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Mental Accounting

Posted by Doug Davidoff

May 23, 2007 12:07:25 PM

Sunday’s Washington Post had an excellent story that focused on how people account for the monetary impact of decisions.  They talked about the concept of ‘mental accounting.’  “Here is the simplest definition of mental accounting: People carry around different running tabs in their heads. You have, for example, an "entertainment account." Losing a movie ticket and having to buy a second one takes $20 out of your entertainment account when you planned to take only $10. Lost cash, on the other hand, is not charged to the entertainment account -- which is why most people don't hesitate to buy a movie ticket after they lose some cash.”

While the article focuses on consumer behavior, this issue is critically important when selling to businesses.  After reading the article, I created a term called ‘Results Accounting.”  Simply put, this just means that every business allocates a certain amount of resources (time, money and energy) to achieve certain results.  If a result is of strategic importance, a company will allocate strategic resources – if not, they won’t.  It is critical that an selling organization understand the results their desired buyer is seeking and ensure the accounting is in alignment.

I’ll talk about reframing results in a later post.

Topics: B2B Sales Strategy