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Amazon Reveals To Us The Secrets To Persuading Others: The Endowment Effect And Your Wardrobe

If you want to discover new ways to persuade others, the next time you visit a website like Amazon, pay close attention to any of the latest features they are promoting. There is a good chance they are using some new psychological trick to drive up sales. If you develop the ability to find these hidden gems, you will be able to use them to your benefit when you influence people.

A few months ago, Amazon started a feature that allows customers who want to buy clothing or shoes to “take home” several sizes around the customers estimated size for no charge. They then get seven days to try the items, after which they can either return everything or keep the size that fits best. Only after seven days does Amazon charge them for things they keep.

Of course, on the surface Amazon is doing this to better compete with brick and mortar stores who usually have many sizes for their customers to try out before choosing. If you wanted to do this with Amazon’s past model, you would need to purchase a few sizes and then mail back the undesired ones for a refund. So, this is definitely a beneficial feature for an online store to offer.

However, Amazon – the largest data-gathering and personal privacy stealing firm – will rarely pass on an opportunity to also take advantage of our weakness for subconscious tricks that get us to buy more from them. In this case, Amazon is taking advantage of a cognitive bias we all have – the endowment effect – with their new Prime Wardrobe feature.

The endowment effect, which was first proposed by behavioral economist Richard Thaler, is our tendency to ascribe higher value to something merely because we own it. The reason for this is hypothesized to be related to loss aversion – another cognitive sciences quirk humans are prone to. Once we own something, giving it away seems like a loss. Thus, we mentally overvalue our possessions to ensure we don’t lose them.

Amazon is subconsciously letting you believe that you own the item for seven days. Even though the item is not yet paid for, the endowment effect still plays a role and get us to overvalue it. Thus, we are more likely to end up keeping at least one of the sizes we have tried out.

Now contrast this to Amazon’s previous approach in which people would get the item shipped, try it and then have to quickly make a decision whether to keep or return it. The sense of ownership of the item shifts us towards liking it more than with their past model resulting in less returns and refunds.

So while we may hive initially picked the item to fulfill a sense of well being, what ends up sealing the deal is our fear of losing something we subconsciously feel belongs to us. Quite ingenious because few are aware that their choice is being influenced by Amazon in this way.

Additionally, we are reminded of the generosity of Amazon giving us many sizes to try out and additional days to decide. And for no cost, which plays on our need to reciprocate by finalizing the purchase.

How the endowment effect plays out in the workplace

Being aware of the power of the endowment effect will help you calibrate some of your ideas and proposals at work. You will start to realize that you might be assigning a greater value to their utility that may be due just because it is your idea. It also helps us to understand the mindset of others who seem to overvalue their projects and contributions.

If you find a way to get people to try out for a few days (without cost or risk) what you are trying to sell them (physical things or ideas), they will start to feel like they own the item. In their mind, this will now be worth much more than before they had this sense of ownership.

Additional Reading:

Nudge: Improving Decisions About Health, Wealth, and Happiness by Richard Thaler and Cass Sunstein, Penguin Group, New York, NY 2009.

Lastly, if you want to improve your persuasion skills so you stop getting tricked by the likes of Amazon, this amazing reading list will help you do exactly that:

Influencing And Persuasion Reading List

Thanks for reading! Please follow me if you liked this because you may find my other advice useful too. I’m grateful you took the time to visit me here.

You can also follow me on Twitter (@DrShaunAdvice) because many smart people like you enjoy my tweets. My teaching is simple and effective. You will grow with it and your eyes will be opened to how easy it actually is to be influential in your life and at work.

I fund my expenses of hosting this site through micro-donations from my audience on Patreon. In my own little way I am hoping to teach people how to influence and improve the outcomes in their lives. Your contributions will keep me inspired to continue this work. Thanks!

Keywords: #EndowmentEffect #BehavioralEconomics #Amazon #PrimeWardrobe #Persuasion #MentalAccounting


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