As you know I’m looking at cognitive biases. Simple thinking traps we follow without knowing we are.
This one has a boring name but it’s incredibly powerful.
It’s the Sunk cost Fallacy.
It’s describes our tendency to follow through on an endeavor if we have already invested time, effort, or money into it, whether or not the current costs outweigh the benefits.
You see, if you didn’t already know, we are far from rational.
Anything we invest time, effort or money into is hard for us to stop doing.
One area you see this a lot is investing.
Say you bought a stock and it’s gone down a lot. Plus it has limited potential for recovery. What do you do?
If you’re rational you may decide to cut your losses, sell and move on. But the Sunk Cost Fallacy means you may keep holding and hoping for a recovery.
And for quite some time.
The marketing insight here is to get people to invest time, money and effort in you. Once they do this it’s very hard to walk away from doing business with you.
Keep your eyes open for it this week.
Have you ever fallen for it? I sure have.