RevOps: Dance with the risk and high-five to Lady Luck
The world of digital marketing, sales, and technology is becoming increasingly chaotic. Decision-making has the power to transform businesses and organizations. Both for better and for worse. I would liken it to a rollercoaster full of laughter, tears, and small doses of absurdity. We have to admit though that sometimes the decisions made in marketing and sales are as confusing as a cat chasing a laser beam. Slow and fast thinking systems, cognitive and hindsight biases, “cornered” loss aversion. The risks are many, but with this article, we take a humorous dive into the wild and sometimes treacherous world of decision-making in digital marketing and sales! Get ready for a comedy of errors that affect RevOps, leaving business owners, freelancers, and marketing and sales executives scratching their heads in bewilderment.
Think of a digital marketer who is afraid of negative comments on social media and taking risks, in general and specifically, is not in his temperament. So it sticks to generic content, which is as exciting as watching water dry up. Fear of possible backlash creates posts like: “Check out our new product that’s… cool.”
- Safe; Yes.
- Attractive? No way.
It’s like going scuba diving and looking at shells. And for those of you who don’t dive yet, it’s like going to a party and all you talk about is the weather. Where’s the appeal and the fun in that?
*Like-salacious will be examined in a future article..🙂
Now imagine a salesperson who is afraid of rejection. He never makes a single phone call because he is afraid to hear “no”. Instead, it sends hundreds of generic, automated emails that end up in spam/junk. Wanting to avoid rejection, he misses out on the infamous personal touch and direct interaction that will lead to more meaningful sales conversations. It’s like trying to talk to someone with smoke signals when you could just walk up and talk to them.
Picture a group huddled in a meeting room discussing a possible price increase for their software. They crunch the numbers, do market analysis, and find that they could generate more revenue with a slight price adjustment. But loss/damage aversion causes them to imagine customers storming into offices with pitchforks and torches, so they give up on the idea and whistle the tune of “Bargain Basement Blues”.
And it doesn’t stop there. They are at the same time extremely reluctant to adopt new technologies. They feel safe by maintaining the status quo. And, they are stuck in antiquated systems and processes, fearing the “disruption” it might cause, thereby missing out on efficiency gains and competitive advantages offered by modern tools. Isn’t it like refusing to upgrade from a typewriter to a computer because they’re afraid of accidentally deleting a document?
Read Also: How to Start with RevOps Practical Steps
Everything comes down to: Decision Making
With the discovery of my – not so new – passion for RevOps, I picked up Daniel Kahneman’s book – Thinking Fast and Slow – for the third time. Coming to a chapter on decision-making and risk perception in relation to gambling, I found something very interesting related to the above examples, which I quote below. The reason is that many times, all of us, without exception, make decisions, as in the examples above, that seem contrary to “Common Sense” which, after all, is not common at all!
Many of the options in our professional and business lives are mixed. That is, there is a risk of loss and an opportunity for profit. What we need to do is decide whether or not to accept a precarious prospect. In other words, let’s face the possibilities of winning and losing.
Think: You are invited to a letter crown game. If letters come you lose 100 euros. If you land a crown, you win 150 euros. Is it attractive? Would you agree to play?
To decide you need to balance the psychological benefit of gaining 150 euros with the psychological cost of losing 100 euros. What does that make you feel? If the expected value of the game is obviously positive since you are able to win more than you will lose, you probably won’t accept to play – like most people. This rejection is due to thinking system 2 (slow and methodical), but the critical inputs are the emotional responses produced by thinking system 1 (fast and instinctive).
Most people feel more strongly the fear of losing 100 euros than the hope of winning 150 euros. We concluded after many such observations that “losses seem greater than gains” and that people are loss averse.
You can measure the size of your loss aversion by asking yourself: What is the minimum profit I need to balance the possibility of losing 100 euros? Most answer around 200 euros, twice the loss/damage. It has been calculated in many experiments and usually ranges between 1.5 and 2.5 (this is of course an average).
Now consider the following two:
- What do you choose, the 90% chance of winning 1 million euros or 50 euros for sure?
- What do you choose, the 90% chance of winning €1 million or €150,000 for sure?
Either way you’ll be disappointed if you don’t win, but the potential pain is compounded in case 2, as you know that if you take the risky prospect and lose, you’ll regret your “greedy” decision to scorn the sure prize of €150,000. In terms of regret, the experience of an outcome depends on the choice you could have taken but rejected.
Loss Aversion in Revenue Operations (RevOps)
Loss or damage aversion refers to our preference to strongly avoid losses and obtain gains of equal value. In other words, we are motivated more by the fear of losing something, than by the possibility of gaining something of equal, and in many cases, greater, value.
Think about the examples at the beginning of the article. How many missed opportunities and how much data was lost from a year of the decisions of those involved? A business or organization that either does not collect data at all or collects poor quality data, has a substantial problem in the effectiveness of data-based decision-making.
Here are just a few of the most common data issues:
- Data quality and accessibility
- Data silos and integration
- Data governance and privacy
- Analytical skills and expertise
- Interpretation and ability to exploit data
- Overreliance on data
- Change management and adoption
If some or all of the above apply, then we’re talking about the kind of professionals and businesses who rely solely on emotion and intuition, fearing that the data might “lead them astray”. It’s like the fortune tellers, who trust their instincts more than cold, hard facts. And, while intuition (which I’ll talk about in a future article) is something that needs to be there, ignoring the power of data analysis is bound to lead to lost ideas and ineffective strategies. It’s like underwater exploration without a compass and instruments for measuring depth and gas reserves.
Exposure in real life, outside of games, is inherently more complex so that you can easily describe in words an otherwise defined event.
The problem is the reliance on metrics. Every measurement is modifiable (gameable)!
So because the decisions we make are not as simple as we think they are, remember that the whole professional and business life is a situation in which we balance between certainty and risk.
Remember the research that showed losses/damages outweighed gains by about 1.5 to 2.5? Practically it means that it takes twice as much willpower to make decisions that benefit and serve everyone and not just us, our team, or our department! See what I mean in this article.
So think logically (thinking system 2) about what you do in your business or organization and ask yourself, your superiors, subordinates, and colleagues: How would we explain what we did if something went wrong and the business – organization closed down?
🎇 Are you perhaps thinking that all this cannot happen to you and your body? Stay tuned for the next article 🙂 🙏