Loss Aversion: 3 Ways To Win More Architecture Clients

“Do we have any utility bills addressed to me?” I urgently asked my wife.

“No, I set them up in my name.” She responded.

“Crap! Where’s our lease and our proof of insurance?” I’m standing up now.

”In that bag in our closet. What’s wrong?” She responded.

”I only have 13 minutes to finish this!” I exclaimed.

This is a small portion of a conversation between my wife and I last week. We recently had our second child and we’ve realized that our Subaru Outback now feels much smaller. So we’re getting a (very used) minivan.

But as much as I’d love this issue to be in praise of minivans (with sponsorships, of course), let’s talk about the crazy part of this true story.

I was feverishly running around my home to make sure I didn’t miss out on spending thousands of dollars.

Why in the world would I do that?!

Loss Aversion

I was afraid of losing an opportunity to buy a wonderful 2016 minivan with 80k miles.

Why was I afraid?

Because this business had smartly put a giant timer at the top of the checkout pages from the second I clicked “Reserve now”.

From that moment forward, I was urgently filling out forms and uploading information to secure my reservation.

I didn’t get distracted.

Or stop moving forward.

Or think about something else.

I put my head down and focused on completing a purchase.

Because I knew that timer was going to hit zero eventually and I didn’t want to find out what would happen if it did.

In the world of cognitive psychology, this effect is known as Loss Aversion.

It boils down to the idea that people hate losing more than they like winning.

For example, the pain of losing $1k is greater than the joy of gaining $1k.

And the same is true for opportunities.

You don’t want to lose an opportunity to buy your ideal car.

You don’t want to lose an opportunity to purchase goods during a sale.

You don’t want to lose an opportunity to work with a great architect ;)

So how can architects utilize Loss Aversion to drive urgency with your ideal clients?

Here’s 3 ways you can use it right now:

01 // Expiration Date

There’s nothing worse than waiting to hear back on a proposal. Yet we do it all the time because we feel like we have to. After all, we want their business right?

Stop waiting and chasing answers. Help prospects decide faster.

Add an expiration date AND consequence to your proposal.

The expiration date is dependent upon your firm and the type of work you do. However, most will fall between 1-4 weeks.

A consequence is added because the natural question everyone will have is “What happens after the proposal expires?”

Here’s some options:

• Soft: Re-evaluate the fee and timeline relative to availability.

• Medium: Push the project start date back X weeks.

• Hard: Increase the total fee by X%.

• Hardest: Rescind the proposal. (Because you only want clients that are urgently excited to work with you)

Just be sure to follow through on these consequences or they become pointless.

02 // Availability Cap

Do you know the average fee and number of projects required to hit your revenue goals?

Great - use it to your advantage.

Let’s say you want your small firm to generate $1MM in revenue over the next 12 months and your average fee is $50k. This means you’ll need 20 projects in order to hit your goal. (20 x $50k = $1MM)

Publicize your availability!

Here’s a few ways to do it:

• “We only take on 5 new projects every quarter. Schedule a meeting today if you’re interested in being 1 of the 5!”

• Put a client gauge on your website and/or social media profiles. (i.e. 8/20 annual project spots remaining)

• Mention it in conversations with prospective clients: “We’re speaking to a few potential clients now but we only have space for 2 more projects this quarter.”

Not only will this encourage prospects to be urgent with their decisions but it will also make each one feel special knowing that they’re one of your select clients.

I love when you can get multiple wins.

03 // FOMO

We’ve all experienced the fear of missing out (FOMO). Nobody likes it.

And for that reason it’s an extremely powerful catalyst.

One of the best ways to utilize FOMO is to publicize changes to your pipeline.

”We made room to take on ONE MORE PROJECT before the end of the month. Schedule a meeting if you’re interested in being the one!”

Mention it in your newsletter, on your website, or on social media.

Don’t be afraid!

TL;DR

Loss Aversion can be utilized by architects to help drive urgency with ideal clients.

The goal is not to fabricate urgency (loss aversion should be used in earnest), but to utilize facts and/or policies by making them clear to prospective clients.

3 ways architects can utilize loss aversion today:

1. Add an expiration date and consequence to your proposals.

2. Publicize your availability.

3. Use FOMO when there are changes to your pipeline.