Behavioral Economics - Sacred Fire Creative

Articles Tagged with: behavioral economics

Is Your Brand Ready for the Coming Transformative Cosmic Shift?

The stars are aligning – quite literally – to create an unprecedented opportunity for brands and businesses to grow with purpose, authenticity, and creativity. At Sacred Fire Creative, we’re inspired by a fascinating alignment of cosmic energies reshaping how we approach relationships, self-discovery, and creativity.

These shifts aren’t just esoteric ideas. They offer real, actionable insights that businesses can use to thrive in the digital age. Here, we explore three cosmic shifts and provide an action plan to help you leverage these shifts to create a brand that truly resonates with your audiences.

Quantum Relationships: Building Deeper, Purposeful Connections

By 2027, we’ll enter what’s known as the Cross of Sleeping Phoenix, a period where people will increasingly seek connections based on shared values, authenticity, and purpose rather than quick, transactional gains. This shift represents a powerful movement towards quantum relationships, where brands can create meaningful, lasting connections.

How to Leverage Quantum Relationships

Identify and clarify your core values. Definite what your brand stands for – sustainability, inclusivity, innovation, or integrity. Align these values with your mission and ensure they are present in every aspect of your branding, from your messaging to customer interactions.
Create purpose-driven content. Share stories and content that echo your audience’s values and demonstrate how your brand aligns with their ideals. Authentic, relatable stories highlighting your brand’s commitment to these values will attract a loyal audience.
Nurture long-term relationships. Rethink your approach to customer relationships by investing in loyalty programs, personalized interactions, and follow-up engagement. Encourage long-term loyalty rather than focusing solely on immediate sales, as the power of a dedicated audience far outweighs the benefits of quick transactions.
Collaborate with like-minded brands. Partner with brands and influencers who share your values to expand your reach and credibility. Look for partnerships that can create a win-win scenario where both parties enhance each other’s mission and values.

Inner Power and Self-Reliance: Trusting Your Vision for an Authentic Brand

The Age of Aquarius is more than a hippy Fifth Dimension song – it’s a call to shift inward, encouraging us to trust our intuition and allow our vision to lead us forward. This era emphasizes the importance of inner power, self-reliance, and authenticity. It’s a reminder that your brand’s unique identity should come from within.

How to Build a Brand Fueled by Inner Power and Self-Reliance

Strengthen your brand story. Your brand’s story should reflect its authentic purpose and vision. Why was your business created? What impact do you aim to make? Articulate this story clearly and consistently across all your communications to foster a genuine connection with your audience.
Encourage team creativity and autonomy. Empower your team members to contribute ideas, embrace creativity, and take ownership of projects. By creating an environment that values individual contributions, you’ll foster a culture of innovation and authenticity.
Invest in self-discovery and growth. Just as we look inward for personal development, business leaders and teams should continuously work on developing their understanding of the brand and its purpose. Consider regular strategy sessions focused on the brand’s vision, where team members can realign with the purpose and share new insights.
Be true to your unique voice. Allow your brand’s voice to reflect its true personality, whether playful, inspiring, or innovative. Consistency in your brand’s voice will attract an audience that resonates with your message and sees your business as a genuine, relatable entity.

The Age of Intuition and Technology: Balancing Strategy and Creativity.

According to Chinese feng shui, we’ve entered Period 9, or Jiu Yun, a time that values creativity, intuitive technology, and the empowerment of feminine energy. In this era, AI, cloud-based solutions, and collaborative creativity will shape the future, making it essential to balance the strategic with the intuitive for optimal growth.

How to Leverage Intuition and Technology for Your Brand

Adopt AI and automation thoughtfully. Invest in AI-driven tools that free up time for creative and strategic work. Use technology to enhance customer experience, streamline processes, and provide insights, but don’t let it replace the human touch that builds connection.
Embrace intuitive creativity in strategy. Go beyond data and metrics by listening to your gut when exploring new ideas. Host brainstorming sessions that allow for a mix of structured and free-flowing creativity, encouraging your team to think outside the box.
Integrate empathy and feminine energy into leadership. Feminine energy in business means emphasizing collaboration, compassion, and intuitive thinking. By balancing this with strategic decision-making, you’ll foster a culture that appeals to today’s values-driven customers. This approach creates a brand that feels deeply connected to its audience.
Use technology to create personalized experiences. Harness the power of AI to gather insights and deliver customized experiences to your audience. Personalized recommendations, targeted email campaigns, and tailored interactions can make your customers feel truly seen and appreciated.

These cosmic shifts we’re experiencing are more than just trends – they signal a new way of doing business. Embracing them can transform your brand from just another business into an impactful entity that resonates with audiences on a deeper level. Brands emphasizing purpose-driven relationships, authentic identity, and intuition balanced with tech will thrive and stand out as leaders in this new era.

Ready to make the shift? Sacred Fire Creative supports entrepreneurs with a clear vision they want to translate into reality. Contact us today, and let’s see how we can collaborate.

attentional bias

Attentional Bias: How to Make Your Audience Focus on You

When you’re trying to cut down on processed food or eating out, the more you notice the fast food restaurants on your way home. If you’ve recently bought a car, you’d see the same car on every corner. If you love pink, you’ll most likely notice all the pink shirts in a store over other colors. This behavior is called attentional bias.

Attentional bias is a person’s tendency to see certain elements or selectively pay attention to something while overlooking other aspects. It explains why sometimes, people can’t concentrate on things even if they want to because something else has already captured their attention.

Some experts think that attentional bias is related to human evolution. Attentional bias is why people usually remember or notice images that use fear or threats as a tactic. The first humans often faced dangerous situations (such as a wild animal running after them), which required them to concentrate and have selective attention/

In marketing, attentional bias is used to capture and focus attention on the message you want to come across.

Here are specific strategies that a business can implement to use attentional bias to their advantage:

Repetition creates attentional bias.

Repeating something can establish an attentional bias. Repetition is why most people, even kids, recognize logos instantly. They’ve seen these logos over and over again throughout their lives. For example, McDonald’s consistently shows its logo throughout their stores and packaging. You’ll recognize the McDonald’s logo no matter what country you live in or how old you are.

Let’s look at a specific example you can apply to your business. For instance, you’re simultaneously preparing flyers, your website, and your email newsletter. It’s essential to have consistent messaging throughout a customer’s journey, including your business logo in all marketing collaterals. This repetition makes people recognize your brand more quickly and give it attention.

Emphasize positive feelings.

Glowing reviews and positive testimonials create positive reactions towards a business or brand. For example, your business website can display high consumer ratings, positive reviews, and partnerships with well-known brands. Doing this generates positive feelings in your customers and makes them pay attention to your brand more than others.

Another way to emphasize positive feelings is to appeal to emotions. Appealing to a customer’s emotions is not new. We’ve all seen how ads use our emotions to elicit positive feelings towards a brand. An excellent example was Coca-Cola’s “Choose Happiness” campaign in 2015. It encouraged customers to share happy memories and experiences and made consumers associate these happy feelings with drinking soda.

Avoid too many choices.

When people are presented with too many choices, it becomes harder to make a decision. This situation is also due to attentional bias. Customers with too many choices often choose none of the options, resulting in a loss of a sale or conversion. When you limit the choices available, it’s easier for the brain to focus and decide on an option.

For example, if your has to choose between eight colors of a dress, it might take them longer to decide on which color to buy than if they were presented with just three colors. When their attention is divided too often, it becomes harder to focus and make a decision.

Attentional bias is an essential psychological concept every marketer should use to their advantage. The next time you are deciding on an image to use or how to design a flyer, keep this in mind and maximize the effect on your customers.

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Sources:

www.conversion-uplift.co.uk

www.bemoreprof.com

www.neuromarketingservices.com

occam's razor

Occam’s Razor: Keeping Things Simple

What is Occam’s razor?

The term “Occam’s razor” may sound like a limited-edition, old-school shaver. But it has nothing to do with shaving.”

Occam’s razor is a philosophical principle credited to 14th-century English scholar William of Occam. It states: “One should not increase, beyond reason, the number of entities required to explain anything.”

This statement means that the simplest solution is usually the best if all things are equal. This is a rule of thumb, though, and not something guaranteed to work 100% of the time. In some situations, the simplest solution may not be the right thing to do.

Still, Occam’s razor encourages us that when faced with several possible solutions, we ought to choose the simplest one or the one with the fewest assumptions. This principle sees constant use in science, technology, and marketing.

How to Apply Occam’s Razor in Business and Marketing

Let’s look at several ways to apply Occam’s razor in business and marketing.

Simplify your online presence.

The easiest way to apply Occam’s razor to your business is to simplify your online presence by having only one website. Some businesses assume they need a new website every time they launch a new brand or service. But having multiple sites is more costly and complicated to build, host, market, and manage.

Focusing your resources on one website instead of multiple websites is the simplest way to maximize your sales and profits from the website. For example, you have $100 to spend on Google ads for your company. Spending the whole amount on one website will be more effective than spending $20 on each of your multiple sites.

Focus on your minimum viable product (MVP).

Another way to apply Occam’s razor is the Minimum Viable Product (MVP). An MVP is a technique where a new product or service is launched in the market with just enough features to get your customers’ attention. Before releasing it to the public, you don’t need to wait until your product has all the bells and whistles you eventually want.

Again, Occam’s razor means the simpler, the better. Releasing an MVP will help you discover what features your customers want and need. You might spend more resources than necessary on features your customers don’t even want. Don’t spend $10,000 on something you can create with $1,000.

Staying simple means fewer mistakes.

When you keep things simple and eliminate unnecessary product features, you also reduce the possibility of mistakes and defects. Think of a watch that tells time versus a watch that tells the time, date, weight, heart rate, today’s weather, and more. The watch that tells time is easier to use and will last you many more years than the watch with dozens of features.

A simple watch might not be as cool or high-tech. But it does its job, and it does its job well. Ten years from now, your time-only watch will still tell time, while the other watch will probably no longer be in use.

Always end with a simple CTA for your customers.

Mcdonald’s created the now-famous “Would you like fries with that?” phrase. By adding this simple sentence to the end of each transaction, they encouraged thousands, maybe millions, of customers to add fries to their orders. In doing so, they could increase each basket size, upsell customers, and add to their profit.

A simple, clear, and consistent call-to-action (CTA) at the end of your social media copy or blog posts can do the same for your business. For example, if you want your social media post to direct traffic to your blog, you can end your post with “To read more about… visit our website.” This simple CTA will nudge your readers to click the link and read your blog.

These are a few examples of applying Occam’s razor to your business. Do you have other ideas for simplifying your product, service, or process to achieve the best outcome? Please share in the comments!

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Sources:

www.fourweeksmba.com

www.leancxscore.com

white bear problem

The “White Bear Problem”: How to Control Your Thoughts, According to Science

Imagine this scenario. Your boss chose you to make a vital presentation at a very important client meeting on Zoom. You’ve prepared for this meeting – did your research, created your slides, wrote your notes, and ensured the stability of your internet connection.

But as the time for the meeting approaches, you become so nervous that the sound of your rapid heartbeat drowns your thoughts. You tell yourself not to be nervous in an effort to calm yourself.

What do you think happens next?

More likely than not, you’ve been in similar situations before. You’d know that no matter how hard you suppress your nervousness, the feeling remains. In fact, the more you tamp it down, the more anxious you get.

Why is that? Why is it hard to get a thought out of your head once it’s made its way in?

This dilemma is called the “white bear problem.”

Russian author Fyodor Dostoevsky once wrote in 1863: “Try to pose for yourself this task: not to think of a polar bear, and you will see that the cursed thing will come to mind every minute.”

This quote became the basis of the ironic process theory, also known as the “white bear problem.” It states that the harder you clamp down a thought, the more frequently and the more intensely this thought will come up in your mind. Social psychologist and Harvard professor Daniel Wegner developed this theory.

According to Dr. Wegner, when you tell yourself to avoid thinking of something, a part of your mind does comply. But, at the same time, another part of your mind checks that you’re not thinking of this forbidden thought and will do so continually.

This constant checking ironically forces you to think the thought you wanted to drive away in the first place.

You can overcome your “white bear” with these strategies.

Having white bears pop up in your head every now and then can be frustrating and irritating. It can also lead you to make decisions you may come to regret.

So, how do you get rid of these white bears once and for all? Dr. Wegner offered a few strategies:

Focus on something else.

You can get rid of your white bears by distracting yourself with a more entertaining or gratifying thought. In the example above, instead of zeroing in on how nervous you are, you can focus on how grateful you are that your boss chose you to make the presentation.

Relax.

You’re more likely to have unwanted thoughts drifting in your mind when you’re mentally bogged down. So, try to relax whenever you can. Watch TV, read a book, work on your hobbies, have fun. Better yet, seek help or delegate a task when you’re feeling overwhelmed.

Put it off.

Sometimes, an unwanted thought simply won’t go away. In that case, schedule a time for thinking this thought as much as your mind wants to. Make sure you set a time limit for it, say, 15 or 30 minutes. Then your white bear won’t pop up as much throughout the day.

Practice mindfulness.

Mindfulness practices like meditation can strengthen your mind and give you better control over your thoughts.

Unwanted thoughts can float into your brain whether you like it or not. But no matter how big or intense your white bear problem is, you can always make it go away.

Sacred Fire Creative is a digital marketing agency that positions itself as a force for good. Work with us and create a positive and lasting impact on your digital tribe.

customer experience in the new reality

Customer Experience in the New Reality

We’re now living in a so-called “new normal” for more than a year because of the Covid-19 global pandemic. Each one of us experiences this new normal in different ways.

As business owners, we have to adapt how we serve our customers depending on how they live through their new normal. We are now called to shift from simply providing customer service to creating customer experience.

In this article, we answer three main questions:

What is customer experience?
How does a profound customer experience look like?
How can small businesses offer an innovative and exceptional new-normal customer experience?

What is customer experience?

Customer experience is not the same as customer service or customer care.

Customer service is the advice or assistance a company gives its clients. On the other hand, customer care relates to how well clients are taken care of when interacting with the brand, whether through social media or other channels.

It’s important to note that individuals may not even be customers during the brand interaction.

What about customer experience? Customer experience involves every interaction between the customer and the brand at every point of contact or touchpoint.

Brands have many different touchpoints with individuals, and these cover the entire customer journey. This journey begins when someone makes their first inquiry. Moreover, it extends even after they use the product or service.

Consciously or not, customers evaluate each touchpoint with the brand. It’s how they decide whether they will continue doing business with the brand or not. This underscores the importance of customer service.

If a person has a profound customer experience with your brand, they may decide to continue doing business with you. Therefore, our ultimate goal is to create a profound customer experience for each of our clients and prospects.

Why is customer experience important?

Here’s a quote by Maya Angelou:

“I’ve learned that people will forget what you said, people will forget what you did, but people will never forget how you made them feel.”

Why is this quote relevant to our discussion of customer experience?

You see, we can’t just tell people what our brand is and expect them to believe that. That’s not how it works.

Instead, how you make your customers feel is what makes the strongest impact.

Why?

People’s memories of an experience often involve emotions—how they felt at moments in time. The customer experience involves how you make your clients feel. And that’s what they will walk away with.

What you’re doing at every single touchpoint with your client is you’re creating a mini-customer experience. These mini-experiences add up. And then, all together, all of those different experiences that involve deep emotion create brand loyalty.

What are the dimensions of a customer experience?

According to Gentile, Spiller, and Noci (2007), there are six dimensions of the customer experience.

1. Sensorial dimension

The sensorial dimension addresses sight, hearing, touch, taste, and smell to arouse aesthetic pleasure, excitement, satisfaction, and a sense of beauty.

One example is that some handbag brands add a specific scent to their products. So, when they deliver any gift to their customers, the gift comes infused with their branded scent. The customer then subconsciously comes to associate the fragrance with the brand.

2. Emotional dimension

The emotional dimension generates moods, feelings, and emotions that hopefully positively influence the customer’s image and attitude toward the brand or company.

You generate this emotion. When you create a touchpoint with your customer, how do you want them to feel afterward? Do you want them to feel relieved? Enlightened? Entertained?

You’ll want to consider this question before deciding what kind of customer experience you’re creating.

3. Cognitive dimension

The cognitive dimension relates to experiences requiring thinking. It engages a customer’s creativity.

It is similar to the emotional dimension. The emotional one activates the heart, while the cognitive one stimulates the brain.

When you interact with your clients, are you activating their minds? Are they thinking, being creative, and running through their head the different scenarios and memories they have relating to this experience?

4. Pragmatic dimension

The pragmatic dimension comes from the practical art of doing something or using a product. It is the art of doing, and it involves action steps. It’s the physical part of doing something while using the product.

Any kind of unboxing belongs to the pragmatic dimension. Let’s look at unboxing an Apple product as an example.

When you open an Apple product, everything lines up just so. When you pull the box apart, you’ll see that there’s just enough space. This creates the feeling that they had taken care of every single step along the way when they made their product.

5. Lifestyle dimension

The lifestyle dimension affirms the beliefs and values shared between the brand and the customer.

When you create a brand, what happens is you’re making a set of shared beliefs and values for your brand and the customer.

For example, Apple’s “Think Different” slogan, part of Steve Jobs’ early marketing campaigns, means they want you to think beyond the ordinary. It implies that people who use Apple are out-of-the-box thinkers. They’re extraordinary; they’re “rebels.”

Disney is another example. The House of Mouse is a brand that relates to the family—its shared belief is the importance of taking care of and spending quality time with your family.

The lifestyle dimension is about confirming the values a brand shares with its customers. It’s about making people raise their hands and say, “That’s me. I identify with that.”

So, when you create customer experience, you’ll want to think about what beliefs and core values are going into your brand. Your implied values will make people who believe the same things come to you.

6. Relational dimension

The relational dimension encourages experiencing the product or service together with other people.

This is how we observe, live through, anticipate, and participate in a customer experience in a community. Some products and services are meant to be used independently and alone. And then, there are others where this relational dimension becomes extremely important.

For example, let’s say you’re going to a Disney park. The experience will vary depending on who you’re with, but you probably wouldn’t go for it on your own. People go there with their families or friends. This means the relational dimension will be crucial here.

What is a profound customer experience, then?

We mentioned earlier that our ultimate goal is to create a profound customer experience for our clients and prospects. But what exactly is a profound customer experience?

Any experience that involves ALL SIX DIMENSIONS is considered a profound experience. So, a profound customer experience engages all of the emotions and senses.

It brings you to the point of creativity, firing up your imagination. And it’s pragmatic—you’re immersed in it, you can feel and touch it, and you can use it.

It has a lifestyle component, where you feel its impact on your core values. You believe in it. And it’s relational, one that you experience in your community.

How does a profound customer experience look like?

Disney provides what is considered a great example of a profound customer experience.

The Disney guest experience

Disney is in the business of creating magic for guests to experience and remember. Walt Disney’s vision is driven by a common purpose that every member of the Disney organization is taught:

“We create happiness by providing the finest in entertainment for all ages, everywhere.”

How do they do this? Disney attracts guests of all ages, from all walks of life, and from all countries. It’s a tourist attraction for the parks’ host countries: the United States, Japan, France, China, and Hong Kong. Seven out of 10 Disney guests are likely to return to the park a second time.

When you go to one of the Disney parks, here’s what people really love and experience:

The parades and the castle fireworks shows
The character meet-and-greet
All the different characters at live shows in the park, like Lion King and Moana.
The interactive themed attractions, such as creating your own lightsaber in Savi’s Workshop, the new attraction at Star Wars: Galaxy’s Edge

Disney’s guest experience is a range of various experiences within one bigger experience. It definitely hits all of the different dimensions of a customer experience.

Moreover, Disney does it multiple times in different ways so that people can experience any part of it as much or as little as they want. This creates a deeper level of loyalty.

How does the new-normal Disney guest experience look like?

Disney closed down parks at the height of the pandemic, with some slowly reopening depending on the health crisis status in their respective countries.

As they couldn’t open in full capacity, they offered alternatives—they shifted from in-person, dynamic experiences in the park and took it all online.

#DisneyMagicMoments

Disney took advantage of their digital assets: their blogs and social media. They launched the #DisneyMagicMoments campaign and released virtual tours of the Disney parks. It was a brilliant way to be immersed and experience the parks in a digital environment.

This campaign also encouraged guests to share photos and videos they took during their Disney vacations. It got a lot of people sharing their memories. They got into reminiscing and sharing the last time they went on a Disney vacation. That way, people could still relate as a community and share their experiences.

#AdventuresatHome

Disney also launched #AdventuresatHome, a DIY at-home adventure pack that allows fans to experience Disney travel adventures at home. They produced six adventure packs featuring Montana, South Africa, the Rhone River, Iceland, Greece, and Alaska. They published those in the Disney parks blog.

Each adventure pack includes:

The Disney shows to catch related to each area
A recipe developed by Disney chefs that you could cook at home
A simple board game with downloadable printables
A high-resolution photo of beautiful scenery or landscape from the area

The Disney new-normal guest experience is genius. The company shifted quickly during the pandemic by offering something new that people could share with their families while in lockdown at home. People aren’t just reliving things they had already seen, and they weren’t just looking at their own photos from before.

The Disney online experiences are interactive and highly engaged. Moreover, they bring some relatable elements to the Disney brand. The recipe touches on different senses, and the board game touches on different dimensions. The core values are brought in—that Disney is a fun brand that you experience with your family. It has all six dimensions of the customer experience melded into one.

What about small businesses?

Obviously, Disney is a giant entity with a considerable capacity for delivering profound customer experiences. But what can small businesses offer as innovative and exceptional new-normal customer experiences?

First, as a small business owner, you should keep in mind:

What do your customers need and want from you?
What pain points can you solve? How can you delight?
How do you bring the customer experience to your clients safely and conveniently?

These are notable examples of how some Sacred Fire Creative small business clients shifted during the pandemic:

Asian Mint

Asian Mint is a restaurant business that serves Thai cuisine in Dallas, Texas. They were shut down right away by the pandemic, though eventually, they got to do takeout and delivery.

One of the most significant shifts they did to cope with the pandemic was offering ChefMint kits. People were at home, but they still wanted to spend quality time with their families in a restaurant setting.

The ChefMint kits made it easy to cook Thai food at home and replicate the experience of dining at Asian Mint. The ingredients were pre-packaged, the recipes were included and worded in an easy-to-follow language. The dishes can be cooked in 20 minutes or less. Anybody within the Dallas area could get these kits delivered in cooler bags. Anybody throughout the US could also order these kits with dry ingredients and recipes.

ChefMint became a way for Asian Mint to increase its outreach. It brought the Asian Mint restaurant experience into the home kitchen.

Nikky Feeding Souls

Nikky Feeding Souls is another brand from the owner of Asian Mint, Nikky Phinyawatana. Before the pandemic, she took small groups on tours of Thailand to experience the culture and cook the food. When the pandemic hit, she created her “Escape to Thailand” series, a virtual Thai cooking, culture, and travel experience. She had ChefMint kits mailed out, along with different kinds of small gifts and little notes about Thai culture. Then she wrapped up the whole experience with live webinars in group settings so that people could experience it together.

Cindy Briggs Workshops

Cindy Briggs is an internationally renowned watercolor artist. She’s been teaching art for 20 years through plein air or live, open-air workshops in places like Italy and France. She had workshops scheduled up to 2022.

With the pandemic, Cindy canceled her plein air workshops and took these workshops online. Cindy had been doing online classes before and simply expanded the workshops.

Through these online workshops, people experienced Cindy through videos, live webinars, and exclusive Facebook groups. Her students got PDF lists of everything they needed for the class and detailed video instructions they could watch on their own time from the comfort of their homes. The advantage of these videos is Cindy’s students can rewind them, speed them up, or go back to a section if they want to. And they can watch one section over and over.

In live webinars, Cindy starts a painting from scratch, and her students can paint along with her. She also gives specific feedback on work submitted through her Facebook group.s.

OMEGA Gymnastics

Gymnastics is a sport that people need to do in a gym. However, with the pandemic requiring gyms to be closed, OMEGA Gymnastics transitioned online. They did Zoom classes where their kids trained from home.

One of the things they did differently was their distance learning program. Following all Covid cleaning and distancing protocols, OMEGA opened a section of the gym for a small number of students. They could come in during the day, do their online classes, get help with homework, and get some time doing movement in the gym. Through this distance learning program, OMEGA provided students technical assistance, helped them stay focused during classes, and got them active during breaks.

The new normal is upon us. Our customers expect, and even demand, customer experiences that fit their perception of the new normal. It’s up to us business owners to adapt and create the experiences they’re looking for.

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loss aversion

What is Loss Aversion?

Let’s talk about loss aversion, why the pain of loss results in irrational decisions, and how marketers are taking advantage of this.

Loss aversion is perfectly summed up by FOMO or the Fear of Missing Out.

It’s the irrational fear of loss. In psychology, loss aversion explains why people, too often, focus on setbacks instead of gains—it explains why the pain of losing is seen to be more powerful than the pleasure of gaining something. In their Prospect Theory study, Daniel Kahneman and Amos Tversky said, “losses loom larger than gains.”

About twice as large!

What makes loss aversion so influential?

Simply put, we hate loss. Receiving something is great, sure—but we don’t love it as much as we hate losing.

If you received a $200 jacket for your birthday, you’d be happy. However, if your dog chewed a giant hole in it the next day, the unhappiness you’d feel would be twice as powerful.

Losing something or downgrading is psychologically distressing, so we do what we can to avoid it (even if it makes absolutely no sense).

It’s not completely our fault, though. There are intense cultural, socioeconomic, and neurological factors at play when it comes to the power of loss aversion.

Loss triggers a reaction from the same part of the brain that processes fear and risk. Our brains also associate loss with prediction errors and disgust. We’re trained to detest loss.

We’re extremely vulnerable to loss aversion when it comes to making decisions because as soon as we imagine a choice, we’re emotionally invested and attached.

People will go to incredible lengths to avoid a perceived loss.

Example: waiting in absurdly long lines to get something for free.

In December of last year, Starbucks created a holiday-themed travel mug that you would get for free if you ordered a Grande holiday beverage. They claimed they would keep the promo going until they ran out of mugs. Nobody knew how many they had on hand, so there were lines around blocks at Starbucks stores across the country. It didn’t matter that the travel mug was valued at less than $5 and made from thin plastic. They had already latched on to the idea of getting a free holiday treat, so not receiving that mug would be considered a significant loss.

People are also likely to make purchases they weren’t necessarily planning on making if you provide them with a free shipping coupon. They’ll recognize that this opportunity doesn’t come along all time, and the thought of losing out on it will persuade them to make a purchase.

Businesses use loss aversion marketing strategies all the time.

A perfectly executed “flash deal” is a big moneymaker. When a product is deeply discounted for a very limited time, the consumer’s brain focuses on the ticking timer and the amount of savings rather than on the product itself. You probably don’t need another sweater or another cordless vacuum cleaner—but at 70% off, that’s a GREAT deal, right? I can’t miss out on that!

It’s also why pre-orders, coupons, and VIP exclusives work. With pre-orders, it’s an early bird discount—the discount is the prize for ordering early. With coupons, it’s a lot like being given free money. Why would anyone throw free money away, right? With VIP exclusives, all you needed to get VIP status was probably to sign up for a newsletter, and voila! It’s too easy. Why risk missing out on the action?

Free trial periods show people exactly what their life would look like with the product or service, making it exponentially harder for them to end it when the trial is over. They’ve experienced the benefits and identified with that life, so they don’t want to lose it.

Insurance companies usually have a mile-long list of extremely unfortunate things that could happen to you and how you’ll be negatively affected if you don’t have the proper coverage. No matter how unlikely these events are, they’ve successfully set you up to view them as losses, and you’re more likely to focus on those than the regular payments required to avoid them.

If your business needs to avoid giving people more than necessary, loss aversion tactics can help you sidestep that waste. Studies have shown that when options are presented as addable rather than retractable, people will only take what they want (toppings on a salad, ingredients in a sandwich, etc.).

You can maximize the effects of loss aversion marketing in your small business, too.

The success of your offer entirely depends on your messaging.

Understanding your target audience and their fears is crucial to connecting with them. You need to clearly explain what their life would be like if they don’t purchase your product or service, and they won’t care unless you speak directly to their pain points and experiences. It’s about showing them what they’ll miss out on if they don’t participate soon and painting a picture they can’t ignore.

People must believe there’s something to lose for loss aversion to work properly. If you post an offer for 20% off and claim that it’s only available for the next two days and then post a 25% off coupon the following week, you’ve given people a reason put off making their decision. Even worse, they’ll notice that you contradicted yourself, and any trust they had in you and your brand will start to fade.

You’re working hard to convert all the “I’ll just buy it tomorrow” shoppers into “I feel good about committing to this now” shoppers. Keep that goal in mind, and you’ll notice a positive trend in your conversion rates.

How about you? How do you leverage on loss aversion? Got a question? Don’t forget to COMMENT below and SHARE your thoughts.

Sources:

https://www.psychologytoday.com/us/blog/science-choice/201803/what-is-loss-aversion

https://www.activecampaign.com/blog/loss-aversion-marketing

https://thedecisionlab.com/biases/loss-aversion/

the power of free

Do You Know the Power of FREE?

Let’s talk about the power of free stuff. Why does the word FREE have such an emotional pull? What do brands get in return when they give something for free? More importantly, how can you use the power of free to your advantage?

Dan Ariely, author of Predictably Irrational (2008), showed that nothing is more motivating than getting something for free.

He set up a table with two bowls: a bowl of Lindt Truffles that he sold for 15 cents and another bowl of Hershey’s Kisses for 1 cent. At the end of the experiment, he found that 73% of the students chose Lindt over Hershey’s. It seemed like students preferred Lindt over Hershey’s even if the cost was 15X higher.

Next, he set up two bowls again, this time selling Lindt Truffles for 14 cents while the Hershey’s Kisses were free. Guess what? 69% of the students chose Hershey’s this time.

This is the power of free or the zero-price effect, and it threatens to turn traditional cost-benefit models on their heads. These models don’t account for the fact that getting something for free has a psychological effect that trumps conventional economic theory.

Enter behavioral economics: the umbrella term under which the power of free falls. This covers the study of economic decision-making through emotional, cognitive, psychological, social, and cultural factors.

Why is FREE so powerful?

It’s not just a price indicator but an emotional trigger.

We tend to make decisions based on how they make us feel. Free things make us happy, and we’ll make decisions that make us happy. It sounds simple, but a decision made in the name of a free thing is often irrational.

That’s largely due to perceived value. We place an unreasonably high value on free things merely because they’re FREE. It’s an option with no downside. There’s no risk involved. We have everything to gain and absolutely nothing to lose.

We’ve all taken promotional shirts, pens, stickers, koozies, frisbees, bottle openers, keychains, and water bottles from companies we don’t even care about. Do we need them? No. But we felt a pull toward them – saying no didn’t feel like an option.

Surprise! It’s because they were free.

Let’s look at an even stronger pull: free food. It’s nearly impossible to turn down free food. It doesn’t even matter if we’ve just eaten, are saving our appetite for something later, or aren’t that crazy about the food being offered. If it’s free and right in front of us, we’re likely to take it.

Most of us don’t consider time or even extra money to be lost when exchanging them for a free item or service.

That’s why we’ll happily wait in a line for multiple hours if Starbucks is offering a free drink when, instead, we could stop by the next day, pay less than $10 for the same drink and be on our way in a matter of seconds.

Another example is paying for additional products that we don’t need to receive free shipping. We could run out of shampoo and go to Ulta’s website to buy a new bottle but end up buying 4 because we didn’t want to pay for shipping. The shipping cost would be much less than those extra three bottles of shampoo, but we want it to be free.

Paying for shipping feels like a waste, but paying for more products to get free shipping feels like a deal. It makes us feel like we’ve worked the system and are coming out on top.

While it may seem beneficial for companies to have free shipping minimums so that we’ll buy more to reach it, studies have shown that we’ll buy more things more often if free shipping is a constant offer.

When Amazon first started offering free shipping, they implemented it everywhere except for France but still lowered France’s shipping cost to 20 cents. Sales across the globe increased dramatically, but the sales in France stayed the same. After a while, they announced free shipping in France as well. Their sales there quickly climbed to match those of the rest of the world.

Twenty-cent shipping wasn’t even close enough to free to be worth it to consumers.

Lots of companies have figured out how to use the power of free to their advantage.

Various restaurants and retailers will send out freebies to people who have downloaded and made an account on their app.

Their FREE app.

They figure that you’ll come in to get your freebie and end up buying more while you’re at it. They got you into their store when you weren’t necessarily planning on it and made a sale, proving that freebie more than worth it to them.

Many restaurants also utilize a buy-one-get-one-free strategy to get us to come in and spend money. You’re excited to go in and share a discounted meal with a friend, riding the high of the free offer. The benefit for the restaurant is that you’re likely to buy more than what the coupon is for, such as drinks, appetizers, desserts, etc.

A slightly different approach is giving away something for free that will, in turn, create a demand for something costly. Cell phone companies do this by bringing in customers with a free phone offer and then charging them for the necessary plan.

The original user of this tactic was the founder of Gillette Razors and Blades. He was having trouble selling his disposable razor blades, so he started giving away the razor for free in various marketing partnerships with other brands. This created the demand for disposable razor blades and is what ultimately got his sales off the ground.

Increasing digital capabilities has had a significant impact on the ability to distribute free things.

Distributing free things online has little to no cost and gives businesses the freedom to reach people they would otherwise be struggling to connect with.

This is one of the best ways for small businesses to utilize the power of free.

Whether it’s a webinar, podcast, workshop, newsletter, or blog, small businesses can give away free things online that will gain them mass exposure at little to no cost while establishing themselves as an expert in their field.

Especially this past year, as even more aspects of running a business have moved online, small businesses are offering free consultations. If they invest a small bit of time into sharing their expertise with a potential customer, that customer is likely to come back to them when they need a paid service.

The key to gaining a return on these types of freebies is to provide value.

While the FREE label will pique interest, small businesses aren’t going to gain loyal followers unless they provide a reason for them to stay.

First, understand your ideal target audience.

Then put yourself in their shoes and identify the type of content they would want or be interested in.

What are their frustrations? What do they face day-to-day? Moreover, what are their aspirations?

Create your freebie around what would be useful to them and deliver a value-packed gift they can’t walk away from. Make it so beneficial to them that you and your business will occupy a part of their memory from that point on.

Small businesses also create positivity in these difficult times by offering their free thing as a celebration.

What do people want on National Margarita Day? A free margarita! Perhaps with the purchase of an entrée.

National Pi Day brings a flock of hungry shoppers to the internet, hoping to find deals on pizza and bakery pies. This is an excellent opportunity for a buy-one-get-one-free deal to increase business at your restaurant.

Free birthday items are another celebratory way to make someone feel special and get them into your shop.

Will some of us only pick up our free birthday treat? Yes. Will a good number of us buy other things while we’re there? Definitely.

Adding on a free item to something that has already been purchased is also an effective way to gain returning customers.

Going back to the fact that free things make us happy, you have associated yourself with that happiness. You gave us a gift that we didn’t ask for, and you made us happy.

The other side to that strategy is that your freebie may be something that we’ve never heard of or used before. You’ve just opened our minds to a new product, increasing the chances that we’ll come back to make a purchase.

The power of free isn’t something that should be overlooked.

There’s more than enough proof that this psychological wonder affects people everywhere.

However, it’s essential to take away that this marketing strategy shouldn’t be used to trick people into spending exorbitant amounts of money.

Doing good business is about harnessing deep, genuine connections with people, and sneaky gimmicks will not get you there.

The best way to use this gold nugget of human behavior is to understand it, embrace it, and use it in the most ethical way possible.

How about you? How are you harnessing the power of free? Got a question? Don’t forget to COMMENT below and SHARE your thoughts.

Sources:

https://www.behavioraleconomics.com/resources/mini-encyclopedia-of-be/zero-price-effect/

https://avgjoefinance.com/power-of-free/

https://www.forentrepreneurs.com/power-of-free/

https://thedecisionlab.com/insights/business/impact-free-consumer-decision-making/

https://www.wired.com/2008/02/ff-free/