The economic theory behind how HBC Energy Capital (a Division of the National Energy Improvement Fund) makes financing better, easier, faster
Humans are loss-averse—meaning that we feel greater emotional pain from our losses than we do joy form our relative gains. This concept is central to Tversky and Kahneman’s ‘Prospect theory.’
When faced with an opportunity that is presented in two different ways, but that both have the same end result—Prospect theory states that humans will choose the option framed as a ‘gain.’ To learn more, this short video explains Prospect Theory well.
Still wondering how this applies to selling energy efficiency?
Well…it’s because financing can relieve your customer’s stress over spending their own money when it is pitched correctly. Ultimately, Prospect Theory is matter of how to frame the element of project cost during your sales pitch.
To explain, let’s imagine two different ways to sell a $250,000 EE upgrade.
When selling the project to the customer, the contractor focuses on the $250,000 cost. Financing is the last thing the contractor talks about in the project proposal and they don’t offer much more information except for where/how to apply.
The contractor uses HBC Energy Capital’s 2-minute online portal to create a financing proposal. The contractor notes that the customer will pay nothing out of pocket and receive x amount of $$ per month in positive cash flow, due to the $51,000 expected annual savings. They ask, “What would your business do with an extra $510,000 of cash over the next ten years?”
Although both options involve the same project with the same outcome, customers will likely have different reactions.
In both cases, the project will cost $250,000. Regardless, customers will be more likely to pursue projects if view the project as an opportunity to save/gain money from the get-go. This is basic Prospect Theory.
So, next time you are selling an EE project to a customer…use HBC Energy Capital and focus on the gains, not the losses.
Have projects to discuss or questions for the HBC Team? We’re here to help you sell!