I once had an IT manager at a large company tell me that he did not include Microsoft Dynamics GP in their ERP software selection short list because the cost was too low. Huh?! Since when is low cost a bad thing?
I am reading an excellent book right now called Influence, The Psychology of Persuasion by Robert B. Cialdini; he gives some insight into this issue. Cialdini talks about the factors that cause one person to say yes to another person and focuses on six basic categories: consistency, reciprocation, social proof, authority, liking and scarcity.
The first tactic – consistency – is what brought to mind the experience of the ERP software buyer. Cialdini tells the story of a jewelry store owner who could not sell certain products and planned to offer them at half price. But due to a miscommunication the jewelry was marked at double the original price. The result? The entire collection sold out immediately. Why? The same reason the IT manager suggested the company buy the most expensive ERP software. Both buyers had the same mentality: “expensive = good.”
The cost of ERP software from Oracle and SAP is much more expensive than Microsoft Dynamics GP. Faced with a complicated decision, this IT manager felt that in order to get the best functionality, the more expensive the better. Why did he assume this?
The author explains that human behavior is trained to respond to certain triggers and act in a kind of mechanical way which he calls “click-whirr.” (The term has to do with a study done with female turkeys, pretty interesting, but you’ll have to read the book.) Price alone can become a trigger feature of quality. We are brought up on the rule, “You get what you pay for” and have no doubt seen that rule confirmed over and over again in our lives. In the case of the jewelry, buyers were making their purchases based on the assumption that “expensive = good” because this had worked for them in the past. Especially with complicated purchases, instead of painstakingly researching all the factors that would indicate the worth of the product, many times it is human nature to respond to the trigger we know to be usually associated with high quality, which is high price.
This may make the buyer seem a bit lazy, but the author points out that this type of behavior is becoming more and more necessary today. We exist in a world of information overload, easily the most rapidly moving and complex time in history. To deal with this, our brain needs shortcuts. We can’t be expected to recognize and analyze every aspect of every purchase and decision. We often must use our stereotypes, our rules of thumb, to classify things according to a few key features and then to respond automatically when a trigger feature is presented.
Choosing the right ERP software is a difficult decision that requires extensive research. Honestly, I think it is unfair to ask an IT manager to determine the “ERP software short list” alone. While he will no doubt choose products built on solid technology, he should not be expected to evaluate the financial functionality that is important to the business. So he has to rely on other ways to evaluate the hundreds of products. Reputation and price become key factors to make sure he is in the right ballpark. Also, since ERP software is always an expensive purchase, the person making the short list might want to “play it safe” assuming that if the company pays more, there is less risk of getting a “bad” product which would reflect negatively on the person making the recommendation.
But a lower price does not always mean an inferior product – you just need to do your homework or work with experts you trust who have a reputation for looking for the best deal. We work with a loan processing company that processes over 1 million transactions per year in Microsoft Dynamics GP, and several other large companies with complex requirements. Just because Microsoft Dynamics GP has a lower price does not mean it is not sophisticated enough to handle the job. It is just a question of clearly understanding your requirements and making thorough evaluations.
Many people have figured out how to influence buyers using this principle of “expensive = good” and applied it to software services as well as the software itself. I know a Dynamics reseller who quotes an extremely high hourly rate for his Dynamics implementations. However, after talking to him about many of his projects, I realized that he rarely if ever, actually charges that rate. It seems the rate is almost always discounted. While some buyers might be scared off at the initial price and not look further it is likely that other buyers will respond to the “expensive = good” trigger. He has planted the seed in the buyer’s mind that “if he can charge that much, he must be really good!” And when he follows that up with a discount, the buyer feels good that he has negotiated such a great deal. This scenario relates to another principle in the book called reciprocity, which I might talk about in a future post.
It takes research to get the right ERP software for your business at the lowest price. But buyers who are willing to compare, and ignore the “click-whirr” reaction, will often find that they can get a great product at a great price.
An easy way to know the cost of Microsoft Dynamics GP and compare it to other ERP Software packages is to request an automated Microsoft Dynamics quick quote – including licensing, maintenance, estimated implementation and deployment option.
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