Our brains go to great lengths to stop us from losing things. Whether it's losing a physical possession or missing out on a great deal, the emotional response associated with the prospect of losing something is far greater than with the prospect of gaining something.
It's known as the loss aversion tendency.
Loss aversion, therefore, has a huge impact on a person's decision-making process. This is something marketers and salespeople have used to their advantage for years. It works by inspiring the fear of loss in potential customers.
We're all familiar with loss aversion tactics; we see them every day in shops, online, in our inboxes. They might look something like this:
We've all been drawn in with these sales tactics because the fear of missing out is real. However, as a marketer, you have to be careful not to overdo it.
Loss aversion tactics instil feelings of fear and risk in your prospects. Whilst this can encourage a prospect to buy your product, it can actually be detrimental to your business in the long-run when overdone. People will begin to associate your brand with fear - far from ideal.
In addition, overuse of loss aversion tactics will reduce the authenticity of your brand. For example, let's say you send an email blast promoting your two-day flash sale. Many of your customers take advantage of this and buy some of your products.
A week later, you send another email blast promoting another sale. Your customers are left wondering why they felt the urgency to shop in the first sale when there was another sale just around the corner...
Too many companies take it one step too far and end up losing the trust of their prospects and customers.
In this article, we cover some of the ways you can use the loss aversion tendency to your advantage, without putting your brand's reputation at risk.
Once a person owns something, they put a higher value on it. That's because they don't want to lose it.
The ownership effect involves making prospects think of products or services as their own before they've bought them. This makes prospects more likely to buy because they fear that they'll lose out if not. There are a few ways you can do this:
Write copy as if the product or service is already theirs.
Use images and videos showing other people using your products or services. When your prospects see other people doing something, they'll picture themselves doing the same. On top of this, people instinctively want what other people have, further building the fear of missing out.
Once your prospects get a taste of what you have to offer, they'll be afraid of losing it. That's why free trials and samples work so well.
This method assumes your prospect is at the decision stage of the buyer's journey. Up until now, they've been delaying making a decision.
They're likely to be seriously considering your product or service and they've probably already pictured what life will be like after their purchase.
At this point, you can ask them to make a decision. You don't have to explicitly give a timeframe: the simple act of asking for a decision will make them fear what they could lose if they decline your offer or don't make the decision.
Frame the item in the cart as already belonging to the customer. For example, 'Your TV is still in your cart. They'll feel as though they're losing their TV if they don't complete the order. Emphasise what they'll miss out on, and consider including a time-sensitive discount.
Most companies use loss aversion tactics in their marketing efforts, whilst largely overlooking their benefits on customer retention.
Customers tend to be resistant to change because they fear losing what they already have. This can work to your advantage, providing you don't give your customers any reason to leave!
Provide excellent customer service and experience. Consider rewarding your long-term customers, too. For example, when customers start accruing points as part of a loyalty programme, they'll have even more to lose if they leave.
In addition, remind your customers why your product or service is so valuable. Use social media or emails to demonstrate the challenges you solve for them.
You don't have to avoid these altogether: just use them sparingly.
As mentioned above, the key is to frame your offers in terms of loss rather than gain. Get your prospects to truly believe there is something to lose.
Loss aversion certainly has a place in today's marketing. The trick is to do it with care and subtlety.
For advice on how to use your marketing and CRM strategies to win and retain customers, we're here to help. We can put together a sales and CRM plan to ensure your prospects and customers keep coming back. Contact us today.
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