Below is a transcript from an episode of my podcast, Unconsidered. Unconsidered can be heard on all major podcast networks.
Hey, it’s Dallas and I have a question for you.
But before I ask it, let me set it up with a story by transporting us to the state of Florida.
Florida is home to several families of water birds – egrets, herons, ducks, geese, shorebirds, gulls, flamingos. You get the idea.
In fact, Florida reports 525 different types of birds, most of them make their homes on the coasts, lakes and beaches surrounding Florida. These birds are not only important for tourist activities, they’re incredibly important to maintaining the ecological diversity and overall balance in the area.
Now. Let’s pretend there’s an oil spill in the panhandle of Florida. Suddenly, these birds are drowning in waters polluted with oil. Their very survival is at stake and something has to be done to save them.
So, now for the question…
Assuming our mission is to rescue as many birds as possible, and each type of bird will be treated equally, how much are you willing to donate to save 50 birds?
Take a second and consider it….
Okay, got it? What if instead of 50 birds, you could save 500 birds? What would you donate to help save 500 birds?
What about 5,000 birds?
I don’t know what you’re personally willing or able to donate, or how charitable you may be. We’re all a little bit different in that regard. But, I am willing to bet that when the amount of birds that needed saving went from 50 to 500 – and then again from 500 to 5,000 – the amount that you were willing to donate did not increase proportionally 10 times, or 100 times respectively.
So, what’s happening here?
Let’s take a quick break and we’ll dive in…
The question I asked you was originally published – with different numbers – in the Journal of Risk and Uncertainty called “An analysis of dollar responses to public issues.”
In their research they found that on average people were willing to donate $80 to save 2,000 birds. That’s about 4 cents per bird.
Then when the researchers asked a different group of people how much they were willing to donate to save 20,000 birds, their research found that this group was willing to donate only $78 – yes, the average donation per person actually went down by $2.00.
More birds needing to be saved, and a lower donation amount.
Finally, when a third group was asked to save 200,000 birds, the average donation amount finally increased, but only by $8 to $88 on average. $8 more dollars is all people were willing to donate to save 198,000 more birds.
So to recap, people were willing to donate on average $80 to save 2,000 birds, $78 to save 20,000 birds and $88 to save 200,000 birds.
In simple math, as the number of birds increased, potential donors valued each bird less and less individually from $0.04 per bird, to a third of a penny per bird – that’s point-3 of a single penny, down to four one-thousandths of a single penny per bird when the number became 200,000 birds.
So, what’s going on here?
What’s happening is what can be referred to as scope insensitivity, or what is sometimes referred to as scope neglect.
Put simply, scope insensitivity implies that as numbers increase in size – often as soon as numbers get into the 100s – our brains can no longer distinguish between big, bigger and biggest. Our emotions, or our feelings towards the numbers start to become indistinguishable.
For example, if you were to tell me there are 17 million children in the United States dealing with hunger – or if you reworded it – that there are so many children in the United States dealing with hunger that you could fill 250 Houston Astrodomes – I would still just feel like that’s a lot of hungry kids.
Even though the number 250 is vastly smaller than 17 million, the feelings I have are identical. I can’t distinguish between them. I can’t visualize one any better than the other.
But if you told me that – according to WorldHelp.org – for $40 I could feed one hungry child for a whole year, I can visualize that. It makes sense in my brain. I can see two $20 dollar bills. I can see how my $40 will make a direct impact on feeding that child for a whole year. And when I can make that connection in my brain, I’m in.
Okay, now that we understand what’s happening – what causes this disconnect in our brains – let’s talk about why this happens to all of us.
To help us understand why scope insensitivity occurs, we have to understand a little bit more how our intuition works. Or our gut feeling.
At a high-level, our intuition is fundamentally bad at dealing with numbers. Intuition is an evolutionary trait stemming from our need to subconsciously spot patterns in the wild for the sake of survival. Think of your intuition as your fight or flight instinct.
Our intuition takes over when our need to make a decision is accelerated.
Intuitional decision making is faster than logical or analytical decision making, but intuition is not good at quickly making sense out of large amounts of data – or big numbers – and because of that, our intuition can’t be trusted.
For example, if I said that you can choose between $1 million dollars right now, or one penny per day, doubled each day, for just 30 days. You’d probably choose the $1 million. And you’d be wrong.
About four and a half million dollars wrong.
Today each of us are asked to make more decisions than ever before. Some research suggests that the average person now makes as many as 35,000 decisions per day. And if you do that math, that’s one decision every 2 seconds.
And to adapt to this increased strain on our ability to make a decision, we’ve all begun leveraging more and more “mental shortcuts” to solve our problems.
When asked a question, rather than picturing all of the specific details of the question – for example, how many birds 200,000 really is, what a penny per day doubled means, or how big the Astrodome is – we think of a simplified version of the type of question we’re being asked.
Naturally, this oversimplification reduces our decisions to a more manageable size, simplifying the amount of information we need to process, and alleviating the amount of stress and strain put on our little decision-making brains.
But, the danger in oversimplifying our decision making process with these mental shortcuts is that when large groups of people are faced with the same problem, they begin to use these shortcuts in unison – a sort of hive mind – and these shortcuts begin to act as a mechanism that causes groups of people to imagine or visualize roughly the same thing.
When large groups of people take these shortcuts and begin to visualize the same thing, these large groups begin to empathize to roughly the same degree, and try to solve the same problem in generally the same way, which leads to generally the same outcome despite the significant differences in the variety of problems that need to be solved.
Now, if you’re a non-profit, or anyone in the fundraising space, this is especially problematic. There is an astronomical amount of suffering happening in our world right now.
Not to be too dramatic – and probably a little bit inaccurate – the amount of suffering occuring at this very moment dwarfs any that we are used to dealing with or thinking about.
This has led to what has been dubbed the “collapse of compassion,” or also compassion fade. Compassion fade happens when, maybe ironically, as the amount of people or things in need of help reaches such a high degree, the amount of compassion people are able to feel for each individual cause or need actually decreases.
In other words… compassion fade is another form of scope insensitivity happening right before our eyes. Things get so big, we give up on trying to understand it.
But, we’ll save compassion fade for another episode.
But, what if you aren’t a non-profit trying to save birds or trying to feed starving children?
All noble causes, but some of us are merely small business owners looking to grow our service-based businesses – salons, plumbers, software companies.
So what if instead, you’re trying to receive approval on a scope of work to develop a new website, or develop a new mobile app.
Or maybe, you’re a large product manufacturer and you’re trying to close a national distribution deal but when it comes to the pricing slide of your pitch deck – the money slide – you get push back from the decision maker.
If you’re listening to this podcast, you’ve likely seen it hundreds of times. You’ve spent weeks – god forbid months – having great conversations with a prospect, developing an intricate scope of well-defined deliverables, to be delivered in a reasonable timeframe. It’s a slam dunk. Everyone is excited to get started, and then, right when it’s time for them to sign on the dotted line…. Crickets.
Unfortunately, I’ve seen this happen dozens and dozens of times. I’ve often heard co-workers lament that the prospect must be stupid, or ask, “what’s wrong with them?” Or they do this general hand wavey thing and proclaim, “they just don’t get it! Don’t they see we’re doing exactly what they asked?”
Well, I’ve got news for you Mr. hand wavey guy. Your prospects and customers aren’t stupid. They aren’t dumb. There’s actually nothing wrong with them.
But you are right about one thing, they don’t get it. Whatever that thing was that you shoved in front of them right at the end. The culmination of all of those discovery meetings and scoping sessions, they don’t get it.
And it’s not their fault.
Sorry to be the bearer of bad news, but the onus of making the buyer – quote/unquote – “get it” falls 100% on you and you failed. It’s not the prospect’s fault, it’s your fault.
Next time this happens, because it will… consider what we’ve learned here, and where you screwed up.
What we’ve learned is that our brains – including the brains of those prospects that didn’t sign with you – are fundamentally bad at dealing with large numbers. And as a reminder, “large” can be anything over 100 – and hopefully whatever it is you’re scoping is over that number.
When your prospect flips to that pricing slide – and trust me, they flip straight to it – like us, their brains can’t separate that big all-in number into its individual components, all of the things you’ve discussed up until that point, and they can’t properly assign a value to the number presented.
You’re now asking them to quickly take all of the individual elements of your proposal – parts, labor, deadlines, services, meetings – and quickly sum all of those into whatever that singular large number is, and then evaluate if that number is reasonable for all of the things you’ve discussed up to that point in time.
So, that prospect of yours starts deploying mental shortcuts.
They start shortcutting all of your conversations. All of your hard work. Rounding off the corners, forgetting less memorable but equally important elements of your proposal.
They’re doing this, subconsciously, because they are trying to roughly assign a value to that large number staring them in the face, which, as we’ve learned, they begin to under-value as the total number increases – like oil-covered birds and starving children.
So, consider this.
The next time you’re putting in all of that work – and if you’re any good at what you do you’ll always get another chance to do the work – show the math.
That big number we like to show our prospects, break it into the individual components. Show the decision maker exactly how you’re assigning value to your work. Show them exactly how you came to that large number. Show them exactly how you valued each thing you’ve discussed to that point in time. Let them see. Let them see the value of each piece of your work.
And don’t be scared. Remember:
So, do it. Show them. Show the math.
The only reason you wouldn’t show the math is because you’re afraid of what they might say. You’re afraid of what questions they might ask about how you priced individual things. You’re afraid they might try to negotiate down or ask you how something might cost what it does. You’re afraid they might say you’re overvaluing your work or they might say someone else is cheaper, and that someone will work for less.
And if you’re afraid of that, if that’s the thing that scares you, if that’s the conversation you’re scared to have, it scares you because you think they might be right.
And if they are right, and you are overvaluing yourself, overvaluing your skill, ultimately overpricing what you are selling and what they are buying – then you deserve the push back. You deserve to get negotiated down. You deserve to lose on merit, or win by being the cheapest in the market. You deserve the honor of wearing the crown of the champion who won the race to the bottom.
There is an infinite number of mediocre freelancers or businesses willing to do what you do for cheaper. If the buyer can’t tell the difference between you and them, they will choose the cheapest and the fastest.
And then for the rest of us, the ones who choose greatness, who choose to run great businesses. The ones who choose to offer high-quality products or services, which are offered at a premium price to businesses and brands willing to pay that premium to achieve the results that come along with it – show the math.
And in that math, make sure the prospect understands why you are worth what you are worth and why those numbers in that proposal are the proper value. Tell them why that number is precisely the value that makes it worth your time, and why that time is the time it takes to drive the results the prospect is asking of their chosen partner, and why even a dollar less compromises the very endeavor they have set out to achieve.
If you want cheap, you can get cheap. If they want results, this is what results cost.
The client will pay more, but they’ll get more than they paid for.
Because when you’re fair and you’re honest in your pricing, and you do great work, you get to keep doing great work for great clients for a long time. Great work begets great clients.
And I’m intentionally using the word great – not good. Great work and great clients is what you’re after. Not good. Great.
Dallas McLaughlin
The Business Owner's Guide To
As a business owner you are inherently a decision maker and it’s a function of your job to make consistently good decisions in critical moments. But no two decisions are exactly same. Having a deep understanding of how decisions are made and having the tools to create consistent decision making frameworks are necessary to make more rapid and impactful decisions on a daily basis.
