Secrets To Persuading Others: The Endowment Effect And Your Wardrobe. Master Influencer MagazineDecision Making

Secrets To Persuading Others: The Endowment Effect For Selling Online

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If you want to discover new ways to persuade others, the next time you visit an online website, 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 and persuade people.

HOW ONLINE retailers persuade us to buy more

Several online retailers have now started a new feature. They allow 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. You can then either return everything or keep the size that fits best. Only after seven days are they charged for things they keep.

If you wanted to do this with their past models, 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, they will also rarely pass on an opportunity to also take advantage of our weakness for subconscious tricks

The endowment effect was first proposed by behavioral economist Richard Thaler. It 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.

HOW THE Endowment effect persuades us to buy more

The online stores are 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.

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Now contrast this to their 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.

So

Additionally, we are reminded of the generosity of the online stores in 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 tO USE THIS TO PERSUADE OTHERS 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

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.


Shaun Mendonsa, PhD is an influencing expert and pharmaceutical development leader. He writes on the topics of influence and persuasion, and develops next generation drugs in human pharma by advising international pharmaceutical CROs and CMOs.


KEYWORDS

Endowment effect, Persuade others, Behavioral economics, Online stores, Persuasion, Mental accounting

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