What is cognitive bias? 7 biases that can make or break your sales

In this article, we break down seven common cognitive biases that impact the decisions consumers make. We show you how to ethically leverage such biases to help prospects overcome objections and see your product as their solution.

Improve communication by understanding consumer behavior

Imagine this: a customer needs your solution, so you present them with the benefits and ROI. Your solution sits well within their price range and your demo call was friendly. However, they hesitate on your deal and reveal they’re considering an overpriced competitor.

We make illogical choices all the time.

The human brain is wired to rely on shortcuts and patterns to solve problems and make judgment calls quickly.

Psychologist Daniel Kahneman, author of Thinking, Fast and Slow, explains:

“We think we’re much more rational than we are and we think that we make our decisions because we have good reasons to make them. Even when it’s the other way around. We believe in the reasons, because we’ve already made the decision.”

In social psychology, these mental shortcuts are called heuristics. We receive tremendous amounts of real-world information every day, so we depend on heuristics to speed up our problem-solving time.

Heuristics allow us to function efficiently, without constantly stopping to think about our next course of action. While heuristics play a critical role in decision-making, they also leave us prone to cognitive biases.

What is cognitive bias?

Cognitive biases are errors in reasoning that cause us to deviate from good judgment and make illogical decisions (thanks to our brain’s tendency to make shortcuts).We all have bias blind spots, despite feeling we’re in control.

Here are some examples of cognitive biases:

• A person sees two newspapers with conflicting headlines so they pick the one that backs up what they already believe (confirmation bias).

• A student gets a bad grade on a test and their parents blame the teacher, dismissing the fact their child didn’t study at all (attribution bias).

• An employee arrives late to work due to external factors out of their control, such as traffic, and their boss judges their character rather than the context of the situation (fundamental attribution error).

• A quiz show contestant passes on a question then finds out the answer and says “I knew that was the answer!” (hindsight bias).

• A person wins a game of poker and chalks it up to their skill, but when they lose the next game they blame it on bad luck (self-serving bias).

• An interviewer assumes the candidate will be a great fit at the company because they look similar to a high-performing current employee (representativeness bias).

• A shark attack on the other side of the country is reported on TV, so a person stops swimming in the sea, despite still doing things that are far more commonly dangerous (availability heuristic).

• A person beats their friend at chess then overestimates their ability and enters a competition against tough opponents. Their overconfidence makes them believe they can win (Dunning-Kruger effect).

Other common biases and logical fallacies in cognitive bias psychology include:

• Attentional bias

• Availability bias

• Cognitive dissonance bias

• The conjunction fallacy

• The consensus bias (a.k.a. false consensus effect)

• The endowment effect

• The framing effect

• The gambler’s fallacy

• In-group bias

• Loss aversion bias

• Observer bias

• Optimism bias

• Status quo bias

• Unconscious bias (such as stereotyping)

Leverage psychology hacks to supercharge your sales

How can we use these elements of behavioral economics to regain control and boost conversions? The good news is our irrational behaviors are not random.

Dan Ariely, best selling author of Predictably Irrational says:

If people’s behavior is predictable, then success in sales comes down to understanding it and communicating accordingly. Sure, we can’t control the final outcome, but we can certainly influence the decision-making process with intervention debiasing techniques and do so with confidence.

An understanding of information processing and how and why people make decisions is a powerful and adaptive sales tool you can use to persuade prospects and direct them along the path to purchase.

With knowledge of cognitive psychology comes a responsibility to use it responsibly. There’s a big difference between persuading someone to buy a solution they need from you instead of a competitor and manipulating or misleading them.

7 cognitive biases that can make or break your sales

Let’s explore seven common types of cognitive biases that you may encounter in sales. We’ll show you how to leverage them to help your prospect overcome objections and make a decision.

Anchoring effect

Don’t you love it when you go to book a holiday and the booking site suddenly displays a price drop? The cost is still high, but it’s half the price it was before. That’s surely enough to justify handing over your credit card, right?

This is called the anchor effect (or anchoring bias) and we’ve all fallen victim to it at one point or another.

We have a habit of relying too heavily on the first piece of information we’re given and then we overestimate and use that information as a base for subsequent decisions.

How can you leverage the anchoring effect in sales?

Whether your first point of communication involves a call or email, the very first thing you say matters.

Carefully plan out how you want to introduce yourself and make sure the first piece of information your prospect receives about your product sets a positive tone for the rest of the conversation.

Play to this bias by unveiling the price of your solution in stages. If you’re offering a discount, start with the full price or base rate and then follow with the discount cost.

Alternatively, demonstrate a price comparison by referencing a competitor’s price that’s higher. When your prospect sees the second price, they’re more likely to view it favorably as they still have the initial quote in mind.

Strengthen your case by sharing testimonials that show how customers have earned or saved far more than they paid for your solution.

Ambiguity effect

Imagine your GPS gives you a choice between two routes to reach your destination in roughly the same amount of time.

You’ve traveled the first route often and you’re familiar with the roads. You can plan your time of arrival down to the second.

You’ve never taken the second route before. The roads could be bumpy and traffic could be bad. You can’t guarantee you’ll reach your destination on time.

Which route are you more likely to take?

Most people are risk-averse and will opt for route one. This is called the ambiguity effect and it causes people to draw on past events and lean towards the familiar while avoiding options that are unknown. It also causes people to shy away from making decisions if they don’t fully understand what’s involved or what the results will be.

How can you leverage the ambiguity effect in sales?

Before you reach out to your prospect, make sure you anticipate any knowledge gaps. Having the relevant information to hand when your prospect has questions is key to conquering this bias.

Don’t overload your prospect with information on your first email or call. Instead, focus on the highlights and simplify what you’re offering.

Try to gauge the existing knowledge of your prospect. Don’t use jargon, acronyms or technical terms, especially if they don’t fully understand what you’re selling. It could scare potential buyers away.

Focus on results and clearly inform your prospect of the positive outcomes they can expect. Include case studies to share concrete examples of customer results.

Research your prospect to help anticipate questions or objections. Pipedrive’s Smart Contact Data feature allows you to find valuable insights quickly to pre-qualify your leads. This allows you to store key information so you can have it on hand when contacting your prospect.

Bandwagon effect

From Beanie Babies to Bitcoin, at some point in our lives, we’ve all fallen victim to the bandwagon effect, also known as social influence.

Social influence can have a profound impact on how people make decisions. We like to think that we’re strong enough to resist letting others influence our decisions. Whether we like to admit it or not, we tend to trust something a lot more if we know it’s already popular with others without conducting our own critical thinking.

How can you leverage the bandwagon effect in sales?

Talk about your customers. If your first point of contact is on a call, leverage social influence by referencing other customers in your conversation, for example: “Most of our clients use X to achieve Y”.

If you’re reaching out to your prospect via email, include case studies that demonstrate how your prospect’s peers are using your offering. Don’t be afraid to show your prospect what their competition is doing.

Why not run a split test to see which customer stories are most effective in creating need and closing deals? The Pipedrive Sales Inbox allows you to send cold emails efficiently using templates and track your progress to see which pitch is driving the most success.

Social proof is powerful stimuli. When you hit a customer milestone, broadcast it on social channels, newsletters and drop it into conversation whenever you can.

Confirmation bias

In short, we love being right!

Confirmation bias is the tendency to jump to conclusions that confirm what we already believe to be true. Sometimes we subconsciously seek information that validates our beliefs, while discounting anything that opposes them.

How can you leverage confirmation bias in sales?

It’s not easy to change your prospects’ preconceptions or distortions. Instead, you should cater to them and share information that complements their existing beliefs and viewpoints.

There’s an easy way to do this: stop talking and listen.

Use your discovery call or meeting to ask guiding questions that help you to understand your prospect’s point of view and what they want to achieve, then listen carefully.

If you launch straight into the benefits of your product or service you risk saying something that clashes with your prospect’s beliefs.

Halo effect

First impressions matter.

Communication author Nicholas Boothman claims that when you meet someone, you only have 90 seconds to make an impression. If you don’t spark a connection in that time, it’s highly unlikely that you’ll ever trigger their interest. This time is critical.

We tend to blanket our feelings, so if your prospect likes you, they’re more likely to have positive associations with your business and product. The opposite is also true, so it’s important to set a positive tone from the very beginning.

How can you leverage the halo effect in sales?

Pay attention to your facial expressions, eyes and body language. It’s essential for all three to convey a sense of warmth and openness:

• Position your body facing towards your prospect and avoid crossing your arms.

• Don’t be afraid to make eye contact as it’s an effective way to gain trust.

• Smile! It shows that you’re enthusiastic. Like yawning, it’s infectious so it won’t be long before your prospect is smiling back.

Make sure your voice, body language and expressions match. A lack of consistency can make you appear disingenuous and compromise your credibility.

In his book How to Make People Like You in 90 Seconds or Less, Boothman says:

“All relationships are built on trust. Trust is built on congruence.”

Mirroring your prospects’ mannerisms also brings synchronicity into the conversation. As human beings, we do this quite naturally and it helps to build rapport. This can include posture, volume of speech and facial expressions. A mismatch in communication styles can destroy a potential deal.

For example, if your prospect is particularly softly-spoken, shouting your pitch won’t work in your favor.

Focus on what you want to get out of your conversation. Ask the right questions and actively listen. This means not only paying attention to the words but the person’s feelings as well.

Truly understanding your prospect and where you can bring value is key to building a genuine connection.

In Brian Tracy’s words.

“As a rule, the person who asks questions has control.”

You can also use this to your advantage when pitching your solution. Focus your pitch on your best skill or product benefit first, then let the halo effect shine onto your other products and services too.

IKEA effect

You’re more likely to value a bookshelf you built yourself than a bookshelf you’ve had delivered, even if it’s made from chipboard – that’s the IKEA effect.

How can you leverage the IKEA effect in sales?

Work together with your prospect to customize your solution so it caters to their specific needs. Make them feel like they have a hand in shaping the solution. Offer them a free trial and ask for feedback.

This can also work nicely when it comes to customer retention. Get your customers involved in BETA trials for new products. It makes your customers feel important and shows you value their opinion. In return, you receive valuable feedback to enhance and refine your offering.

Sunk-cost fallacy

“Persons who go through a great deal of trouble or pain to attain something tend to value it more highly than persons who attain the same thing with a minimum of effort.” – Robert B. Cialdini

We instinctively want to finish what we start. We’re especially, and sometimes irrationally, committed to finishing something and sticking it out when we’ve already invested time, energy or money into it, despite any potential negative outcomes.

Think about a game of Monopoly that goes on for hours and hours. Everyone’s starting to get tired and there’s no end in sight, but you feel like you have to keep playing. Otherwise, it would have all been for nothing, right?

How can you leverage the sunk cost fallacy in sales?

Encourage your prospect to agree to small commitments. This is similar to the IKEA Effect: help your prospect get involved with your product.

Send questions for your potential buyer to consider before your next meeting. This is also a useful technique to frame how your prospect thinks about your offering.

Email some reading materials and useful resources to your prospect. This not only works to increase commitment but shows that you’re helpful and want to add value.

If your prospect has cooperated with the requests so far, it’s likely that they’re interested in your solution. Why not offer a free trial to dial up the commitment levels?

This also plays nicely into the hyperbolic discounting effect, which finds that we are more attracted to immediate wins than long-term rewards. Delayed payment terms are an effective way to satisfy your prospect’s desire for an instant pay-off.

Final thoughts

Understanding these cognitive biases and playing to them instead of against them is an important skill when it comes to creating a need for your solution and demonstrating value.

Here are four key takeaways to bring to your everyday sales processes to create need, build trust and motivate your prospect to buy:

• Research. Know as much about your prospect as possible before you ever reach out. Try to match prospects against lookalike customers to anticipate any possible objections, challenges and preconceptions.

• First impressions matter. Carefully plan your opening line, how you want to present your solution and, of course, how you present yourself. You need to be likable and set a positive tone from the very beginning if you want to build a meaningful connection.

• Actively listen. Ask open questions and give your prospect the opportunity to express their opinions and needs. Active listening is key to establishing rapport and truly understanding your prospect’s values, pain points and desires.

• Find the need and create value. Find something your prospect really cares about, like a personal objective or sales goal, and center your focus on that. Look at your solution from their perspective. What problem can you solve for them? How is your product or service going to make them more successful?

For more sales tips and actionable advice, check out The Sales Pipeline Academy. Learn how to refine your sales process and increase your conversion rate in our free 2-week email course.

Combine this actionable sales advice with your newfound knowledge of cognitive biases to supercharge your selling right away.