July 18th, 2012
Risks are inevitable in business. However, one can’t deny the endearing effect of a success story that came out of something that only had a small chance at it. In fact, the Harvard Business Review defines this as the long-shot bias.
“One of the most pervasive of these is a phenomenon called the favourite long-shot bias, first observed by the American Psychologist Richard Griffith in 1949. Since then, numerous studies have found evidence of the bias at racetracks and other sports betting markets all around the world. Indeed, it is probably the most discussed empirical regularity in sports gambling markets, and the literature documenting it now runs to well over a hundred scientific papers.”
Regardless, excesses of this bias are a deadly reality. Just look at the case of Facebook’s IPO. Even though many of its supporters more or less worship the ground that Mark Zuckerberg treads, the disasters surrounding Facebook in the stock market have done more than prove his company’s vulnerability.
Speaking of which, that is just one example of what happens when you have an unhealthy love of risks. Here is a simpler example from the same HBR blog:
“This oversensitivity to small changes in likelihood at both ends of the probability spectrum gives rise to an interesting phenomenon in gambling on horse racing; punters tend to value long shots more than they should, given how rarely they win, while valuing favorites too little given how often they win. The result is that punters make bigger losses over the long run when they bet on long-shots than they do when betting on favorites (they still make losses when betting on favorites because the racetrack takes a percentage of each bet, but the losses are smaller). ”
Given the recent popularity of risk-taking and how more and more people are discouraging reserved positions, one can conclude that there is a small ‘epidemic’ of the long-shot bias. Unfortunately, as shown above, this bias isn’t all that healthy (hence, the ‘epidemic’ label). Now this has both good news and bad news:
- Bad News – It means that more business owners out there are making reckless mistakes all for the sake of their love of the long-shot. What’s worse, such frequency could lead to more mismanagement unless expert steps are taken to put it under control.
- Good News – It’s good news for financial planners who specialize in risk management. Those of you who are looking for financial leads now have an identifiable market. This makes it easier for you to plan out lead generation campaigns and set appointments.
At this point, this doesn’t mean that risks should never be taken. As a matter of fact, there are some cases where taking risks are pretty much a necessity (take career decisions for instance). On the other hand, that might as well be comparing apples to oranges. Though on the bright side, financial planners like yourselves now have a time to shine with a clearly defined source of B2B leads. With this prevalent attitude towards risk, you need to be there to offer aid before an evident long-shot bias starts doing some serious damage. It’s the one edge that you can have over the rest of your competitors!
October 3rd, 2011
Financial planning lead generation can be tough if not done properly by the right people. This is a glaring you cannot deny. But, no matter how difficult marketing your solutions, and getting interested prospects, you just cannot drop it easily and find other ways to boost your sales. You know well that generating leads and setting appointments are essential requisites to increased sales performance. Instead of brooding about the challenges that make it daunting, what needs to be done is to strengthen your campaign. But then again, you will go back to the basic question, how? (more…)
September 29th, 2011
Several companies do not like the idea of paying outsourced telemarketing service for financial planning lead generation and appointment setting. They think that cold-calling is too old, in fact obsolete, to use against today’s digital tools like email marketing and social media. Also, the implementation of the Do Not Call Registry along with other legal, regulatory and privacy guidelines have prevented telemarketers to reach other targeted prospects. Apart from these two, still there are other reasons why some firms have reservations to use phone marketing. (more…)
September 28th, 2011
Every body wants to know the right way to use financial resources. For example, home owners want to understand the right plan that will be able to insure college education funds for their children. Business owners, on the other hand, are so eager to determine the best approach to manage their available cash, business risks involved, taxes and liabilities. Both of which aim for the same goal – to get maximum results from their decisions. But the fact remains that many of them do not know the ins and outs of financial planning. (more…)