We believe that the decisions we make are rational. In fact we are constantly influenced by cognitive biases. These biases distort the process of thinking and our perception of reality, they influence each of our decisions and judgements.
Why do these biases happen?
Our attention has a limited capacity. This means we can’t possibly evaluate every detail or event when forming our thoughts and opinions. Remember- we make around 3000 decisions per day! Because of this our mind creates and then later relies on mental shortcuts that save our energy and help us to speed up our ability to make judgements.
Sometimes these biases are very obvious, but more often they are subtle and we are not conscious about them.
Why is it important to know that they exist?
Because your customers are influenced by them. And these biases can be the reason why they don’t buy from you (or the opposite- buy). You would want to know how to communicate your product or service in a more efficient way!
Endowment effect
We automatically place a higher value on things that are ours!
Daniel Kahnerman, psychologist and economist famous for his works on decision making, made an experiment where participants were given mugs and then given an opportunity to sell their mugs. After people accepted the mugs and established the ownership, the price they asked for their mugs was much higher than an initial price for a mug.
How you can use the endowment effect in your marketing strategy:
1 Create the feeling of the ownership by offering free trials.
2 Introduce free return policy. It creates the effect when a business seems endowing while not expecting many customers will return products.
3 Use haptic images or videos. Provide the feeling of ownership to customers by showing how the product might look in their possession and how they might feel with it.
