The Psychology Of Risk

What makes people hesitate to buy from you? You know that they know they need what you offer. The price is good – at least, reasonable. Your copy is persuasive, and you've fully made the case that your widget is the answer to their prayers.

Yet still, they hesitate. WHY?

Because plonking down their hard-earned dollars involves at least 5 different kinds of risk:

• Financial risk – that you'll take the money and run
• Physical risk – the product could possibly be harmful or dangerous, or you could be an ID thief
• Social risk – important people may disapprove of their purchase, or find out they've been the victim of the first two risks
• Performance risk – the product or service won't work for them
• And finally, the risk of Hassle – that operating or returning the item will be a royal pain in the you-know-what.

According to the December 4, 2006 issue of Time, risk is stimulated in the region of the brain known as the amygdala – the small, almond-shaped bundle of nerves located at the top of the brain stem. The amygdala is also in charge of processing memories, and emotional reactions, putting it squarely in the purview of this newsletter.

Unfortunately, Time also tells us that the brain is wired in such a way that the "risk" signals sent out from the amygdala travel to the higher areas of the brain much more rapidly than the "everything's OK" response can be sent back down. In other words, "Setting off your internal alarm is quite easy, but shutting it down takes some doing."

You don't have to do anything to generate the feeling of risk in your prospects – it's already there. Your job is to alleviate it. Obliterate it. Squash it to the point that it actually seems more risky not to buy from you.

And doing that is going to take some work.

How To Obliterate Your Prospect's Feeling Of Risk

We'll start with the most obvious: Give them a rock-solid, no-questions-asked, hassle-free guarantee.

A guarantee tells your prospect that you stand behind your product. The stronger and broader you make it, the more it will increase sales. It calms the fear of Financial risk, as well as Performance and Hassle.

And, when you set it up right, it can even reinforce your sales message.

Matthew Smith, for example, is the founder of Shoes For Crews, a company that manufactures innovative shoes for restaurant employees.

His shoes are guaranteed to prevent on-the-job injuries caused by slipping on wet or greasy floors. But he does more than just offer to refund the purchase price of the shoe if an injury does occur.

Early on, Matthew realized that employers didn't really care where employees bought their shoes. What they cared about was preventing injuries and workers compensation claims.

So he did something you should also do: He made his guarantee relate to his prospect's core desires. The Shoes For Crews guarantee is that if anyone does slip and fall at work while wearing these shoes, SFC will pay up to $5,000 in medical expenses and worker's compensation costs.

Talk about obliterating risk! Matthew not only takes the risk out of buying his shoes, but his shoes help take the risk out of running a restaurant. How's it working for him? Currently, Shoes For Crews supplies footwear to 9 of the 10 largest restaurant chains in the country.

Matthew's guarantee works for several reasons: It isn't so far-fetched as to be unbelievable, it relates to the needs of his customers, and – most importantly – it builds confidence in his product.

A Guarantee Is Only The Beginning

Unfortunately, a strong guarantee isn't enough to squash that feeling of Risk all by itself. To completely erase hesitation, you also need:

• Lots of testimonials – from other satisfied customers, as well as from noted experts. These turn Social Risk into peer pressure, proving that not only does the product work (bye-bye Performance risk, too!), but people have benefited from it. Experts think it's a wise decision. You really can't lose buy going ahead and signing up!
• To tell the full story. Make sure your prospect has every tiny little scrap of information she needs to make up her mind. And be specific. Give her a FULL list of features and benefits, and explain why you can offer this fantastic bargain at such a low price. And don't forget to tell her about your privacy policy. You must answer all of her questions to calm her nerves.
• Finally, give him more than one choice. One of the things Time found interesting was the way in which we can misjudge risk if we feel we have some control over it. The example they used was flying vs. driving – statistically, flying is far less dangerous. Yet we feel safer in the car because we're in control.

Likewise, if you give your prospect a choice between Package A and Package B, you're putting him in charge. He's making a decision, and it lessens his feeling of risk.

Any one of these tips will help to lesson your prospect's feeling of risk. But putting them all together, and combining them with a superior product or service and a commitment to honesty in your business dealings, will do more than calm her nerves. It will make your business a genuine benefit to your customers' lives.

And that is a guarantee of success.