Thursday, 29 May 2014

The loss aversion effect

If you perform marketing for your company, you might have noticed it.

The very strong influence of the 'loss aversion effect'.

It's another known effect of the long list of cognitive biases. 

These biases are etched straight onto our brain, and are consequently hard to escape from. 

This particular effect stands for our strong tendency to prefer 'not losing' over gaining

A famous example is the study of cab drivers in New York. They have a lot of work during rainy days, and next to no work on very sunny days. 

Now you would think that cab drivers as a whole would put in more hours during the rainy days, as those days give them the opportunity to earn a lot very fast, and thus pile up savings.

The opposite is true: on rainy days they call it a day from the moment they've put in the right amount of hours. And on sunny days they sit and wait and sit and wait until they've scrambled together the expected daily amount.

Irrational? Yes. 
Because working a long day when business goes very well, would instantly make up for several bad days. 

But there you go: the fear of losing out largely outranks the wish of winning or gaining more.  

What has this got to do with marketing?

Very, very much.

New marketing strategies or tools spring up all the time. And invariably it are the FIRST who start with it, who gain, who build a competitive edge, who nibble at the market share, collect more customers.

Remember the days that it was 'highly advantagous to be on YouTube'? That 'you should have a mobile website'? That 'you will earn more if you have an online availability system'? 

Those who instantly react to such messages are far and few between.
As a whole, we marketers tend to only start, sigh, with any strategy, when the lines have already been drawn and we fear to lose out. 
We tag along, so to speak. 
There's no longer any advantage in it (35 hours of video material are uploaded onto YouTube every single second) but we're not so much interested in advantages, as in not having disadvantages.

Hence why 'gain 20€' does not work as well as 'do not lose out on your 20€'!

We humans are much more afraid of losing, than we dream of winning.


PS: A minor correction here: it are not only those who are FIRST with a marketing strategy that reap all the benefits. Also those who are not first, but BEST at it. 

Wednesday, 28 May 2014

The less-is-better effect

There are over a hundred mapped cognitive biases.

As Marketing and Sales are always quick to use any psychological effect to their advantage, it's little miracle that those cognitive biases are included in the standard education of online marketers.

The 'Less-Is-Better-Effect' is one of the best known, and most used.

In short, it stands for the irrational preference for a lesser or smaller alternative.

Wikipedia mentions the following exemplary results of tests:

People prefer a dinnerware set with 24 intact pieces over a set with 31 pieces with a few broken pieces.

Seven ounces of ice cream overflowing in a small cup is preferred over eight ounces in a much larger cup.
A smaller dictionary is preferred over a larger one with a torn cover.
People perceive people giving away a $45 scarf as more generous than those who give a cheap $55 coat.
All these examples are irrational in the sense that even with a few pieces broken, the dinner set of 31 pieces will still be larger than the one only including 24.
Eight ounces of ice cream is more than seven - but the presentation gives the impression that seven ounces is more.
So you might understand why I use this particular photo in this page. It's almost a given that the majority of visitors to this blog or any other web page, will be more attracted and attach more kudos to a detail of a luxury car, over a complete overview photo of a standard car.
This effect is not to be confused with 'less is more'. For in the end, if less is more, than nothing would be the zenith of brilliance. It's the perceived quality and value.
Which has got nothing to do with the real value.
And here we are again, forever ending with the same foundation: marketing, in general, is about perception.
About how you and me and our businesses or image are perceived by the online visitor.