GOT A HOLD ON ME
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, the endowment effect can lead us to 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.
MARKETING 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?
Creativity is the power to connect the seemingly unconnected.
- William Plomer
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