The endowment effect
Why people value things they own more than identical items they don't, and how to apply the endowment effect to boost sales.
In this issue
Hey 👋 The Crew here.
Are you a mountain person or a seaside person?
If you prefer the former, you might be more introverted—and enjoy more secluded environments, according to reports.
… Or maybe you would rather ski than surf. There’s that, too.
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“Wait… you can run digital billboard ads as easily as you run social campaigns?”
Ever dreamed of seeing your brand on a digital billboard?
Or dayparting your ad placements in prime physical locations?
If you have, you probably felt intimidated by the process—and the budget required.
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They’re also the only OOH tool that offers dayparting, which means you can finally show ads when and where your audience is most likely to see them.
Curious to see how your brand would look off screen?
Check out Blindspot and discover how easy billboard advertising can be.
If you sometimes feel like you just can’t part ways with all the seemingly useless stuff you own…
It’s not just you. It’s human psychology.
In 1990, a group of researchers led by Nobel-prize winner Daniel Kahneman ran an experiment to determine if we value objects we own more than those we don’t.
The results? Yes, we do. A lot.
They found that we tend to value objects we own by approximately 2.5 times more—from big things like real estate to small items like coffee mugs.
They called it the “endowment effect.”
And a major example of the endowment effect happened around in the 1980s, when Chrysler offered a 30-day money-back guarantee to customers to battle bankruptcy.
The company got major publicity, mitigated shopper risk, and got 94% of Chrysler dealers to sign up.
Can you guess how many buyers returned the car? Less than 1%.
Turns out 30 days is more than enough time to make a person feel like they own something too much to give it back.
Now that you understand the concept, here’s how you can use it in your strategy:
Three ways you can leverage the endowment effect
Maximize interactivity
The threshold required for the endowment effect to kick in is surprisingly low. All it takes is a little bit of interaction.
In fact, just touching a product can increase its perceived value by 24%. It’s also one of the reasons tech or car shops often allow you to “test” their products.
But in e-commerce, touching isn’t easy, right?
You can increase the endowment effect through the vividness of the stimulus, though.
For example, if your landing page shows detailed product pages that are interactive—like a 360° view—it can increase your chances of elevating the product’s value.
IKEA does this with its IKEA Place app, in which you can add furniture to your room using augmented reality (AR)—essentially trying it out in your own space.
Use language that indicates ownership
Interactivity boosts the feeling of ownership, yes. But so does language.
This is why brands tend to use language that indicates ownership, hoping it will trigger the endowment effect.
Check out this ad by Apple:
That’s a lot of “Your” here. And for a good reason.
Provide money-back guarantees—if you can take that risk
As Coldplay would say, “we’re going back to the start.”
Remember the Chrysler example? Offering a 30-day free trial for a car not only improved the decision–making process for customers—it also induced the endowment effect.
Because once customers start to feel a sense of ownership, they are far less likely to return the product.
Offering a money-back guarantee reduces the perceived risk for the buyer, while simultaneously increasing their attachment to the product.
As long as you can handle the hassle and cost of e-commerce returns—which aren’t getting lower—this can be a great tool to instill a sense of ownership. Even in the early stages.
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SEO:The dust settles. August Core update has officially rolled out after 19th days, leaving approximately 44% of websites feeling traffic drops, 27% feeling increases, and the rest no change. What about you?
THREADS: …keeps gaining steam. The app has cracked the top 10 most downloaded apps chart for July—sitting comfortably on the 7th place, behind the likes of Temu and Telegram. Its main competitor X is not on the list, though.
INSTAGRAM:What’s that? No more monologuing? Instagram now allows your followers to leave comments on your Stories—and others can see these comments and engage with them. Interesting.
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