No one likes to lose, whether it is a game, argument, running a business, or even wanting to buy a product. In fact, it has been observed that when people decide to buy something, they are keen to avoid taking a loss. Since this is a well-known fact, most marketers employ loss aversion marketing tactics.
Understanding Loss Aversion
Loss aversion primarily means that people do not want to lose anything in order to get gains. Researchers have found loss aversion is a potent psychological instigator among those who want to acquire something. Behavioral psychologists have found that loss and suffering a disadvantage has a bigger effect on people’s choices and decision-making compared to gains and advantages.
If a person assumes that they will suffer a loss, it will evoke a strong reaction in them and that, in turn, affects their buying behavior. Marketers understand this and use it to increase sales and profits.
Here are five of the most commonly used loss aversion marketing tactics that can help small business owners not only retain customers but also significantly increase sales.
Neuromarketing combines marketing with neuroscience so that brands can check how their marketing campaigns engage and connect with their target audience. There are neuromarketing tools that allow brands to measure physiological as well as neurochemical responses. These responses are indicators of emotional engagement when the target audience reads the marketing content.
Neuromarketing tools and technologies are often tested in focus groups. Usually, when people are in a group, they do not air their actual opinions and feelings. Hence, the spoken word may not genuinely reflect the group’s opinion. However, when you utilize neuromarketing technology, it enables you to precisely figure out the emotional resonance of readers towards the content. That, in turn, allows you to create content that grabs your audience’s attention and gets the desired results.
Here are some ways that you can use neuromarketing which can transform your marketing:
Before finding out how the endowment effect has an impact on marketing, it is best to understand what this effect is all about. According to behavioral psychologists, the endowment effect refers to how people value their possessions. A person will value certain goods if they own them but will not put a high value on goods that they do not own. While this may sound strange, most people tend to value their own possessions compared to similar goods that they do not own. This irrationality in behavior comes from cognition bias.
Psychologists have done several experiments and studies to understand what the endowment effect is and they believe it is a form of bias that people demonstrate in their everyday life. When it comes to people, who are potential buyers, it is important to understand the endowment effect. Generally, people are irrational and subjective when they have to buy something. They do not use logic and end up valuing something higher than what it is only because they own it.
Researchers have also found that the endowment effect comes into play when people own items or goods that have sentimental value. It is due to the emotions and feelings that these goods evoke in a person that they tend to add a sizeable monetary value to them.
If you are a marketer, you should know more about hyperbolic discounting and make it an integral part of your marketing strategy.
Hyperbolic discounting is a cognitive bias, wherein people are ready to take a small reward in the present rather than a big reward in the future. For instance, if a person is asked to choose between a plate of cookies today and two plates of cookies next week, they will always opt for the former than the latter due to hyperbolic discounting.
On the other hand, if a person has to choose between a plate of cookies after one year and two plates of cookies after 1 year 1 day, they will always go for the latter. It is prudent to note here that the reward is still the same but the person’s behavior has altered. And, that is what hyperbolic discounting is – when a person perceives that they will get both rewards in the distant future, the time difference between the two rewards becomes insignificant.
In a marketing context, social proof is a concept where a business attracts more customers because of the simple reason of already having many customers. Psychologists confirm this concept through their research studies that indicate that people are more likely to purchase a product or opt for a service that others are already purchasing. Also known as the bandwagon effect, you will notice this happening in crowded places like amusement parks or even restaurants.
In fact, social proof is prominently seen when people have to make choices between a less popular alternative and a hugely popular one. You may have noticed that a restaurant that has fewer patrons will be deemed to be not very good when it comes to quality and people prefer to wait in long lines outside popular restaurants. The same is the case with the sales of popular gadgets or smartphones. The more popular it gets, the more people want it. Crowds attract crowds – that’s the phenomenon behind social proofing.