When I was unsubscribing to a service online, I encountered some resistance. My unsubscribing experience included a detailed accounting of all the features to which I would no long have access—in bold, red typeface. It also featured a checklist where I had to acknowledge one-by-one all the benefits I was forfeiting. It was a wonderful example of a company that takes advantage of the effects of Loss Aversion.
Loss Aversion is part of the bigger concept of Prospect Theory, first introduced nearly 50 years ago by Nobel-prize-winning economist Daniel Kahneman and Amos Tversky. Loss Aversion describes how we hate losing things much more than we enjoy gaining things.
We discussed the effects of Loss Aversion on customer behavior in this episode, part of our new series The Ten Most Effective Ways to Influence Your Customers’ Behavior. Loss Aversion is the 2nd of the ten effective ways. We also explain how you can use these effects to your benefit when presenting your marketing message and in your Customer Experience. Perhaps most importantly, we give you actionable items you can take to implement these ideas into your organization today.
Key Ideas to Improve your Customer Experience
People hate losing things the most and will often change their behavior to avoid doing so. That means if customers are behaving a way that you don’t like, like unsubscribing, you can steer their behavior to a better outcome by emphasizing what they might lose if they continue in that direction.
Here are some of the key moments in our discussion:
- 03:49 Ryan explains what Loss Aversion is and how it affects behavior.
- 05:14 We talk about how this could affect your marketing messaging, with a little strategy.
- 06:54 Ryan explains the concept of Framing and shares a study about banking consumers in Israel that demonstrates how this works in marketing.
- 12:26 We talk about how it is essential to understand the effects of losses for your customers.
- 15:35 Ryan touches on the idea of Prospect Theory and how it relates to Loss Aversion and decision-making.
- 17:35 We discuss how FOMO (Fear Of Missing Out) affects Loss Aversion also.
- 22:38 We share practicalities of how to apply this to your Customer Experience.
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Customer Experience Information & Resources
LinkedIn recognizes Colin Shaw as one of the ‘World’s Top 150 Business Influencers.’ As a result, he has 289,000 followers of his work. Shaw is Founder and CEO of Beyond Philosophy LLC, which helps organizations unlock growth by discovering customers’ hidden, unmet needs that drive value ($). The Financial Times selected Beyond Philosophy LLC as one of the best management consultancies for the last two years. Follow Colin on LinkedIn and Twitter.
Click here to learn more about Professor Ryan Hamilton of Emory University.
Why Customers Buy: As an official “Influencer” on LinkedIn, Colin writes a regular newsletter on all things Customer Experience. Click here to join the other 22,000 subscribers.
Experience Health Check: You already have an experience, even if you weren’t deliberate about it. Our Experience Health Check can help you understand what you have today. Colin or one of our team can assess your digital or physical Customer Experience, interacting with your organization as a customer to define what is good and what needs improving. Then, they will provide a list of recommendations for critical next steps for your organization. Click here to learn more.
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