Question: How logical was the last major decision you made?
Answer: Not as logical as you think.
In a stunning set of discoveries several years ago, UCLA neuroscientist Antonio Damasio found that humans are quite literally not capable of making decisions when operating purely from their rational mind; that, in fact, all final decisions are made from our emotion center.
Damasio was studying patients who had suffered brain damage that inhibited their ability to have feelings, without inhibiting their intelligence. These patients lived in a constant state of suspension, unable to operate in the world. They were capable of understanding and analyzing all of the possible factors for any given decision, but never actually made any decisions.
Without emotions, they never pulled the trigger and thus spent their days in an endless haze of options.
Cognitive bias impacts everything we do, from the smallest to the largest decision. It’s one of the ways our brains lie to us, and the only antidote (and it’s only partially effective) is recognizing and attempting to counter them.
In this article, we’re going to take a look at what cognitive bias is, and how it impacts sales organizations at four crucial levels.
What is cognitive bias?
Simply put, cognitive bias is a system of thinking and decision-making shortcuts that are not based on logic. They are also sometimes referred to as “logical fallacies,” because while they grow out of the brain’s very useful technique for filtering signal from noise, they ultimately represent false logic.
Hundreds of cognitive biases have been identified and described by researchers. You’ve probably heard of some of the most commonly understood ones, for instance:
- Bandwagon effect, which is the brain’s tendency to believe something when lots of other people also believe it
- Confirmation bias, which is the brain’s tendency to look for, interpret and focus on information that confirms what you already believe
- Gambler’s fallacy, which is the brain’s tendency to think something is either more or less likely in the future simply because it happened in the past
- Optimism bias, which is the brain’s tendency to overestimate pleasing outcomes, a fallacy salespeople are notorious for
- Sunk cost fallacy, which is the brain’s tendency to want to continue to invest in something that it has already invested in, even if a different choice would be more effective
Cognitive bias in the sales organization
Many, if not all, of these biases, have an impact on sales organizations. Understanding how they work can enable salespeople to avoid their worst pitfalls and, in some cases, use them to their advantage.
In a sales environment, cognitive bias can impact effectiveness on at least four levels:
- The buyer
- The salesperson
- The manager
- Executive leadership
Let’s take a look at the sunk cost bias operating in a typical sales organization.
The sunk cost bias
The sunk cost bias causes our brains to prefer investing in something we’ve already invested in, even when we’d be better off with a different choice.
Now let’s take a look at how the sunk cost bias affects each layer of the sales organization.
At the buyer level
Customers may be less likely to buy from you if they already have an entrenched solution, even if they’re unhappy with that solution. It’s nearly impossible to counteract this bias once it’s in play. Logical arguments do little to combat it.
One extremely effective way to do this is to use DecisionLink, which makes it easy and fast for salespeople to co-create accurate, visually appealing value calculations for the proposed solution. This process asks the customer to invest time and energy in collecting accurate data in order to receive valuable information, and thus triggers their sunk cost bias in favor of your product.
The sunk cost bias at the salesperson level
The sunk cost bias is a huge culprit in bloated pipelines. It’s responsible for salespeople defending sales that have drawn on too long or devolved into pricing wars.
The sunk cost bias at the manager’s level
A manager’s (hopefully) superior experience can help them to avoid and counteract the salesperson’s tendency to get attached to specific opportunities. However, they themselves may easily get invested in software, processes, and tactics that are not effective for their teams, simply because they’ve invested in them.
They also may overinvest their coaching effort into “high performers” with whom they’ve spent a lot of time when logically the best use of coaching time is with mediocre and new performers.
The sunk cost bias at the strategic level
When sunk cost bias comes to play at the executive level, it gets expensive. Hundreds of thousands of dollars spent on go-to-market strategies that don’t work. Millions of dollars spent trying to revive acquisitions or keep departments or product lines on life support when logic dictates they would be better cut loose.
The sunk cost bias, and other cognitive biases are a reality that impacts all areas of our lives and businesses. While we can never entirely eliminate them from our thinking (and probably shouldn’t), we can learn to understand them and use them to our advantage rather than our detriment.
You can read more about cognitive bias in Buster Benson’s excellent article here, or search the Membrain blog for more of our work on cognitive bias in sales.