On Thursday, June 23rd, the UK vote on whether to stay in the European Union or to exit. The vote referred to as the ‘Brexit’ gives us another excellent example of how emotions affect people’s behavior.
Propeller TV’s “Brexit: Leave EU or Not?” gives us a glimpse of what people on the streets of London think about the Brexit:
The Brexit is about Loss Aversion
When you listen to this video, what I find most interesting here is that no matter where the person was from, his or her gender, or whether they were for or against it, nearly all of them talk about things that will be lost if they stay in the EU or leave it. It appears that whether for or against it, most of their opinions are driven by the concept of loss aversion.
Daniel Kahneman first presented the idea of Loss Aversion with Amos Tversky in the late 70s and mid-80s. Loss aversion explains why people are more interested in keeping what they have than risking it to see what they will gain. Over the next twenty years, Kahneman and Tversky went on to demonstrate how these concepts played out in economic behavior.
A Feeling of Déjà Vu?
The Brexit isn’t the first time Loss Aversion and politics have walked the streets of the UK. The Scottish independence referendum a couple of years ago showed loss aversion in action also. People in Scotland were worried more about what they would lose by leaving the UK rather than what they might gain by an independent Scotland.
The “Better Together” party that campaigned for the UK to stay together sensed this sentiment, and played upon it in their commercials:
Much discussion occurred at the time about how their negative campaign was preaching doom and gloom if Scotland were to go independent. However, since Scotland voted to stay in the UK, it worked!
With the Brexit vote, the same pattern is repeating itself. The campaign to remain in the European Union is quite negative, emphasizing what people will lose if they decide to leave the European Union. They are creating FUD, or Fear, Uncertainty and Doubt. These emotions clearly make people hang on to what they have and forgo the risk of losing it.
People’s Emotions Drive Their Actions
I have long felt that how people respond to their feelings drives the decisions they make. In the early 2000s, I connected it to their behavior as consumers. Today, I am convinced it is the primary motivator of anything people do. We are irrational beings, driven by emotion with the logic there to justify our emotional decisions. Loss aversion is just one of the many descriptors we use to identify a particular pattern of this irrational behavior.
Loss Aversion teaches us that people would rather keep what they have rather than risk it for something they could have. This insight can help you roll out a change in service a different way so that Customers aren’t frustrated or disappointed (two emotions that definitively don’t drive value for your organization!). It can help you decide what to offer your long-time, loyal customers to keep them. It can show you how to appeal to your competitor’s Customers who have recently been disappointed or frustrated by a loss of services.
Understanding these concepts is essential for business today. Seeing the way people respond to their emotions and the choices they make can give you insight into what they want. It can help you design your business to present them what they want the way they want it so when they want what you have they want to come to you.
Let us know how you see Loss Aversion affecting your decisions?
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If you enjoyed this post, you might be interested in the following blogs:
What Does the Scottish Independence Vote Have to Do with Customer Experience?
3 Common Ways Customers Make Decisions
Colin Shaw is the founder and CEO of Beyond Philosophy, one of the world’s leading Customer experience consultancy & training organizations. Colin is an international author of five bestselling books and an engaging keynote speaker.
Follow Colin Shaw on Twitter & Periscope @ColinShaw_CX