The behavioral economics of “Loss Aversion”!
It is thought that the pain of #losing is #psychologically about twice as powerful as the pleasure of #gaining. 😄
Or (in the words of a #Product’s person) The pain of losing one #customer is powerful and stands out than the #acquisition or winning of one customer. 🤯
We tend to be dishonest and take risks to avoid losses, than to make a gain. 👀 All the above are examples of one of critical human behaviour — Loss Aversion. 🚀
#Decision making being one of the most critical skill for any job, it’s naturally an important skill for Product Managers. Learning about the factors affecting our decision making, identifying the consequences and impact of our cognitive biases should be taken into account. 🙂
Thanks to Daniel #Kahneman and Amos #Tversky, the “Prospect Theory” explains the key concepts and proof of Loss Aversion in human behavior. 🙏🏽But what are the basic examples of Loss Aversion around us? Let’s find them out from some marketing tactics that companies apply.
1. Discounts, coupons, rewards.
2. Social proof or FOMO (Fear of Missing Out)
3. Preordering of products for a new launched feature or product.
4. Free trails and samples.
What’s the most basic example of loss aversion?
