One of the mantras in our programs concerns how people make buying decisions. And this may surprise you, but most purchasing decisions are made using emotion, memory, and ease of the decision than anything other factors. Note: IT’S NOT PRICE! The mantra is: How do we create a positive emotional experience instead of just a transaction?
Are most of your project chases based on price alone? Have you cut your overhead and profit down to next to nothing and still find it hard to compete? Do you find it hard to differentiate your company in this highly commoditized market? Do you think that owners only look at price? If this is the case, then this chapter is vital for you and the future success of your company.
The first thing we must look at is how people make buying decisions. And although many contractors tell me that the buying decision is made on price alone, they are simply wrong. I know. Just keep reading.
At a recent AGC meeting, two large owners representatives (Disney and MD Anderson Cancer Center) were asked how they chose contractors. The contractors in the audience had their tablets and pens at the ready. They were going to find the magic formula, that one thing that would differentiate them from the competition. Was it fee below a certain percentage? Was it resume? Was it schedule compression?
To everyone’s shock and amazement, they both said that, “It was just a feeling that they had during the interview process.” They could tell which project teams would work well together and with them. They emphasized that if you are in that room for an interview, you were capable of building the project. So it really comes down to those intangibles of relationship and emotional connection.
The latest neuroscience bears this out. Daniel Kahneman is a Nobel prize winning psychologist who studied why people buy stuff. And what he found out was a little shocking. Purchasing decisions, whether they are for products or services, are formed in our subconscious or System 1 mind. The System 2 mind is the cognitive part and has very little input into decision making.
More on those two systems in part 2!