The simplest and most effective way to upsell customers is by establishing a relationship. When people make decisions, they usually do so after consulting friends and family. There are numerous psychological and evolutionary reasons that I don’t have the time to get into with this post, but let’s look at a few anecdotal examples. When people choose a college to apply to, it’s usually done with the input of family, intimate friends and a guidance counselor. When a woman at a bar is approached by a man, within a few minutes she’ll instinctively signal for her friend’s approval with her body language. If her friends don’t approve, they’ll give “the raised eyebrow look” or simply turn their back to the man and give him negative body language. Our need to ask for approval and consultation when making choices is done both consciously and subconsciously. The decisions we make are naturally biased to include the opinions of our peer group.

So if you really want to grow your business, if you want word-of-mouth buzz, increased conversions and customer loyalty, you need to work on developing more than just a customer/client relationship. To do so entails changing the way we think about our clients.

To change our relationship with our clients, we have to stop thinking about them as potential leads. Instead, we should think about how we can best benefit them without the need to get paid back. If the focus is on getting fair compensation for value that we give, then inherently the value of the transaction is degraded. If instead the focus is on giving as much to our clients as we can, they’ll then in turn value the relationship with us that much more.

They’re are numerous ways to give value to our clients, but the best way to do so is for FREE. What? Don’t people devalue things that are free? Not necessarily. If what we give away is of little value, for example a corporate sponsored water bottle at a marathon, then we associate little to no value with the transaction or the other party. If however, we give something meaningful, something above and beyond what people normally associate with “free”, then we’ll get a whole lot of customer loyalty. People will talk about how they got a “great deal” or know “this guy” that gives them special treatment.

Have you ever read Alice Schroeder’s “The Snowball: Warren Buffett and the Business of Life?” It’s a fantastic biography and I highly recommend it. There’s one passage in the book that I found quite salient to this topic. Every year, the little known investment bank (at least for non-financial people) Allen & Co. hosts a media conference at Sun Valley. The most highly regarded media and tech CEO’s, the Steve Jobs, Bill Gates, and Warren Buffetts of the world always attend. They might shun media conferences from bigger and more well known investment banks like J.P Morgan, but they almost always go to Allen & Co. The two main reasons they go is because a.) everybody who’s a bigwig goes and b.) the deeply personal relationship that Herb Allen’s, the CEO of Allen & Co., has built with them.

How can one guy build a relationship with the top industry leaders, including diehart competitors, across numerous sectors? Free surf n turf, babysitters and exclusive schwag like Allen & Co. Golf Polos. Most of that stuff costs Allen & Co. pennys. But the effect is powerful. The kids of the CEO’s always want to come back every year. And Warren Buffett, one of the richest men on earth, admitted that he relishes putting on the Allen & Co. polos.

So make a list of what you can give to your customers right now, that would cost them nothing to receive. Make it big. A couple of helpful hints on your blog, or a free newsletter is just the tip of the iceberg. Do you have a book, a video or some other form of content that you can give away for free? How about a sample version of something you’re selling? If your business is offline, make sure to include hand written thank you note. Sooner or later, you’ll repeat the rewards. It may not be in the form of direct income. It may be through word or mouth or new relationships which are often more valuable than money.

Steve Forbes Interviews P. Brett Hammond, TIAA-CREF chief investment strategist

(Click above to open video in New Window)

My Notes on the Interview:

Preinterview – A Republican complains about a Democrat. Shocking.
3:08 – Reframing 401(k)s, annuities (income) vs. nest eggs
5:05 – Differentiate the goals of your money
6:05 – Variable annuities explained (riskier than fixed annuities, but chance for higher payouts)
8:00 – Streamlining 401(k)s (autoenroll, assett allocation, annuities)
9:30 – Average contribution rates of 6-8% is not enough. Aim for 17%. (Increase your auto contribution)
10:30 – Why you should default into a lifecycle fund
11:30 – The paradox of choice affecting 401(k)s
12:20 – Inertia. Or people are lazy
14:30 – Pick the best company in a sector rather than sector. I disagree. I don’t think anybody should be picking their own stocks. Knowing just enough to be dangerous is worse than knowing nothing
16:20 – Look at Management. Buffett & Peter Lynch mentions investing in companies that are so good, that an incompetent executive won’t mess it up, as eventually somebody incompetent will be in charge
21:00 – Macroeconmic Viewpoints. Feel free to skip this
25:20 – “Bold Prediction: Euro as new standard.” Feel free to skip this

Thoughts:

Although inertia plays a role in why people aren’t more proactive when it comes to 401(k)s, behavioral economists have long proven that people feel the pain from losses much stronger than the joy of gains. So when the average small investor thinks about investing, he focuses more on what he might lose rather than on what he might gain. This is why left to their own devices, people tend to buy high and sell low.

This is also why people tend to adopt their company’s default option when it comes to selecting a 401(k) plan. Just making an option the default makes people think of it as superior to the other choices.

Extra Reading:

Loss Aversion and Status Quo Label Bias

“Don’t wear it now,” she simply said.
“What? Why?” I whined.
“You’ll get it dirty. Save it for later,” she responded.
“Um, when?”
“Maybe when you go back to America.”

At the time, it made no sense to me why I should “save wearing a T-shirt.” Aren’t new clothes meant to be worn?

When I was six, my grandmother was escorting me to America for the first time. I had not seen my parents since I was two and had never left China. On the Delta flight over, my grandmother saved portions of every meal that we were served, even the bones from my chicken wings which still had a few pieces of flesh. There were also times when I was still feeling hungry after finishing a meal. Instead of asking the flight attendant for more food, she’d say “no you’re not” and take away my Jello! But then when I wokeup from a nap, she’d conjure food from nowhere.

“I saved my meal from earlier because I knew you’d be hungry later,” she said.

That same evening, during a layover, my grandmother realized that we were missing one of the chicken dinner she had saved. I tried to reassure her that it was no big deal. But the look of pain on her face was as if she had been told a loved one was a dying. It was unbearable. She was angry with herself for being slightly careless.

That day, I learned two important lessons. The first was of the uselessness of delayed gratification. The second, and more important lesson, was about being honest with myself.

Everybody loves to place blame. We blame society, wall street, the media, the government and each other for our collective inability to save. But looking at what’s wrong with the world is the wrong approach to personal finance. Now there’s nothing wrong with taking an interest in the economy. And in this global environment, it may very well be a necessity to educate oneself on macroeconomics.

But when people focus most of their mental energy on things they can’t control, they are inherently paralyzing themselves. Because what else is paralysis?

Instead of developing habits based around saving or investing, people focus on the things that they can’t fix. So they do nothing but lie to themselves. This is why when people buy something they can’t afford, they might feel anxious, but then quickly reassure themselves that “they’ve been good and deserve it” or that “it’s on sale so it’s a deal.”

To face ourselves, that’s the hardest thing to do. To learn how to do it at an early age, that’s God’s gift to make the act of self-examination bearable.