Latest / Sales Leadership with Fexingo: Quota Carriers, Sales Managers, and Revenue Teams / How Sales Reps Can Overcome the Sunk Cost Fallacy
Transcript
- Lucas: Luna, I want to talk about something I see every time I ride along with sales teams: the deal that should have died three months ago but is still being worked on. Luna: Oh, the zombie deal. Every team has one. The prospect keeps saying 'next quarter' and the rep keeps nodding. Lucas: Exactly. And it's not laziness or stupidity. It's one of the most well-documented cognitive biases in behavioral economics: the sunk cost fallacy. The more time, energy, and emotional capital a rep has poured into a deal, the harder it is to walk away. Luna: Right. Because walking away means admitting all that effort was wasted. And nobody wants to do that. Lucas: And here's the kicker: research from the Journal of Marketing actually quantified this. They found that salespeople who explicitly tracked the time they'd invested in a deal were 32 percent less likely to allocate time to new, high-potential leads. The very act of recording the sunk cost made it harder to shift focus. Luna: Thirty-two percent? That's huge. So the CRM itself can become a trap if you're not careful. Lucas: It can. The system is telling you 'you've spent 40 hours on this account' and your brain interprets that as 'you must keep going to justify those 40 hours.' But from a pure expected-value standpoint, those hours are gone. Irrelevant. The only question is: what is the expected value of the next hour you invest? Luna: So how do you break that cycle? Is it just about discipline, or are there actual frameworks? Lucas: There are frameworks. Let me give you three that I've seen work. First: set a time budget per deal stage before you even start. Not a dollar amount — a time budget. For discovery, cap it at two hours. For demo, cap it at three hours of prep. When the budget is used up, you escalate to a manager or you walk. Luna: That's interesting because it flips the question from 'should I keep going?' to 'did I exceed my budget?' It depersonalizes the decision. Lucas: Exactly. Second tool: the 'fresh eyes' audit. Every four weeks, have a rep who knows nothing about the deal review the CRM record. Just the objective data — company size, decision-maker access, timeline. If that rep says 'I wouldn't prospect into this account,' you have a flag. Luna: That requires a culture where reps are willing to be honest, not territorial. But I love it because it bypasses emotional attachment. Lucas: Third: a decision journal. After every significant deal — won or lost — have the rep write down why they made the calls they did. After six months, patterns emerge. You start seeing which deals were kept alive by hope versus evidence. Luna: I want to give a concrete example. I was talking to a VP of sales at a mid-market SaaS company, and he told me about a rep who had spent 80 hours over six months on a single prospect. The prospect kept asking for custom demos, more pricing options. The rep kept delivering. It never closed. Lucas: Eighty hours. That's two full work weeks. In that same period, that rep could have sourced and closed two smaller deals worth the same revenue. The opportunity cost is staggering. Luna: That's exactly what the VP said. He ended up implementing a rule: any deal in stage four for more than 60 days gets auto-escalated to a manager review. They cut their average sales cycle by 18 percent. Lucas: That's a smart structural fix. Because the rep's brain is fighting biology. We are wired to avoid loss more than we seek gain — that's loss aversion. Sunk cost is a variant: we treat past investment as a loss if we walk away. Luna: So the solution has to be structural, not just willpower. What about compensation? Does that play a role? Lucas: Huge role. If you pay reps only on closed-won revenue, you incentivize them to hang onto any deal that might eventually close. But if you add a bonus for new pipeline generation — a separate commission for qualified leads added — you give them a financial reason to pivot. Luna: So you're saying pay reps for the inputs they control, not just the outcomes. Lucas: Exactly. And this is where the best sales leaders earn their money. They design compensation that aligns with rational decision-making. One company I know pays 10 percent of a rep's variable comp based on how many deals they proactively disqualified. It sends a clear message: we reward judgment, not stubbornness. Luna: That's radical. But I can see how it would change behavior overnight. Suddenly, walking away becomes a positive act. Lucas: And it's honest with the customer too. If a deal isn't right, stringing them along doesn't help anyone. The best reps I've seen have a high 'disqualification rate' early in the funnel. They're not just saying no — they're saying 'not now, not here, and here's why.' That builds trust. Luna: Let me ask you this: does the sunk cost fallacy get worse with experience? Because I've seen veteran reps fall into it harder than newbies. Lucas: It does. There's research on that too. Experienced reps have more 'invested identity' — they see themselves as people who close tough deals. So a struggling deal threatens their self-concept. Newer reps are more willing to say 'this one's not for me.' Luna: That's a paradox. Experience should make you better at knowing when to walk, but it actually makes you worse. Lucas: Unless you have systems in place. The most experienced reps I know use checklists. They literally have a list of criteria that must be met to keep a deal active past 45 days. If one criterion is missing, they escalate or disengage. It's not about gut feel — it's about process. Luna: So for a rep listening right now, what's the one thing they can do today? Lucas: Open your CRM. Look at every deal in the pipeline that's been there longer than the average cycle for that stage. Pick the one that feels most emotionally charged. Then ask yourself: if I had zero time invested in this deal, would I start working it today? If the answer is no, you know what to do. Luna: That's a brutal but clarifying question. And if the answer is no, you need to have the 'walk away' conversation with your manager. Lucas: And with the prospect, honestly. You can say 'we've been going back and forth for months, and it doesn't seem like the timing is right. Let's set a check-in for six months from now.' That preserves the relationship without burning more time. Luna: Speaking of preserving relationships — and I know this is a bit of a pivot — one thing that keeps this show going is that we don't interrupt our conversations with ads. We keep it a clean, focused discussion because that's what works for listeners who are busy sales professionals. Lucas: Yeah, we hear from a lot of you that you listen on the drive between meetings, and the last thing you need is a mid-episode ad break. If you find value in that approach and want to support it, you can always buy me a coffee dot com slash fexingo. It's a small way to keep the episodes ad-free and focused. Luna: Exactly. No pressure, but it helps. Now, back to the sunk cost — one more thought on the manager's role. Lucas, what should a sales leader do when they see a rep stuck in a zombie deal? Lucas: First, don't just tell them to drop it. That feels like a judgment. Instead, ask a probing question: 'If this deal closed tomorrow, what's the revenue? And if you spent that same time on these three new accounts, what's the expected revenue?' Make the math visible. Luna: So you're reframing the decision as a portfolio optimization problem, not a win-loss. Lucas: Exactly. And if the rep still resists, you can offer a compromise: 'Give me two hours on these new accounts this week, and if that doesn't yield anything, you can go back to the big one.' Usually, the new accounts generate more momentum. Luna: I've seen that work. It's like a behavioral nudge — you're not taking away their pet deal, you're just asking for a small experiment. Lucas: And the data backs it up. A study from the Harvard Business Review looked at B2B sales teams and found that the top 20 percent of reps disqualified deals 40 percent faster than the bottom 20 percent. They were more willing to cut bait early. Luna: Forty percent faster. That's not just time saved — that's mental energy saved. It frees you up to be present for the deals that actually matter. Lucas: And that's the real cost of the sunk cost fallacy. It's not just the wasted hours — it's the opportunity cost of not working on the next great deal. Every hour you spend on a zombie deal is an hour you're not spending on a deal that could triple your quota. Luna: So the antidote is a combination of structure, honesty, and a willingness to let go. It sounds simple, but it's hard in practice. Lucas: It is hard. But the reps who master it are the ones who build careers, not just pipelines. They're the ones who can look back at a quarter and say 'I lost five deals early, and it was the best thing for my pipeline.' Luna: I think that's a great note to end on. Thanks, Lucas. Lucas: Thanks, Luna.