Humans are endlessly fascinating. We do things that make no logical sense but that’s because we are not run by logic.
This week’s cognitive bias is one I took a while to get my head around. But I’ll explain it simply so your brain doesn’t bend.
Now I’m guessing you wouldn’t shovel money into a fire. That’s because we hate to lose.
In fact loss aversion is so powerful you can transform your marketing with it.
Loss aversion is the tendency to prefer avoiding losses to acquiring equivalent gains.
What this means is if you can frame your offer as avoiding loss you’re onto a winner. So you would say stop losing $20,000 every month instead of get an extra $20,000 a month.
Seems crazy right? But that’s the joy of psychology. We work with what people do, not what they should do. After all the offer is exactly the same. You gain $20,000.
But avoiding the loss of $20,000 is more motivating for most people.
The other interesting aspect of loss aversion is you will do anything to avoid taking a loss. So let’s say you bought some cryptocurrency at the peak late last year. Most of them are down a lot. Most people won’t sell because they don’t want to accept a loss. They will continue to believe it will return to the high levels and they can sell it then.
They may be right they may not be. It’s the psychology that’s interesting.
Bonus Tip: Loss aversion applies to status. If any action is seen to have a risk if lowering a person status they won’t do it. This is critical if you sell business to business as status is even more important there.
So show your clients how you help them avoid losing and they will gladly buy from you over and over.