I help entrepreneurs leapfrog over the typical potholes that derail most small businesses with inspiration, motivation, education, and support across a wide range of business topics drawn from over a decade of running my own business, teaching entrepreneurship for the City of New York, and coaching and consulting privately with dozens of women and minority small business owners. Honestly, why go it alone when help is an email away?
Loss Prevention
The last few weeks I've been deconstructing some very common behaviorial economic tactics that drive consumer perceptions, namely the Decoy Effect, the Anchoring Effect, and the Framing Effect.
Each of these is based on a cognitive bias known as loss aversion.
As humans, we're wired to avoid loss to a greater degree than we are to acquiring an equal gain.
What this means is that we will make decisions that protect us from potential loss out of proportion to what we see as similar potential benefit.
This is because we feel the pain of loss more acutely than the pleasure of gain.
It's also why FOMO (Fear Of Missing Out) tactics work.
Those dwindling stock numbers, countdown clocks, and ever urgent 'going fast' messages are designed specifically to trigger our loss aversion.
Interestingly, social proof can also activate our FOMO and tweak our aversion to loss. When a business promotes their great reviews, we feel drawn to experience their good stuff for ourselves and avoid the loss of that opportunity.
Loss aversion is also an important aspect of buyer's remorse, especially in that brief time between purchase and activation or receipt.
Our fear kicks in and we wonder if the money we've lost on the sale is really worth the price and potential gain of our investment.
So what does this mean for you and your business?
- Understand what constitutes loss for your prospects.
While it's easy to think in terms of dollars and cents, it doesn't all come down to economics. Loss of health, quality of life, fulfillment, personal freedom, and social status can be just as powerful and even more so.
- Refine your messaging and sales content.
Make sure you're stressing the right things to the right extent and in the right order. Be sure you understand the intentional and unintended influences on your prospects' decision-making as they move through your buying process. Tweak your messaging as necessary.
- Focus on your post-sales customer experience.
This is one of the most critical points in the customer journey, but it's often neglected or completely overlooked. Design a strategy that instills confidence with newly acquaired customers and reinforces their purchase decisions so buyer's remorse has no space to take root.
I hope you've enjoyed the past few week's exploration of consumer behavior and loss aversion tactics. If you have questions or want a deep dive into other common business strategies, just drop me a note.
And, of course, if you'd like my eyes on your individual business, schedule some time with me.
Until next week,
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Easily Said & Done
I help entrepreneurs leapfrog over the typical potholes that derail most small businesses with inspiration, motivation, education, and support across a wide range of business topics drawn from over a decade of running my own business, teaching entrepreneurship for the City of New York, and coaching and consulting privately with dozens of women and minority small business owners. Honestly, why go it alone when help is an email away?
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