People

Fear of losing out can engage the customers who otherwise can’t be bothered

Bri Williams /


You’re sitting in your lounge room when you see a campervan pull up put the front.  A metal arm with solar panels stretches from the side of the van to cover a section of your roof, shading your house.

Inside the van you see a couple of oddball retirees who are delighting in “stealing” sun from your roof to power their gadgets and hot water.

This is the premise of a TV ad for Origin Energy that is currently screening across many eastern seaboard states, and I think it is one of the most behaviourally effective ads I’ve seen in a long time.

 

Loss aversion

 

With the caption “Don’t waste your roof”, the ad is hitting us directly with Loss Aversion – our fear of losing out.

It works by tapping into the unstated belief that the sun that shines on our property is, well, ours.  Taking it for granted, we only become territorial once we risk losing it, in this case by “sun stealers” or in the case of high-rises being built next door, property developers who quite literally cast a shadow.

“Sun stealers” a clever strategy to disrupt customer the inertia around solar power, and is an example of how giving people something to fear about not taking action can overcome any anxiety about actually taking action.

 

Endowment effect

 

Loss Aversion stems from what’s known as the “Endowment Effect”, which means we tend to overvalue things we believe we own.  Any time you hear someone cry “but it was my…”, chances are you’ve hit an endowment effect sore spot.

In business that means people can become overly possessive of ideas or projects, of desk spaces and even anticipated promotions. When people lose access to these things (real or imagined), they’ll tend to be pretty snarky and/or disillusioned.

With customers, the Endowment Effect can work to our advantage if they play a role in creating the product or even if you get them to physically handle it. Test drive anyone? 

Beware though if your customer gets too attached to the level of service you provide and then you need to ‘take it away’ from them, for instance changing your service mix from face-to-face to telesales.

And for you, if you’ve ever wondered why we find it hard to part with possessions we treasure but others think are junk, or reacted badly when someone has ‘taken’ something you took for granted (or even ‘your’ car park), then you have your answer in the Endowment Effect.  Don’t wait for a campervan to pull up out the front to remind you how fickle we can be with where we find value.

Related articles on Loss Aversion

Bri Williams runs People Patterns, a consultancy specialising in the application of behavioural economics to everyday business issues.

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Bri Williams

Bri Williams is an authority on behavioural economics applied to everyday business and personal effectiveness.

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