Psych out to stand out

Even in a highly structured procurement process, it’s often the subtle, human nuances that can make or break a bid. Which is where behavioural economics comes into play, shedding light on the psychological, social, cognitive, and emotional factors that guide our economic decisions.

It’s a domain filled with counter-intuitive insights and heuristics that explain why humans don’t always behave strictly rationally, including in a B2B context.

Let’s look at some practical applications of behavioural economics principles to the art and science of winning bids.

Social Proof

Humans are herd creatures. We're hard wired to observe others' behaviour and follow suit, especially when we're feeling uncertain. It’s why e-tailers want us to know that Lazlo from Port Lincoln just bought this item.

So while it’s not rocket science, don’t forget to push the social proof button by showcasing success stories, client testimonials, and case studies. Reminding buyers that ‘70% of industry leaders are already using our solution’ provides valuable reassurance and validation.

Loss Aversion

We know from Kahneman’s Prospect Theory that humans tend to feel the pain of a loss – actual or anticipated – more acutely than the pleasure of a comparable gain. Hence Tesla’s messaging tends to focus on what you’ll 'lose' if you stick with a petrol vehicle rather than what you’ll save if you switch.

In some cases, you can make a bid more persuasive by emphasising the cost of not accepting your proposal. For instance, if you’re offering a $1 million cost-saving, you can highlight that without your solution, the buyer stands to leave $1 million on the table. The potential loss carries a heavier emotional weight and can nudge the buyer in your favour.

Endowment Effect

We tend to value things more highly once we own them, a phenomenon known as the Endowment Effect. In a bid scenario, help your clients visualise 'owning' your solution. Advertising agencies often theme presentations using the prospect’s brand look and feel. You can also offer a demo, or a hands-on workshop. Once buyers can picture themselves using your product or service, they'll be more reluctant to let it go.

Scarcity Bias

If you felt irrationally compelled to stock up on toilet paper during COVID, you know that people place a higher value on things that seem scarce compared to those in abundance. It’s a tactic that marketers have employed for generations, and that sneaker brands have taken to a whole new level.

In bid development, emphasise the unique value you bring to the table. Show how your solution, team, or approach offers something rare, even exclusive. Are you the only team with a specific kind of experience? Do you have proprietary IP that drives superior results? Remember to leverage your 'limited edition' advantages.

The Decoy Effect

Our brains crave options. Which is why effective BDMs don’t ask when we could meet, but if we’d prefer Monday or Tuesday.

The Decoy Effect, or 'asymmetric dominance effect', happens when you introduce an extra, less attractive option to make an existing one seem more desirable. I’m pretty sure it’s how the real estate agent persuaded me to purchase our first home. And why there’s a $17,000 gold option in the Apple watch range.

For major bids, it’s vital to structure your options strategically. And that might mean including a ‘decoy’ option that makes your target offer even more compelling. (Just be ready in case the buyer chooses it. It’s happened before.)

Hyperbolic Discounting

Hyperbolic discounting is about the pulling power of now. It’s the principle that people prefer instant gratification to deferred rewards. So, effective proposals emphasise speed to value. Instead of merely stating that your solution is cost-effective, stress that it ‘starts saving you money from the first month of implementation.’

Share concrete examples where previous clients have experienced quick returns. Incorporate charts that demonstrate a rapid upward trend from the get-go. Show buyers that by choosing your solution, they're stepping into a brighter, more profitable future - and that future begins as soon as they say yes.

Confirmation Bias

Lastly, confirmation bias describes our tendency to search for, interpret, and remember information in a way that confirms our preconceptions. Bids can leverage this bias by affirming the beliefs and values a buyer already holds. If your prospect prides themselves on being innovators in their industry, or ESG leaders, underline how your solution will help them reinforce this image.

Bonus points for good behaviour

Humans, nudged and buffeted by a complex web of cognitive biases and heuristics, evaluate major bid proposals. So, take the time to take a page from Behavioural Economics to better understand their preferences, biases, and thought processes. And craft your bids not only with a powerful solution and business case but also with a deep understanding of economic decision making.