bytes, configuration of RAM and processor, resolution of screen and camera pixels, connectivity and data transfer features, frequency of the phone and its platform. We talk about all the technical specifications, features of the mobile and also update them with the price. Suppose, the customer is convinced and understand that they can do many things with a high end mobile. They agree to buy the mobile and ask us to visit next week.

When we visit the customer the next week we see that they have already bought an ordinary mobile phone of some other brand for just few bucks. A salesperson from a different company approached them with a mobile phone with ordinary features and the customer bought it. Here’s what exactly happened with the customer. Since they weren’t that technical they could not remember all the technical specifications, features, configurations, benefits and the facilities of a high end mobile phone? So when the second salesman approached the customer, he was easily able to sell an ordinary mobile to them. The salesman told them that the mobile has a camera, now the customer was able to relate that with our mobile phone and thought that even this mobile has camera. But, since they are not technical they were not able to understand the difference between technical difference and specifications. They know that they need a camera but forget the resolution, they know the memory but don’t remember the actual capacity and similarly the same thing happens with other features like processor, RAM, connectivity and so on.

When we meet them again the customer says that it was wonderful that we educated them about the mobile phone and they bought it. Finally, they buy an ordinary mobile phone at a lower price because they remembered few tings like camera, screen, memory, file transferring etc but they actually forget the technical differences due to lesser knowledge about technology.

Why does this happen? The technical things for a layman are not stored in their conscious mind they are stored in the subconscious mind. As time passes they forget the information and start forgetting technical details. They will remember only major things which they can remember through the conscious mind. All the data, that we had educated the customer about, will be stored in the subconscious mind. Unfortunately, when we give time gap for them to take the decision that’s when they start forgetting things that are technical.

If we give them time to think and meanwhile some other brand comes across and they find it more lucrative and attractive and if they are able to relate it to our brand or product the customer will go there. They might suffer later when they realize that they have bought a very ordinary product at a higher cost. But ultimately it is our loss. It is a loss to the seller and not only the buyer, who bought an inferior product at a high price. While purchasing an inferior product customer compares it with the price of our brand and thinks that he is getting similar product at much lower price. The customer is cheated by the other brand but it is not only the customer but also us who suffered because we cannot sell our brand. It happens because we give them time to decide and within that time another smart sales person comes and sells his product.

So, the fifth step which is important in closing a deal or sale is to book the client. It means whenever we find that our customer is convinced always book them. It is not that we have to take the entire money from the customer we can take an advance. Most of the time the customers don’t have sufficient money to pay and they need time to arrange money or they need time to take decision. At least some part of the price of the product can be taken as booking amount. Here psychology comes into picture as the customer has already given an advance it becomes his commitment and the customer understands that his advance money will not be refunded. So, at this stage when he has given an advance if another seller comes to him for selling a similar product the customer will refuse because has already bought this product. The customer will not say that he has given an advance rather the customer will say that he has already bought the product. So the sale is secured. The time that the customer asked to decide whether to buy or not, he will use it to arrange the funds so that they can take the delivery of the product. So, remember to always book the client. When we have booked our client it becomes a commitment for the customer and will give boost to our sales.

These are the five important steps of selling and the last but not the least is the after sales service that ensures the long term relations with the customer to meet his future needs and also generates a referral business for our brand.

We have also seen that many people take commitment from a client without advance or with advance and say that they have done the sale. This is not sale but just a lead generation. Here, we have initiated a sale and have not closed the sale. Sale is closed only when the contract is over, that means when the goods have been delivered to the customer and the offered price for the product has been paid. When these two conditions are over only then the sale is closed. If we have delivered partial goods or the customer has not paid the complete payment, even then sale is not closed. A sale is closed only when the complete payment is received from the customer and the complete product has been delivered on time.

Selling without dealing with a Problem

We have discussed earlier that to sell something we need to identify a problem or to create a problem. If it is not there then explain it better.

One more factor very important in sales to remember is that sometime people buy things even when there is no problem. If we are going to buy diamond, luxury car, bungalow or membership of a club it means we are going to buy something expensive. Is there a problem without a diamond, car or bungalow? No there is no problem. It is for the social status and the ego. Ego and status symbol are a part of psychology. If we touch this psychology of the customer while selling the expensive product and make the customer realize that they will be special and superior to others by using our product or services, we will be able to close our sale easily. In the above said situations we are actually touching the psychology and the ego of the customer even without having the problem. So, we also need to keep in mind that sometimes a product and at other times ego and psychology helps us to close the sale.