As all B2B sales meetings went online during the pandemic, Matt Dixon and Ted McKenna, authors of The Jolt Effect, saw an unprecedented opportunity to run the most extensive study of sales conversations ever conducted. They analyzed 2.5 million sales calls using AI/machine learning, and what they learned ran counter to conventional wisdom.
The top two reasons (B2B) sales fall apart are:
1. Problem not big enough (44%)
2. Fear of messing up (56%)
Most founders struggle with #1, which is undoubtedly the first battle, but the counterintuitive insight from their study was that #2 > #1. Even after prospects verbally agreed to move forward, deals fell apart due to indecision.
More importantly, the tactics to fix #1 negatively impact #2. So, closing a deal is a balancing act of countering two opposing forces (PUSH and FRICTION).
In this issue, I map these insights on the customer forces behavioral model and show you how to use behavioral psychology (Prospect Theory) to formulate an effective 3-part founder-led sales playbook for achieving problem/solution fit.
The principles covered here don’t just apply to B2B but sales in general.
A Brief Primer on Prospect Theory
Consider the following two scenarios.
Scenario 1: You’re given $1,000 and asked to choose between two options:
- Toss a coin to win another $1,000 or win nothing (50:50 chance)
- Win $500 for sure
Scenario 2: You’re given $2,000 and asked to choose between two options:
- Toss a coin to lose $1,000 or lose nothing (50:50 chance)
- Lose $500 for sure
Most people choose option 2 (taking the $500 over gambling) in scenario 1 and option 1 (gambling over losing $500) in scenario 2 — even though the financial outcomes in each scenario are identical!
Classical economics (Expected Utility Theory) posits that people value gains and losses similarly, but Daniel Kahneman and Amos Tversky found otherwise. They shared their findings in a 1979 paper on Prospect Theory — which won them the Nobel Prize in Economics. The example above is from Kahneman’s groundbreaking book Thinking, Fast and Slow.
There are three key takeaways from Prospect Theory:
1. Loss Aversion:
While sensitivity varies from person to person, losing can feel 2-2.5 times more painful than winning.
2. Diminishing Sensitivity:
Both curves start steep and then flatline, meaning we feel winning or losing the first $500 a lot more than the next $500.
3. Adaptation Level:
Notice that the y-axis is emotional versus absolute value. This is where our irrationality creeps in. What exactly is emotional value? In B2B sales, this is a computed sum of three types of value: functional, monetary (ROI), and status (social, self).
As you can probably guess, the last is more susceptible to fluctuation, bringing us to the concept of adaptation level. We judge gains and losses relative to a reference point, which can change quickly.
Say your manager calls you into their office and informs you that you’ll receive a $10k bonus for a job well done in your next paycheck. You leave feeling good until you learn from your coworkers that they’ll be getting $20k. Then you get an email from your VP saying they made a mistake and retract the $10k bonus. Ouch!
We can summarize these three takeaways into a single insight:
Key Insight: We become risk-averse (don’t gamble) when we feel we’re winning and risk-taking (gamble) when we feel we’re losing.
Applying Prospect Theory to Sales
Sales is fundamentally about causing a switch from an old way (status quo) to your new way. Too many founders rush to pitch and demo their products too quickly in an attempt to PULL the prospect towards their solution.
This typically results in a “meh” response:
Here’s why.
1. Loss Aversion:
They perceive the risk of switching to your new way disproportionally more than the gains you promise.
2. Diminishing Sensitivity:
Unless you promise something significantly better, you’re ignored in an increasingly noisy world. Then there’s a lack of trust and believability to contend with.
To cause a switch:
PULL (of your new way) > INERTIA (status quo) + FRICTION (of your new way)
3. Adaptation Level:
To your prospects, their existing alternative is a familiar and safe reference point. And your new way represents a gamble.
Simply layering on a stronger promise (PULL) isn’t enough. Unless your prospects already feel like they are losing with their status quo, they’re NOT going to switch.
So, how do you reset their reference point? Hint: Use the force (of PUSH), Luke.
With the theory out of the way, let’s outline a more effective founder-led sales playbook next that utilizes the customer forces model and these insights from Prospect Theory.
What is the Customer Forces Model?
The Customer Forces model is a behavioral model that attributes all customer decisions to the interplay of four causal forces: PUSH, PULL, INERTIA, and FRICTION.
To learn more, see:
A Blueprint for Understanding How People Buy Anything
A 3-Part Founder-Led Sales Playbook
ACT I: Breaking the Old Way
The first battle is beating the status quo (old way). If you’re successful, you get paid with attention, which opens the door to showcasing your new way (demo).
ACT II: Showing a New Way
The second battle is demonstrating how you get the job done better than the status quo. If you’re successful here, you get paid with trust and, ideally, a verbal commitment to move forward.
ACT III: Paving the New Way
The third battle is getting the prospect to a tangible commitment, like signing a contract or starting a pilot. This is where the fear of messing up flares, and as we saw earlier, more than half of deals fizzle out due to indecision.
Let’s dive in:
ACT I: Breaking the Old Way
For the reasons I outlined above, breaking the old way isn’t about touting the benefits of your solution (PULL). Instead, it’s about resetting the reference point of the status quo using a macro-switching trigger that you didn’t cause or invent.
Some examples of macro-switching triggers:
- New technology adoption, e.g., AI
- Regulatory changes
- Climate change
Your goal is to visually paint a picture of a mountain of opportunity (or crisis) that other people like them are already achieving (or avoiding).
Desire is the source of all struggling.
This outcome gap resets their reference point and motivates them to consider a new desired outcome. This materializes the missing force of PUSH in the story above.
The biggest contributing factor to their emotional value at this point is their sense of self, status, or social value caused by the situational trigger.
The next step is breaking their old way by showing them how their current path does NOT get them to this desired outcome. You do this not by blatantly attacking the status quo but by revealing insightful shortcomings in the status quo. Ideally, they’ve already experienced symptoms that back your claims. Your insights illuminate the root causes of these symptoms that position you as the expert.
The biggest contributing factor to emotional value at this point is the functional value of the old way (problems) unfit to meet the new desired outcome which has monetary value (negative impact).
How do you come up with these insights? This is where good customer/problem discovery comes in.
See:
- How to Systematically Uncover Big Problems Worth Solving
- 3 Common Customer Interviewing Mistakes That Lead to Mediocre Interviews and What to Do Instead
- Stop Trying To Validate Problems
I’ve summarized the necessary insights you’ll need to gather to paint a picture of the mountain as a mnemonic below:
Breaking the old way → Customer/Problem Fit → Permission to demo.
ACT II: Showing the New Way
Notice that there was no mention of your solution in Act I. That’s what Act II is about. This is where you show a new path toward achieving the desired outcome established in Act I.
It’s important to emphasize that job of your demo isn't to train or impress your prospects with the breadth of your product. That's a recipe for overwhelming them with needless FRICTION. Then they ghost you.
The art of the demo is showing the minimum feature set that gets the prospect to see the path to the goal. It’s all about customer PULL.
Solving exactly → Problem/Solution Fit → Verbal commitment to move forward.
ACT III: Paving the New Way
An interesting thing occurs in Act III, where prospects reset their reference point again as they consider the switch inevitable. I call this the prospect’s “oh crap” moment. This is where the anxiety of the New Way (FRICTION) flares up, and remember that negative forces have more punch than positive forces.
It’s easy to relate if you picture yourself as the prospect scanning the mountain you’ve just committed yourself to scale:
The biggest contributing factor to emotional value at this stage is the prospect’s sense of self, status, or social value. If they decide to switch and things go south, it’s their reputation on the line (fear of messing up).
Left unchecked, this drop in emotional value can undo the PULL of your New Way — leading to the observed “Fear of Messing Up” indecision outcome outlined above.
The conventional tactic salespeople have used at this stage is dialing up the FUD (Fear, uncertainty, and doubt) to PUSH a decision, but this is the wrong force applied at the wrong time. Applying pressure to relieve anxiety backfires and only makes prospects more anxious.
Act III isn’t about increasing motivation to change (PUSH) but reducing anxiety to change (FRICTION).
In their book, the JOLT Effect, Matt and Ted share many techniques for reducing FRICTION, such as:
- limiting choices,
- offering recommendations,
- setting the right expectations,
- reducing complexity,
- breaking the bigger goal into smaller milestones,
- sharing an onboarding plan.
All of them stem from positioning yourself as a trusted advisor to your prospects, which I believe can/should come more easily to founders as you are closer to the product and have ultimate decision authority — provided you stay disciplined.
Paving the New Way → Trusted advisor → Tangible commitment to move forward.
Finally, getting a prospect to a closed deal isn’t the journey's end. It’s the prospect journey's end, but the customer journey's beginning.
As they make their way up the mountain, these forces will flare up again—a topic for another day.
