Consumers want choice. They dislike sellers who disrespect this fact. They don't like being taken for granted. All of us with experience in selling know this only too well. But recent research on consumer behavior suggests that one can actually boost sales by offering less options, not more. So, how do you make sense of these two conflicting views. How do you sell more by limiting options for your customers?
Blind faith is becoming outdated
Let's consider applying both these conflicting views to the product we are most familiar with: mutual funds. There was perhaps a time when clients would repose "blind faith" in your advice and simply go ahead with investing in that one fund that you thought was best for them. There still are some such investors, but increasingly, investors want to get more involved in the process of decision making. They want to feel empowered to take an informed decision rather than have your decision imposed on them. For new age investors, "blind faith" is becoming increasingly rare. MF distributors would do well to appreciate the changing requirements of investors and adapt accordingly.
Does your list of recommended funds enlighten or confuse a prospect?
There is another option, which is very commonly used in our business - which is the preparation of a list of recommended funds. You conduct your quantitative and qualitative analysis of thousands of MF schemes across each product category and short list 3-5 schemes which is your opinion are best in class in each category, which are then published as your recommendation list.
Assuming you short list only 3 schemes in each category, your recommended funds list will consist of 40-50 schemes, made up of these categories:
You've done a great job of focusing attention on just 3 schemes per category from hundreds that are out there in each category. You are giving your clients a choice of the best in class in each category, and by limiting it to just 3 per category, you are avoiding the pitfall of confusing your client in the name of offering choice.
Trouble is that many investors don't look at it the way we in this business do. For us, each category is self-explanatory, which means 3 per category is not at all confusing. But for an investor who is not familiar with our fund categories, he sees a list of 45 funds. That's enough to get him confused and avoid a decision.
Two issues to consider
Your immediate response here will be that this is precisely where you as advisors come in - your job is to help your clients decide the product categories that are most suitable to their needs and circumstances, and then work with them on the decision of which fund or funds out of the 3 per category, in the categories selected.
There are two issues we need to consider here:
Prospects come to you when they find the material you have put out on your website and in your social media presence easy to understand and relate to. When they see a recommended funds list that is a result of a lot of your hard work, rather than a "wow", you will often encounter a groan. "45 funds with all kinds of complex names! This whole thing is just so confusing!" Rather than attracting prospects, your recommended funds list may just be a put off - given the number of categories of funds that we have in the industry, and the way we name our funds.
Looking ahead, as fund distributors enhance their websites beyond service to sales, an online sales proposition needs to do what you normally do in face to face meetings: help clients decide which category is relevant for them and then help them choose from your short-list within that category. Those who don't convert their websites into sales engines, will always face capacity constraints since the in-person sales element becomes mandatory in the sales process.
Sell more by giving less options
So, how do you offer choice without confusing your clients? Research suggests that consumers buy more when given limited choice (which then becomes easy to understand and decide from) rather than too wide a choice, which becomes confusing and counter-productive.
On your website, consider revamping it in such a way that you show each prospect only 3 funds from which to make a choice - not 3 funds from each category, but 3 funds in all. Don't show your prospect your entire list of recommended funds, unless they specifically ask for it by ticking an appropriate box in your website. Focus on empowering them to make decisions that they are fully equipped to make. Ask questions that establish purpose, time horizon and risk tolerance. Based on this, let your system decide which fund category is most appropriate for that particular need. Explain why you made the choice of the fund category. Give the prospect an option to over-ride the automated decision and select any other fund category. They will like the fact that they have an option to over-ride, but few in reality will. Then show them the 3 funds that you have selected as best-in-class. Explain how you made this choice. Again, give them an ability to over-ride your short-list and select any other scheme in that category. Few will actually do this, but they will appreciate the fact that they have an option to do so.
You will find that when you narrow down options, you actually sell more. Clients like to make decisions, but get put off when the decision looks too complicated to make. Simplify the decision making process by intelligently giving less options and not more.
Share this article