Reilly Newman | Whether in sales, relationships, or social commitments, they work best when those involved put “skin in the game.” Many studies and books have been written diving into the science of putting skin in the game, but what does it actually mean and how can we apply it to brands and marketing?
Commonly attributed to legendary investor Warren Buffet, “skin in the game” was a phrase he made popular to refer to someone being invested in something. To further clarify, to not have skin in the game would mean you are not invested and have no risk in the outcome.
Skin in the game can be reduced to the person involved exposing themselves to potential risk in efforts to obtain a collective goal. When individuals have skin in the game collectively, it reduces the overall risk for all individuals involved because they are more committed. In transactions, a business is invested in the buyer because they have spent the resources to create the product or service. A buyer is committed because they have paid for the offering. In a human relationship, someone can make for a good partner because they can get a broken heart.
By investing in something, we become more exposed to risk by default. Scientific studies have develop research on how society works better when citizens have skin in the game. They care more about their environment and the people it makes up because, through their investment, they have taken on ownership. If the society is at risk, they are at risk as well.
When it comes to skin in the game, there are many psychological biases at play from loss aversion to the sunk cost effect, but the true value comes down to the sense of ownership. The psychological effects due play a role, but I want to focus on the ownership as a business can play into this with their efforts.
To encourage a buyer to put “skin in your brand” we want them to take on (emotional) ownership. This starts with them putting skin in the game of the relationship between the business and the buyer. For this inertia to be started, the business must be the one to first put skin in the game. This signaling shows that the business is committed and can be trusted. This can be part of the process of growing a business through the phases of Know, Trust, and Own taking place in the Trust and Own phases.
When the business signals “skin in the game” to the audience it creates confidence in what they are offering and begins to generate the desired trust. A business can signal their investment in several obvious and subtle ways:
- Investment in facility or storefronts
- Brand Identity and Reputation
- Education, Credentials
- Expertise, Area of focus
- Trademarks, Patents
- Years in business
- Warranties, trials, etc.
- Pricing strategy
- Service
- Certifications
The list can go on, but as you’ll notice, each of these helps build trust. They increase the likelihood that the other party (the buyer) will put skin in the game to by purchasing. The list above are all signals that are showing commitment because they come with a cost. They each took time, effort, and money to development which we understand as skin in the game because they have invested in their business.
This investment makes a point. It is the “proof in the pudding” that the business is invested and not just a flash in the pan. It is committed and willing to prove it. This initial signal is just enough for us to feel less risk in our decision to commit to the relationship, as well by parting with our money and/or time. This self-sacrifice of the business to show us their commitment allows us to give them some of our trust and move toward a purchase decision.
By the business putting skin in the game, we are more likely to put “skin in the brand” by purchasing and now taking on some ownership of the brand. This ownership is because we made the decision to go with them, to be part of what they are doing, and most importantly to trust them. This decision is a reflection of ourselves in many ways and it is why purchasing can be very difficult at times. However, when we receive signals from the business that they do have skin in the game, then that gives us the reassurance that this business is like us. They want this relationship to work just as much as we do. This is one part of the bigger picture of garnering trust. Therefore it’s paramount to the building of your business so your audience can put “skin in the brand.”
