ENDOWMENT effect

Over-estimating the value of items we already own, use, or have committed to.

Our way of evaluating items becomes skewed once we have them. If I feel an item “belongs to me” (even if I don’t officially own it), I perceive it to be worth more than fair market value.  

I will also resist giving up the item to avoid a sense of loss (we will explore loss aversion next week). This is why car dealerships allow potential buyers to take vehicles home overnight!

In short, a sense of ownership creates value. 

SO WHAT

Any tactic that makes us feel a sense of psychological ownership over a product can encourage us to spend more on it. Conversely, as sellers, we may price things unreasonably.

NOW WHAT

  • Free trials  / "try before you buy" cause consumers to build emotional attachments with a product and thus are very effective sales tools.

  • Marketers can create a feeling of ownership with messaging by using phrases like "you're entitled to..." or "you've earned access to…"

  • Use imagery to show consumers how a product might look and feel in their possession; this builds an emotional bond.

     

AUDIENCE IMPLICATION

Are you targeting the portion of your audience with highest propensity for trial? How can you reach and engage those prospects who are most likely to "test drive" your product?

  

Sources / Additional Reading

https://www.behavioraleconomics.com/resources/mini-encyclopedia-of-be/endowment-effect/

https://www.investopedia.com/terms/e/endowment-effect.asp

https://thedecisionlab.com/biases/endowment-effect

 

 

YOU CAN HAVE IT ALL. YOU JUST CAN’T HAVE IT ALL AT ONCE.

OPRAH WINFREY