Focus On Your Prospect’s Gut To Improve Conversion Rates
August 16, 2016
by Dan Solin
Warren Buffett: If You Own A Good Business, Keep It
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As a former trial lawyer, I was taught to marshal facts in a persuasive way and present them to the jury. The premise was that the lawyer who did the best job of conveying the facts would convince the jury of the merit of his client’s case (or the lack of merit on the other side).
Many advisors make this assumption when presenting to prospects. They describe the history of their firm, provide impressive background information and go into detail about their investment philosophy.
Unfortunately, this emphasis on factual information is misguided.
The importance of gut instinct
A 2012 study, authored by professors from Columbia Business School and, at the time, the Graduate School of Business at the University of Pittsburgh, found that predictions of future events were more accurate when participants rely on gut feelings.
The authors of the study conducted eight experiments. They asked participants to attempt to predict the outcome of various future events, like the movement of the Dow Jones Industrial Average (DJIA), the winner of American Idol, the outcome of a championship football game and the weather.
The study found that those who trusted their feelings made more accurate predictions than those who relied less on their gut instinct.
The difference in prediction accuracy was compelling. For participants asked to predict the winner of American Idol, 41% of those who relied heavily on their feelings were accurate, compared to 24% of low-reliance participants. Predictions about future levels of the DJIA were 25% more accurate for those who relied heavily on their instinct.
Professor Michel Pham, one of the authors of the study, explained why relying on your feelings is likely to make you a better predictor: “When we rely on our feelings, what feels ‘right’ or ‘wrong’ summarizes all the knowledge and information that we have acquired consciously and unconsciously about the world around us. It is this cumulative knowledge, which our feelings summarize for us, that allows us make better predictions. In a sense, our feelings give us access to a privileged window of knowledge and information – a window that a more analytical form of reasoning blocks us from.”
There is one caveat to these findings. The improved accuracy for those relying on their feelings is only evident if they have a baseline knowledge about the event in question. If you have no knowledge about sports, your instinct about the outcome of a football game will not improve the accuracy of your guess regarding its result.