I hope that headline didn’t scare you too much. I was mostly just
trying to arrest your attention, but you DO actually stand to lose
out if you don’t read this newsletter.
You will miss out on all the extra money your offers could be
bringing in if you learn to MASTER a little-understood
psychological phenomenon known as “loss aversion”.
But don’t worry! I’m going to tell you all about it so you can
begin to put this incredibly powerful natural force to work in
your marketing, and you can avoid the terrible loss I
mentioned in the subject of this email.
Basically, “loss aversion” is the tendency that people would
strongly rather avoid a loss than acquire a gain.
Some experiments suggest that losses are TWICE as
psychologically powerful as gains. I believe it. That’s the
little joke I was making with the headline and intro for this
newsletter.
If you opened it and read it right away, you’ve personally felt this
powerful psychological effect yourself. Without even knowing
what it is you stand to lose, you IMMEDIATELY pay attention
when you think you stand to lose *something*.
If I was selling you something in this email, and I convincingly
made the case for a REAL loss you might experience in the
future, and showed that my product could spare you – you
would be HIGHLY motivated to buy it.
I’m not saying you should become a fear monger in your
marketing, but if you can figure out a LOSS that your prospect
may suffer if they pass on your offer – go ahead and detail it in
your messaging.
See, if your messaging relies too heavily on the POSITIVE
outcomes your products or services can deliver, people
become resistant. They can feel like you’re “selling the dream”
and promising things that can’t be true – but for some reason,
people are less averse when you’re describing the nightmares
they can avoid.
Are you likely to listen to a stranger who wants to sell you
something to make your life better? Probably not – it trips all
your mental alarms, right? It puts you on guard and makes you
suspicious. However, if you meet a stranger who wants to sell
you something that will help you escape a terrible fate, you
automatically give the guy the benefit of the doubt – after all, he’s
not trying to pull one over on you – he just wants to help…
So using “loss aversion” in your marketing this way can
help you get inside the prospects defenses and show him
that you’re really out to help HIM, rather than take
advantage.
But that’s only one way you can use the power of the “loss
aversion” trick in your own marketing.
Another way it manifests itself is in something called the
“Endowment Effect”. What that means is that people have a
tendency to place more value on things they own than things
they don’t. The underlying reason for that is because of that deep
psychological desire for people to avoid the loss of things
they *own*.
Theoretically, perfectly logical people would place the same
value on something whether they would want to be buying it or
selling it. But people are NEVER perfectly logical, and what
happens is that the very act of OWNERSHIP of something
raises its value in our minds.
Sure there’s no CASH value that gets added through ownership,
but we *stick* all kinds of things to objects that we own:
memories, experiences, imagined futures, etc.
This can be manifested in all kinds of ways, like not wanting to
get rid of an old car because of all the great road trips you took
in it. That MENTAL value has no worth to anyone but the owner,
but it DOES have value.
Imagine if you waited in line for an HOUR to get tickets for your
and your family to see a hot new movie on opening weekend.
Now say you take two steps from the box office and someone
offers to buy your tickets from you at double price.
Would you take it?
Logic says that you should. It’s a 100% profit. But you probably
said “no” in this case. Because you waited in line and invested
your time… Your family’s hopes for seeing the movie are
attached to those tickets… Their future enjoyment is now a part
of that transaction for you. The guy who wants to buy those
tickets doesn’t care about all that, but you DO.
So how can you use this in marketing?
You may not have ever realized it, but free trials, “try
before you buy” and promotions of that nature ALL rely
on the “Endowment Effect” to work.
What the marketer is betting on in this case is that by
*giving* you the product, you take some measure of ownership.
Then, when it comes time to either pay for it or give it back,
parting with the MONEY will be easier than parting with the
PRODUCT that they’ve made part of their status quo.
See, that’s what’s great about the invention of money. Back in
the bartering days, I bet it was hard to turn a huge profit, because
you’re trading with people for things that they OWN, which makes
them place a much higher value on them.
But no one feels like they *own* their money. No one ever
hesitates to part with a particular $5 bill for that Starbucks
because they sure had a good time with old Abe Lincoln.
And why that works for us in business is because when you think
of things THAT way, it becomes very easy to make your products
and services MORE valuable than the money you’re asking for
in exchange.
Now imagine if you’ve got BOTH of these uses of “loss aversion”
working for the same offer:
You have a product that can help the prospect avoid a
REAL loss…You have a trial period, where the person can take
ownership of the item and USE it…All they have to do if they DON’T want it is send it back, but
of course they put themselves back at risk…But if they decide to keep it, you’ll just bill them later and
everyone is happy!
Do you see how you can use this one powerful psychological
phenomenon to craft a practically IRRESISTIBLE offer?
I hope you do, and I’ll hope you’ll put it to use!
WARNING: It’s VERY EASY to overdo it with this if you
aren’t careful. While I recommend using a trial period whenever
you can, you can really diminish your marketing effectiveness if
you use “loss aversion” *too much* in your marketing messages.
You start to get that “boy who cried wolf” problem where people
quit listening to you if all you talk about if doom and gloom and
how the sky will fall if they don’t buy your new product.
Sure, you can still pull it off with NEW leads, but overdo it and
you can damage your relationships with EXISTING customers,
and that will WRECK your chances for huge, long-term
back-end profits.
Use “loss aversion” sparingly, and ONLY if there is a REAL
risk that your product can help your prospects overcome.
Don’t *create* fear where there is none – but if there IS a real fear
out there, don’t be afraid to address it with your marketing.
Remember what Robert Collier said about entering into the
conversation your prospect is already having in their head. You
want to work with what they’re ALREADY thinking about, without
having to make things up.
Stick to that, and you should do great!
Until next time,
Keep Stomping!
~Andy Jenkins
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