Loss Aversion 😥
🧠Psych - 31 / 100
Hello,
Today, We will be talking about the Loss Aversion 😥.
What is it?
Our tendency to weigh losses higher than the potential gains in a situation.
Example -
The loss felt from money, or any other valuable object, can feel worse than gaining that same thing.
You would prefer avoiding losses to attaining equivalent gains. Simply put, it’s better not to lose $10, than to find $10.
Where does it occur?
Mostly, this type of cognitive psychological phenomenon can be seen in situations involving finance or money.
The idea suggests that people have a tendency to stick with what they have unless there is a good reason to switch. So, when we think about change we focus more on what we might lose rather than on what we might get. [1]
Why do I need to know?
There is reason why Netflix still offers 30-day free trial before you hop on a plan. Because you aren’t paying anything, you can enjoy full access to Netflix for free!
Once you get accustomed to Netflix for 30 days, you will find paying for it easier than before. Try to incorporate something similar in your business.
Takeaways:-
Use Loss Aversion to your advantage in your business. If you can integrate it, you can reduce your customer acquisition value.
When faced with a decision that could be influenced by loss aversion, try framing the question differently to highlight and potential gain of a transaction. [2]
References & Studies:-
https://www.behavioraleconomics.com/resources/mini-encyclopedia-of-be/loss-aversion/
https://thedecisionlab.com/biases/loss-aversion/
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