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It’s a Tuesday and you decide to go to the ATM. The air is crisp, and you feel happy walking down the sunny sidewalk towards the bank. You get there, put in your card, type in your PIN number and wait to withdraw 100 dollars. With a series of hums and a grunt, the machine ejects five twenties into the holding slot. 

As you’re counting your money, a sudden breeze materializes out of nowhere, tugging the money out of your hand. You run after your cash, trying to step on a lone twenty as it flutters down the sidewalk. Gotcha! You victoriously clutch the bill in your hands. It’s all that you have left.

How do you feel?

Now, let’s have you imagine a different scene.

You wake up, brush your teeth and get ready for work. As you’re walking down the sidewalk towards the bus stop, you decide to look down at some new flowers your neighbor recently planted. Sitting next to the flowers in a pile is a stack of crisp four twenty-dollar bills. A nice little surprise!

How do you feel?

According to research in behavioral economics, we absolutely hate losing. In fact, losing feels more painful than an equivalent gain will feel good. In the preceding thought experiment, it’s likely that your emotions were stronger in the first scenario (losing eighty dollars) than in the second (gaining eighty dollars)—that’s what loss aversion does to us.


The image above is from the app Pact (former Gympact). Pact uses the principle of loss aversion to get people to go to the gym. Users enter a credit card, set a workout-per-week goal, and choose the amount of money they’re willing to pay per missed workout. Each time a user misses a workout goal, they get charged the penalty. This money is then given as a reward to users in the system who do stick to their workout goals.

Exercise
Define how your product protects your users/customers from losses. If you worked at the NYTimes, you could communicate something like “Your friends think you're smart—let's keep it that way.  Read NYTimes in your inbox, daily.” And if Facebook were to use loss framing, they could say “Never miss out on what your friends are doing again.”  How would you use loss aversion to promote your product?  


Irrationally yours