Fear of missing out
Don't loose customers thanks to the fear of loss
As an entrepreneur and marketing professional, you are generally hunting for profit. We often work with the assumption that our clients also think like that. Again and again we try to convince consumers of the benefits of our products and services. Day after day we tell them how their life will benefit when they team up with us. But sales are lagging behind, and registrations continue to fail to materialize on our website. What is going wrong here?
Fear of loss
There has been much research into the phenomenon of ‘fear of loss’ in relation to purchasing decisions (in marketing jargon called ‘loss aversion’). Many studies show that the fear of loss is twice as powerful a motivatior to take action or purchase, than the desire for profit. Translating this roughly into practice, it means that only 40% of a group of people would come out of their armchairs to get 10 euros, and 80% take action if 10 euros would be taken away from them if they stayed seated.c
The fear of loss is closely related to the psychological ‘ownership effect’ also called endowment effect. This is the phenomenon that humans naturally attach greater value to the things they possess, than to the things they don’t possess. Someone might spend 100 euros on a nice watch. This person will probably not sell the watch soon after for the same amount. And should they lose the watch because the clasp is broken, they are inclined to put more money down to repair it than they would for a new one. From the time of purchase they have added emotional value to the object, and on top of that, people do not like change. “Once mine, always mine, and that’s that.”
This fact becomes really interesting when we realize that this principle also applies to ‘fictitious possession’. Once we have decided to buy something, it feels as if the product is ours. We imagine it already being ours and then we go all the way to actually purchase the product. Even if the price rises in the meantime and we therefore have to pay more than we had planned.
In (marketing) practice
So we know that the fear of loss is a major drive behind decision making. But how do we apply this to win us customers and increase our conversion rate? Here are some powerful examples of how loss limition is easy to implement in our marketing strategy.
if you assume that the customer does not like to lose anything, you must “give” him your product first. Therefore go for a strategy in which the consumer can try your product, or service for a limited time for free. During this time the possession effect occurs pretty quickly. If the customer feels they own the product, then they will make much more effort to keep it than they had in mind prior to the trial. This strategy works particularly well with subscriptions or software products, but with a little creativity you can apply this to almost any business.
Create a frame of reference:
companies often tend to put the cheapest product on top, especially when making price lists. That’s a big fallacy when you want to take into account the fear of loss. Put the most complicated and expensive product top of the list and the chances are that customers will spend more on average. The thing is, the customer sees this product as a reference for all the following products which will be assessed to this standard.
When they first see the cheapest product, it sets the standard by which they compare all the other options which will look more expensive, and the added quality or scope of services doesn’t do much for them because they do not fit their frame of reference. However, when the customer first sees the most comprehensive product and assumes that is the norm, each additional option will be experienced as a small loss (of quality or size). Their unconscious will stop them going too far below the norm, and then they are more likely to choose one of the more expensive options.
In our texts we can make simple adjustments to achieve higher conversion rates. We tend to emphasize profit and all the benefits of our product or service, but the opposite works better. Emphasize what the potential customer will lose if they don’t come into action: do not miss any offers anymore and sign up to receive updates!
- You are losing money every month with your expensive subscription. Switch!
- Don’t stay in the dark, register now!
- Don’t miss any more offers. Sign up to receive updates!
Why do vouchers work so well at inciting a purchase? The core of this is also the fear of loss. The voucher has a monetary value. With a coupon of 10 euros, the consumer feels that he actually owns 10 euros. They obviously don’t want to lose that money by letting the voucher expire. If you want to use this really cost-effectively, you must ensure that you give the coupons to a specific group. Namely, the group of people who are interested, but would not come to the conclusion on their own to deal with you. A web shop, for example, can direct vouchers to the people who have placed a product in your shopping cart, but they can close the site without continuing with their order. But the fear of losing the discount will win most people over and go ahead with the order.
There are still many more applications that make use of the fear of losing, and the ownership effect, but these tips are certainly easy to implement, and work for almost any business. Don’t miss this opportunity to have a good look at your own marketingstrategy.