Businesses don't run on numbers, they run on responses to numbers
Category: Blog & News
Numbers are the point of truth for businesses; at the end of the day, all our plans and activities boil down to some digits on a financial statement.
Numbers dominate meetings, keep people up at night and have the power to make us feel like it’s been a day good or not. But it’s not the numbers themselves that influence behaviour, it’s their meaning. As people in business we therefore need to understand what makes a number meaningful, and most importantly, the role we play in giving it meaning.
Numbers are meaningless without context
15 what? Is 15 good or bad? Is it $15, 15 minutes, 15 years, 15 degrees?
Numbers are meaningless without context, and we play a significant role in framing that context. Whether you are a marketer trying to communicate the value of your widget, a product manager trying to get stakeholders to invest in your business case or a financial advisor trying to persuade clients to take your recommended path, it’s the behaviour in response to the number that you need to manage. These three tips should get you started.
Tip 1. Give them something to lose
Here’s a UK ad for a phone company.
Notice the ad talks about the £194 you could be wasting on the wrong phone tariff? The copywriters had a choice to make here and they could have said “You can save £194” by changing tariffs. Does it matter how they frame the number?
Absolutely! Sure, everyone likes a good news story but we love a story where a crisis has been averted!
In this ad ‘wasting’ is framed in the negative using the behavioural principle of “Loss Aversion” which states that we are more motivated to avoid a loss than seek a gain. In effect we feel a bit queasy when it’s pointed out that we are losing money and will be motivated to address the issue. Contrast this with the pain-free, ‘gee that would be nice’ reaction we get when offered a saving.
In your business, whether dealing with a customer or investor, ask yourself what do they have to lose if they don’t move forward with you?
Tip 2. Tell a story
How much is a piece of junk worth? The Significant Objects project in the US was keen to find out how much people would be willing to pay for junk items online after one new dimension was added to the sales process: a story. Sure enough, items like you would find at a garage sale or in a recycled goods store were resold online for a whopping $3612.51 - a 2800% return on the initial outlay of $128.74. This project demonstrated how context and narrative have a profound impact on how value is judged.
For your business, what is the story you tell about your product or service? How does the story influence the number or value that will be attributed?
Tip 3. Take care with what comes first
Thanks to the behavioural principle of “Anchoring” we know that the information first received is the most impactful. It’s a bit like a chick imprinting on the first animal they see, we latch on to the first number and regard all that follow in reference.
Imagine for example you are selecting from a wine list. The first bottle is $80, the next $60 and the last $20. If you are like most, you will opt for the middle option because it seems reasonable next to $80.
Now imagine the list started with $20 then $60 and $80. Suddenly both $60 and $80 seem extremely expensive and $20 the only sensible option.
When you are positioning numbers make sure you pay attention to what comes first. As a general rule, remember to list your highest price first so that everything else will seem relatively inexpensive.
P.S. If you are interested in having me talk with your team about how to apply behavioural techniques to your business you can read more about my workshops and seminars here.