- Psychology of Marketing
- Regret Aversion
How to leverage the fear of missing out
Hey there 👋 - Abhi here!
Happy Thursday to the 25,211 marketers reading today :)
Sitting out on the deck at my place in Chicago. The weather's finally good. But this piece is even better. Coincidence? I think not...
Today we're going to cover:
Regret aversion (a.k.a. creating FOMO)
A lottery experiment you might regret
How our insights extend to business
Reading Time = 4 minutes 12 seconds
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The Lottery Problem
Imagine we're back in the 1900s, and - for some reason - you bought a lottery ticket.
But before you open the sealed envelope, a stranger asks if you'd be willing to switch your ticket for theirs. Both are still sealed. Both have an equal chance of winning.
And they offer you a nice notebook to sweeten the pot too!
So why not? There's a high chance one might do it—nothing to lose (or regret) because you would never know if the first one was even a winner. Plus, the free notebook.
Now imagine a slightly different scenario - you've both opened your envelopes. You both know your numbers. And if you switch and the other person wins, you'll know.
You'll have to live with that regret for the rest of your life. And this fear of regret often drives people like you and me away from such decisions.
Even with the notebook in the deal, most people would say no!
In fact, in a study from 2011, two scientists found that the same is true even at scale:
The Key Stats:
73% in the sealed envelope condition chose to exchange and anticipated lesser levels of regret
But 56% in the baseline condition (opened ticket) chose to exchange and anticipated higher levels of regret
This is regret aversion in action. People are willing to forego a direct, material gain (i.e., notebook) if that protects them from future regrets (i.e., potentially giving away the winning lottery ticket). That's why the exchange rate drops from 73% to 56%.
But what does this mean for you and your business?
Let's walk through three research-backed tactics (with a couple of examples).
3 Tactics For You
1/ For E-Commerce Brands: The Branded Guarantee
Customers are too tired of those generic, old guarantees. We see right through them. But that doesn't mean they don't work. I'd just take it one step further.
The branded guarantee aligns with your brand's image, value prop, and voice. Take this example from Casper:
"right to your door" - cool, I don't have to work for it
"100 nights, risk free" - worst case I get a free bed for a 100 nights
"We'll pick it up" - and it's easy to return too?
They've done a great job of making this decision regret-free. And I can't resist a good pun, either. "No springs attached." Come on, that's gold right there!
2/ For SaaS Companies: Defy Customer Objections
While cranking out landing pages for HOOX, I came up with a great tactic to analyze customer objections, defy them, and increase conversion rates:
copy paste all your negative reviews into ChatGPT
put in the following prompt before the reviews
Hit enter, and you'll soon see 5 points, such as (delivery time and size) pop up. Address those in your FAQs, but pick one key objection and tackle it above the fold.
For instance, if it's a product that people think will take too long to set up. Right below the CTA, you include a little blurb that says, "Set it up in under 1 minute."
3/ For Online Businesses: Social Proof
That's just another way of saying FOMO.
Take Hampton, for instance—a vetted community for founders. They know their value lies in the quality of their community. You can reduce their anticipated regret if you show them the right people and leverage their credibility.
Legit founders in the community = Guaranteed value.
But this sort of social proof might not make sense for your business. And I get that.
So think back to the first tactic up there - defying customer objections. You can leverage the same tactic (and prompts) to pick the social proof that works for you.
It can be a panel of legitimate businesses that use your product (if it's B2B) or a couple of happy testimonials that defy a common objection (if it's e-commerce).
And that's all from me today :)
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ICYMI, last week we analyzed The Pratfall Effect
A Review From A Fellow Marketing Psychologist...
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See you next Thursday,
Abhishek "No Springs Attached" Shah