Understanding the principle of liking and knowing how to use it in your marketing and on your website can give you an unfair advantage over the competition.
Loss Aversion Principle
People don’t like to lose. Whether it’s losing a game, an argument, or an item we want to buy, we don’t like it. In fact, people make buying decisions that are motivated by their desire to avoid a loss. This is the principle of loss aversion.
While economics may lay down the foundational laws of supply and demand, marketing can use loss aversion to manipulate the variables and win big. Here’s everything you need to know about the principle of loss aversion, plus all other important principles and theories that can supercharge your marketing and influence people to buy your products or services.
What is loss aversion?
Loss aversion refers to the tendency of people to strongly prefer avoiding losses to acquiring gains. Studies show that loss aversion is twice as powerful psychologically as the acquisition of something. Just the idea of a loss is enough to create a strong reaction. Loss aversion is a powerful motivator in all aspects of life, including consumer behavior.
How Your Business Can Use Loss Aversion To Increase Sales
You’re familiar with loss aversion marketing tactics whether you realize it or not. They’re everywhere.
'Only 3 left in stock! Order now!'
'Available while supplies last.'
'Flash Sale! Today Only!'
'Don’t miss out on this awesome deal!'
We are invited, pressured and cajoled to purchase using the fear of loss every single day. These hard-sell pressure tactics create what marketers call 'urgency.'
And, while these urgency tactics may sometimes be obnoxious, they work. Urgency plays directly to our desire to avoid loss. Your marketing efforts should take these fear of loss tactics into account when planning their overall strategy.
Loss aversion strengthens status quo bias
Loss aversion can also help your business keep existing customers.
Fear of loss has a way of immobilizing people. As the old saying goes, 'A bird in the hand is worth two in the bush.' We want to hold on to what we know, even if there may be something better waiting for us.
And, why do we stick with what we know? Because it’s also possible that what’s waiting for us is worse than what we already have.
Loss aversion increases the ownership effect
People work hard to get what they have. And once we’ve got something, we hate to let it go. This is true whether the thing we have is actually ours or if we just think of it as ours.
At the end of the day, despite our best intentions, all people really do subconsciously think that they are the center of the universe. And, why not? We spend our entire lives seeing the world through the lens of our own experience. We are the centers of our own little universes.
What that means is that when we see things happen to other people, we subconsciously imagine that happening to ourselves as well. So, if we see someone holding an item we think looks cool, we imagine ourselves in that role, too. Couple this feeling of ownership with the fear of loss and it creates a powerful hook into our brains.
What are the core principles of marketing psychology?
There are many important principles, theories, and concepts used in marketing psychology. These include:
- the principle of reciprocity
- information-gap theory
- social proof theory
- and loss aversion marketing
You can research each of these principles, plus dozens of other key principles of marketing psychology, via the links below.
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