How Loss Aversion Can Boost Conversion Rates
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People don’t like missing out.
Loss Aversion is a really powerful piece of behavioural economics that brands can use to nudge people over the line to the purchase. When used properly (and ethically) it can be that final nudge, but as with many marketing tactics, it’s easy to abuse.
You see it everywhere these days in marketing and some tactics are stronger than others, and one of the key things to consider is the position someone is in their purchase journey.
If someone receives an email that has a countdown saying ‘2 hours left to buy this before its gone’ you’ll probably convert more people than if you just put the product in the email on its own.
But if you stick that loss aversion further down the funnel, when someone has found what they want, and they’re just making that final consideration, that’s when you’ll see a huge impact with it, especially where stock is limited (because if it's not, then who cares about the urgency).
Think about where you might have seen loss aversion tactics employed, when does it affect your purchase decision the most?
Assuming you don’t clear your inbox of marketing emails, run a search for an ecommerce brand and see how many ‘last chance 30% off sale’ emails you see, how soon after that last chance do you see another one? It really starts to lose it’s impact, not to mention the fact that no one will ever purchase from that business at full price.
Now think about the last time you went to book a flight or a hotel and saw that ‘3 other people are looking at this room’ or ‘only 1 ticket left at this price’. These are the loss aversion tactics that really spark that tiny panic in the back of your mind and convinces you to confirm your order.
The image below is a great example of where it can be used to great effect (but also unethically, as was seen in the hotel booking industry). If there are genuinely 43 people looking at that room on those dates, then fine, it’s the perfect place to use loss aversion or FOMO as the customer could genuinely miss out on the room they wanted.
Thoughts on loss aversion? Fantastic tactic to get consumers pulling the trigger on what they actually want? Or questionable behaviour?