"V LAB Marketing Research Institute" EP.7 [Loss Aversion] Why is punishment more useful than reward?
Photo by Kristina Tripkovic (opens in a new tab) on Unsplash (opens in a new tab)
Hey, can I ask you a question? Do you think you would be happier if you picked up a hundred dollar bill on the street? Or would it make you more heartbroken if you accidentally lost a fifty-yuan copper plate?
Early this morning, I came to Songjiang Road to help teach at the “Taipei City Small and Medium Enterprises Knowledge Academy (opens in a new tab)” run by the Industrial Development Bureau of the Taipei City Government. The theme of today’s full-day course is to talk about the development strategies of digital e-commerce. When talking about consumer psychology and behavior, I casually asked the above question to the students present.
Well, I don’t know what your answer is? On the other hand, all the students at the scene said in unison that although it seemed like a small blessing to find a hundred yuan, it would be even more sad if they accidentally dropped a fifty yuan copper plate!
This is actually the so-called Loss aversion (opens in a new tab), which is also a cognitive bias that everyone should be familiar with. It refers to the fact that people instinctively work harder to avoid losses than to obtain benefits. Having said that, this is actually a very common phenomenon when it comes to economic and marketing decisions.
Best-selling psychology book “Think Fast, Slow (opens in a new tab)》author Daniel Kahneman (opens in a new tab) (Daniel Kahneman) and another well-known cognitive psychologist Amos Tversky (opens in a new tab) first mentioned the concept of loss aversion (opens in a new tab) in their 1979 study, but in the study “Advances in Prospect” published in 1992 Theory (opens in a new tab)” (Prospect Theory (opens in a new tab)) makes it clearer: They found that the pain of loss is psychologically twice as intense as the pleasure of gain, so people will make every effort to avoid loss.
Therefore, loss aversion can also explain: Why is punishment usually more useful than reward from a motivational perspective?
Although loss aversion is an instinctive psychological reaction of human beings, it is still affected by many factors that lead to differences in degree. As for how loss aversion can be applied to marketing? Welcome to this episode of “V LAB Marketing Institute (opens in a new tab)” (https://vlab-marketing.firstory.io/episodes/ckol1icexbaiu0871zmv9ztrc (opens in a new tab))!
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Vista Cheng speaks and runs workshops on AI workflows, writing and content systems for companies, schools and public agencies.
