Welcome to the latest installation of our weekly blog series – Psychological Hacks for Marketers. Each week we will introduce a new shortcut that the consumer’s brand takes and how the crafty marketer can take advantage. Last week’s topic was Anchoring.
This week we are discussing:
Human beings are predominantly risk-averse. We intentionally seek out things that maintain the status quo. Sure we want to grow, personally and professionally, but we don’t want to risk losing anything in order to do that.
Loss aversion is psychological phenomenon that best explains this. Years of studies have proven that the feeling we get from losing something we already have is much stronger than the feeling from gaining something new.
Imagine losing $100. Now imagine finding $100. The sadness, anger and discomfort you would feel in the first situation is far stronger than the joy you would feel in the second.
So how can marketers use this to help them sell products and services to consumers?
- In promotional material, it is always a good idea to create a marketing message around loss, or potential loss from not buying your product. For example, if your solution saves them time, don’t stress the gain in hours of their day. Instead, show them how many hours they are giving up by not buying from you.
- Free trials are another great way to take advantage of loss aversion. When you give something away for free, you are letting consumers experience life with your product. When the free trial expires, they are forced to either give that up or pay to keep it. And we don’t want to give something up that makes us happy.
- Show people using your product or language that lets the prospective customer imagine themselves with the product already. If you can create in them a feeling that the product is already theirs, they will be more likely to complete the purchase.
- Using time or quantity limits, where prospects are notified that if they don’t act fast they will miss out on an offer forces them to view a decision in terms of gain/loss. Even losing the ability to choose is something we don’t like. So if you tell me that I have 10 seconds to make up my mind, I will do anything not to lose that chance.
There are several very powerful ways that companies and marketers can use the concept of loss aversion to their advantage. Doing so can create demand in the consumers mind that was not already there before.
Stay tuned next week for another installment of the Psychology Hacks series. Have a suggestion? Let us know.