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.