Understanding irrationality in B2B decision making

B2B technology vendors often overestimate the degree to which their markets make rational decisions. They forget the human element in business decisions to their detriment.

The results from PWC’s Global State of Information Security Survey: 2014 illustrate the irrational side of B2B decision making. Although enterprises across the globe see data security risks increasing and become more advanced, most have not invested in technologies that address these new challenges such behavioral network monitoring, security information event management platforms, data protection tools, mobile device management tools. Nor do they hold the partners they share data with to data security standards. Yet 74% of organizations overall, and 84% of CEOs, feel confident that they have effective data security strategies in place.  A simple explanation exists for this disconnect between these internal perceptions and the realities of data security: Business decision-makers are human. They have limitations in terms of the amount of information they can process, they make decisions based on incomplete information, and their decisions are influenced by emotions to a greater degree than they realize.

The human brain can only process a limited amount of information at one time. When it gets overloaded it simplifies situations into contextual frameworks it can understand. This often happens unconsciously. Wall Street traders have access to vast amounts of information about the companies and markets they invest in. However, their investment choices are often based on a handful of dimensions that they feel most comfortable evaluating. Likewise, data security has grown so complex that even people devoted to it cannot keep up with the latest threats and solutions. When evaluating their comfort with their security position senior managers tend to evaluate the dimensions that they understand. If they feel good about those, they project that confidence to their overall situation.

This tendency to reduce complex situations into simpler frameworks creates challenges for many B2B technology vendors that focus their value proposition on functionality or ROI.

  • Many vendors assume that prospects systematically evaluate solutions against each other; most prospects do not. Instead they heavily weight their decisions on a few factors that may or may not be related to functionality. They also rely on brand equity and peer usage as surrogates for detailed evaluations. Some companies recognize these tendencies and bring in external consultants to help review their needs and options.
  • ROI pitches can fall flat because many B2B decision-makers do not have a clear picture of the cost of their existing solutions and processes. They view licensing and support costs as concrete. Promised costs savings from efficiencies gained are ambiguous because the decision makers have no real basis for comparison.
  • From an emotional perspective any change in processes or vendors is a referendum on the performance of the current team and processes. Unless they are in crisis mode, most decision-makers will acknowledge that things could be better, but feel that they are doing OK and can be defensive. This explains why F.U.D. messages sometimes do not resonate as well as expected. It’s also why many changes in processes and systems come with new management – the new staff doesn’t have any emotional investment in the status quo.

Organizations and individuals also create a narrative of how they perceive themselves and look to solutions that fit within narrative (e.g., we only use large vendors, we use market leaders). This internal narrative may or may not be based on reality and the resulting choices may not be rational.

The implication of these dynamics is that in order to develop value propositions and sales approaches that resonate, B2B vendors must understand how their market actually thinks, feels, and makes decisions. Isurus helps organizations use primary research to better understand their customers and prospects as people, and the influence of emotional and non-rational factors on buying decisions.