Question submitted by Brenda, Cragieburn
Springtime is here, along with the blooming of flowers and the welcome sun (and yes, hay fever). The end of winter also means it’s time to Marie-Kondo our wardrobes and rid ourselves of anything that doesn’t immediately spark joy in our souls.
If you’re anything like me Brenda (and let’s be honest, you sent in the question so let’s assume you are), you might also have a little trouble deciding exactly what qualifies an item of clothing for elimination. It’s a Survivor-esque endeavour at times, enlisting Olympic-grade mental gymnastics to justify why you absolutely need to keep that once-pristine white basic Uniqlo tee that’s somehow yellowed into the colour of aged cheddar.
Why is it so hard to decide what’s worth keeping, and what’s destined for a new life as a schmatte?
The Endowment Effect
What’s at play here is the Endowment Effect, a bias that refers to our tendency to believe that something is worth more, simply because we own it. Yes, even your ratty old Uniqlo tee.
The Endowment Effect was demonstrated in a series of studies conducted by Kahneman, Knetsch, and Thaler throughout the 1990s. In one study, university students were randomly assigned into one of two groups; Sellers or Buyers.
Sellers were given a coffee mug and asked how much they’d be willing to part with it for. Buyers were shown the same coffee mugs and asked how much they’d be willing to pay for one. On average, sellers wanted $7.12, while buyers were only willing to pay $2.87. The difference? Ownership.
From an evolutionary perspective, it makes sense that we’d be wired to overvalue what we already own. For most of our existence, resources were scarce and difficult or dangerous to come by. While finding an additional day’s worth of food would have been a nice bonus, losing a day’s worth could have been catastrophic.
Valuing, and therefore protecting what we had, undoubtedly kept us safer for longer. While most things are much easier to get a hold of these days, the bias is still deeply entrenched in our psyche.
For Challenger Brands, the key takeaway is finding ways to make it easier for prospective customers to feel like our product is already theirs. This could be done through free trials, test drives, ‘light’ versions, co-designing and more. Creating a premature sense of ownership will make walking away feel all the more painful, and closing the deal far more likely.
Behaviourally Yours,
PS If you missed the last edition, you can still check out why everyone is suddenly an Olympic breakdance critic here.
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