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Reversing Risk

Written by: Mark Deo

Article Overview: How can you help improve your sales? Reverse the risk on the customer! When risk is taken out of the picture a customer is much more likely to make a purchase. How can you achieve this? Read on to find out!

Reversing Risk

One day a father decided to go shopping for his daughter's birthday present. Melissa was to be nine in just a few days and she wanted a puppy - a Cocker Spaniel to be exact. Well, when the center of your universe wants a puppy there's only one thing to do - get her a puppy!

So the man visited a local pet shop. Cruising the isle of the sad, penned, baby beasts, the man spotted the most adorable Cocker Spaniel imaginable. Consulting the salesperson he asked the price of the puppy.

"That cute little one there is $150," the salesperson replied.
"Wow, that's some serious change for a dog," the father said.
"If you get him today, I can give you a 10% discount," the salesperson countered.

The father thought for a moment. "What if she can't handle a dog yet? What if he's disobedient? What if??"
Being a smart shopper the father thought he owed it to himself to visit at least one other pet store. He drove up the road and stopped at another pet shop. Low and behold if he didn't find the absolute twin of the Cocker Spaniel he saw at the previous store. Maybe this one's a bit less, he thought.

Once again questioning the clerk, "How much for this little guy?"
"Oh yes," answered the salesperson. "That little one there is $200."
"What?" the father exploded. "Two hundred dollars? Why so much? At the pet shop just down the street the exact same puppy is selling for $150. That's nearly a third less! Why such a difference?"
"I understand how you feel," the salesperson replied. "You see, this is a very special puppy."
"How so?" asked the father.
"You see," said the salesperson. "This is probably the only Cocker Spaniel that you will find that is guaranteed to satisfy your daughter Melissa or he's FREE!"
"What do you mean?" asked the father.

Then the salesperson told the father, "Take this puppy home with you today and pay me nothing. In fact I REFUSE to take even a penny from you until you and Melissa tell me that you are both totally satisfied with this puppy. In fact let's talk again in two weeks. If you are NOT totally satisfied that this is the puppy and the ONLY puppy for you guys then I will take him back and you won't owe me a dime. To go a step further I will pack this puppy up for you tonight in a special ribbon-wrapped cage with two weeks free puppy chow, a food dish, water bowl and special chew toy."

Which puppy do you think the father bought?

Why?

Reversing Risk
If you guessed the more expensive puppy with the guarantee, then you are correct. But why spend more for the same puppy? Because that father was not merely buying a puppy; he was buying a guarantee of birthday joy for his little daughter. Saving $50 was less important to him than running the risk that he or his daughter would be unhappy with the puppy.

Why then are you still trying to compete based on price? Don't you know that your customers are just like that father? They are looking for the supplier that understands their motives. They are looking for the supplier with the best competitive edge.

Having a competitive edge doesn't mean having a lower price. On the contrary, having a competitive edge means that you have developed a way to make it easier for the customer to say YES to your product or service rather than NO. How? By removing or significantly lowering their risk.

RISK is the primary obstacle to making a purchase decision. Think about the last time you changed your mind when considering a purchase. Wasn't it because the risk seemed to outweigh the reward? What if the product or service DIDN'T perform as advertised? Could you afford to take that chance? What if that chance was eliminated?

Everybody can come up with some way to reverse the customer's risk. What ultimate results are your client's looking for from your product or service? If you can guarantee these either in part or in whole, then you have successfully come up with a powerful risk reversal offer.

Example 1:
I have a client that manufacturer's computer components. They pride themselves in their less than 0.15% error rate. This high accuracy rate really set them apart from their competition. But their competitors were grabbing-up market share because they were always under-pricing and out-bidding my client. The components they made would sell for just a few dollars but if they failed within the warranty period, the manufacturer would have to repair or replace the entire computer. My client was so confident of their component accuracy they began offering a guarantee that if one of their components caused the failure of a manufacturer's computer within the warranty period then they would pay for the repair or replacement of the ENTIRE computer. The guarantee allowed my client to regain their market leadership as well as reduce the replacement and repair cost for their manufacturing clients. It also improved customer satisfaction for the manufacturer and allowed THEM to claim a failure rate on their computers.

Example 2:
This example relates to my website, but keep in mind this example is intended for demonstrative purposes, not as a self promotion. When visitors go to my web site they find a very compelling offer. First, they can sample all kinds of articles and information on small business marketing and management improvement for FREE. Without spending any money at all they can learn valuable information, which may help them market their products or manage their business more effectively. Second, they can sign up to receive my 100-page Small Biz Success E-Manual, which provides even more information and heaps on more value. Finally when they decide to make a purchase of a book, tape, or learning program they receive a no questions asked, 100% money back guarantee. If they are unsatisfied in any way with their purchase within the first 30 days I will give them back every penny of the purchase price. I have yet to have any customer ask for a refund

When we reverse risk everybody wins:
1. It's a way to improve the level of service for our customers.
2. It holds our organization more accountable to peak performance.
3. It heaps on more and more value.
4. It adds to a more quantifiable return-on-investment for our clients.
5. It gives us the ability to more easily overcome the price objection.
6. It makes our solution unique and credible in an already crowded marketplace.

Think about ways that you can apply this "risk reversal" strategy to your business. I assure you every type of business can.

Related Articles
  MANAGING RISK
  Risk Assessment & Analysis Techniques
  If you are going to buy a business, you need to accept business risk.
  Peter Bernstein on Amaranth: Better to be Wrong Than Too Right
  Bet On Yourself

Article Tags: beasts, birthday present, cocker spaniel, daughter melissa, few days, pet shop, pet store, puppy, salesperson, shopping, smart shopper, spaniel, universe



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