How to make your customers buy from you: The Loss Aversion Bias.
A 500 word essay on how you can use the loss aversion bias to motivate your customers to buy from you.
Hey friends,
Welcome to Issue #17 of Market Curve - a weekly newsletter exploring the intersection of marketing with consumer psychology and behavioral economics. Through Market Curve, I hope to offer marketers and founders a different perspective on how to better understand their customers - one that is rooted in science.
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Today on Market Curve, we talk about the Loss Aversion Bias - a simple tool which when used right can yield great benefits. By the end of this essay, you’ll learn:
What is the loss aversion effect.
How to use it in your own landing page copy.
How to get inspired by watching 4 real landing page examples.
All in less than 5 minutes!
Let’s dive in, shall we?
Let's imagine a scenario. You and I are playing out a friendly bet and I tell you this:
"You know what, if I flip this coin and you call heads, I'll give you 1000 dollars. If it comes out tails, you'll have to give me 500 dollars".
If you're like the most of us, then you'll back out of the bet. And for good reason. You wouldn't want to risk losing 500 bucks just over a chance event that the coin will land on heads. Despite the fact that you stand to gain twice as much in the alternate event, you will be (somewhat) reluctant to shell out 500 dollars.
Humans are notorious at this. Much more than you imagine. Nobel winning economist Daniel Kahnemann rightly said that "losses loom larger than gains". This is what is known as the loss aversion bias.
Psychologically speaking, the pain of losing is about twice as powerful as the pleasure of gaining. It's no wonder therefore that the loss aversion bias is used by advertisers and marketers as a tool to incentivize consumers to change their purchase behavior.
Take Netflix for example. I recently signed up for Netflix a couple months back. (I know..I know.. Im late to the Netflix and chill party). When I signed up for the Netflix account, they offered me a free 30 day trial. Within those 30 days, as you might have guessed, I binge-watched my backside off. Now, at the end of the 30 days, I was greeted with Netflix saying "your payment is due Shounak".
What do you think I did? I whipped out my credit card and paid Netflix. I didn't want to lose out on more shows and movies. I loved the experience and wanted to keep watching it.
This is loss aversion bias at work.
Now let's see how you can use the loss aversion bias in your landing page, increase conversions and make $$$.
Use offers or discounts on your subscriptions.
If you have a monthly and a yearly plan, show your customer the exact amount they will be saving by signing up to your yearly plan. If you have a limited number of seats available on your course, then you can say something like "Only 10 more seats left". You can do the same for your info products, SaaS subscriptions, etc etc.
Draw your customer's attention to your default pricing.
Default pricing says to your customer - "people just like you are choosing this tier as their default tier. Maybe you should do it too". We like to choose the same things as others because it makes us feel safe in our choices. Not only will it make your customers feel safe, but it will also trigger their loss aversion as they will feel they are missing out on things that "people like them" are choosing at will.
Show the missing features across all paid tiers.
Comparing and contrasting features across the pricing tiers helps your customers visualize what they will be missing out on. Sometimes we think that we don't need XYZ features but once we actually see those features not included in our pricing plan, our loss aversion bias kicks in. It helps us see what features we will lose out on by not shelling out a few more bucks. Remember, value >> price.
Display an exit pop up when your prospect is going to close the page.
Prospects leaving websites is a frequent event. In most cases, either they did not find what they were looking for or didn't find the website copy appealing. You can sure up the latter by hiring me. If not, you can try showing an exit pop up right before they leave. You can use that pop-up to ask something like "Did you know that you can get XYZ % off on your first purchase?" or "Are you struggling with XYZ problem" etc. This will trigger the loss aversion bias in your prospect and they will be incentivized to engage with your business - especially if you make an irresistible offer.
The anchoring effect is an extremely powerful tool which can have disproportionate returns on your conversion rates. It’s definitely worth experimenting. Use it wisely and don't be evil.
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Thank you so much for reading! If you want to get in touch, you can respond directly to this email or reach out on Twitter or LinkedIn. Always excited to meet like-minded people!Â
Until next week!
— Shounak.