The Power of Negative Thinking: Loss Aversion & Marketing


I was listening to Derek Halpern’s Social Triggers Insider podcast and he was discussing how irrational our decision making process is and how we’re more motivated by the fear of loss as compared to the hope of gain.

It reminded me of a study where Duke students stated the cost they would be willing to pay for a ticket to a Duke-UNC basketball game. When some of those surveyed actually got tickets to the game through a raffle, they were only willing to sell them for significantly more than the amount they had originally valued them at.

In the first case they were focused on the money they would lose (have to pay.) In the second, they were focused on the lost opportunity of seeing the game live.

In an example from Robert Cialdini’s Influence: The Psychology of Persuasion, a campaign to get home owners to insulate their homes was much more effective when the ad focused on the money home owners would lose by not insulating their homes rather than in the cost savings.

Why would this be?

Because gains are fleeting and losses linger. People behave irrationally to avoid loss. Gamblers bet more recklessly after losing a big hand, compounding their losses.

While in no way am I recommending that you manipulate people into making bad decisions, it is important to understand why your marketing is more or less effective than it could be.

So, how can you use this in your own web marketing?

Leverage scarcity. Scarcity, one of Cialdini’s “weapons of influence,” is powerful because it represents a loss of freedom…in this case freedom of choice. We want what we feel may be taken away from us if we don’t “act now!”

If you’re selling a product, promote its limited quantity. Beanie babies did this effectively by managing supply and “retiring” some products forever, greatly increasing demand.

If you’re offering something that’s virtually limitless, like a white paper or audio recording, you can create an artificial scarcity by putting an end date when the product will no longer be available.

If you’re planning an event, make sure you mention the limited seating. Or perhaps you can offer early bird tickets, which gives you the opportunity to market to people’s loss aversion multiple times: once when tickets are announced, once when the early bird discounts are expiring and then just before ticket sales end.

Create “ownership.” Loss of money (and the freedom of choice that comes with it) can be a barrier to people buying your products or services. However, once they’ve taken ownership of something it’s difficult to give that up. (Remember those Duke fans?)

So, is there a way in which you can help your prospects take ownership of your product or service?

The “puppy dog close” is a famous example, where pet store owners let indecisive families “try out” a puppy over the weekend. Rarely are those cute, doe-eyed puppies ever returned.

If you have a service that requires monthly billing (like a membership site), you could provide a free month of access.

This is especially effective when you still require customers’ credit card information up front while allowing them to opt-out within the trial period. (Not surprisingly, most don’t.) Constant Contact, Spotify and plenty of other companies use this method to efficiently grow their user base.

How can you test to see if loss aversion will work for you?

One way of testing this idea out is to create an A/B split in your email marketing, where you send out the same offer to two different groups, but worded differently. Send out one offer to half your list that touts the cost savings, and another that focuses on the lost income, and see which one converts at a higher rate. 

You can do run a similar experiment on your website with Google’s Website Optimizer, which allows you to randomly show different pages to incoming visitors and measure conversion rates.


For better or worse, people are more motivated to avoid pain than to gain pleasure.

While you may want to tout the financial savings your employee retention software can offer, you’ll sell more when you put the focus on how much businesses stand to lose in employee turnover costs buy not buying the software.

If you don’t want to lose any more sales with ineffective web marketing, please contact us today.

Yeah, I went there. 😉