Habits and Hustle - Episode 312: Loss Aversion: How Fear of Missing Out Shapes Our Choices

Episode Date: January 19, 2024

Ever wonder why we fear loss more than we crave success? The answer is loss aversion. In this bonus episode of Habits & Hustle, I dive into the power of loss aversion and its grip on our daily decisions - from the subscriptions we can't let go of to our relentless gym commitments. I dive deep into the tactics businesses use to play on our fears and keep us hooked. Whether you're an entrepreneur looking to craft irresistible campaigns or a savvy consumer aiming to make smarter choices, this episode is a game-changer for you!  What we discuss:  (02:19 - 04:09) Psychological Marketing Technique (08:50 - 09:56) The Power of Fear in Sales  (13:22 - 13:38) Loss Aversion Technique for Marketers and Customers Thank you to our sponsors:  Go to www.hbr.org/subscriptions and enter PROMO CODE: HABITS to learn more about this great opportunity to help manage your career and business. Find more from Jen:  Website: https://www.jennifercohen.com/ Instagram: @therealjencohen  Books: https://www.jennifercohen.com/books Speaking: https://www.jennifercohen.com/speaking-engagement

Hi guys, it's Tony Robbins. You're listening to Habits and Hustle. Crush it! Widely acknowledged as the leader in business leadership information, Harvard Business Review provides information, tools, and practical advice on leadership, management, and strategy through the hbr.org website, their print publication, and their podcasts. What's derailing your company's transformation? And another one called Decision Making and Problem Solving, Leaders' Framework for Decision Making. Plus, HBR produces a number of leading business podcasts from HBR and Leadership to HBR Idea Cast. I'm telling you guys, they're such great foundational information if you're trying to get a leg

up on anything business. While much of Harvard's Business Reviews content is available for free after signing up at their site, subscriptions to unlimited content start only at $10 a month. Go to www.hbr.org slash subscriptions and enter promo code habits right now to take advantage of this great offer. Again, go to www.hbr.org slash subscriptions and enter promo code habits to learn more manage your career and business. Hi everybody and welcome to another solo of Habits and Hustle with my foil, Shawnni. Hello everyone. So nice to see you. I know it is. You know what Sydney said? She goes, I haven't seen you in so long. Well, she hasn't. You've been very busy trying to save the world. I am. I'm on a mission, you guys.

You know, one Israeli at a time. If it's the last thing I do, peace in the Middle East will come. Yes. I mean, that's what we all want. But that's where you've been. I haven't seen you for so long. Yeah. All right. So I want to talk to you guys today about something that I... I kind of was doing some work on something, I guess a week or so ago, and I wrote a little note to myself.

I jotted a note down because I really wanted to have a podcast talking about something. With a physical written note with a pen? Yeah, I was in a meeting and I was talking about this whole concept. And then I'm like, you know, this would make a really interesting podcast episode. I want to talk about it and I want to bring it bring it up with you. And what the topic is and what it is, it's a psychological marketing technique. And it's the loss aversion technique. Have you ever heard of this? I have heard of this. Okay, I have heard of this years ago. Okay, interesting concept. It's a great concept. I think I subconsciously use it a lot, but I don't know the depths of it too well.

Okay, well, this is what it basically is. I wrote down some notes. Basically, as human beings, people are twice as sensitive to loss than they are to gains. So if I give you $100, you'll be happy. But if you had to lose $100, you'd be twice as unhappy. Yes, that makes sense. It's crazy. So what marketing people do when they're creating a campaign or what sales people do is that they want you to know basically what you will lose if you don't do something versus what you will gain.

Because that psychologically what the loss in your head is so much more severe than whatever that gain is. So like now that we're in 2024 and we are all talking about New Year's resolutions and what to do, you know, all these things we want to like, we want to accomplish and do. If you really want to get someone to do what you want, if you want to try to persuade somebody to do something that you want them to do, you would tweak your technique based on this idea of loss aversion. So for example, if I said to you, Shawnee, come to the gym, you're gonna get really fit. Actually, it would be way more persuasive if I said to you, Shawnee, come to the gym, or else you're gonna get really fat. That would get me to the gym so much faster.

If I said to you, Shawnee, come to the gym, or else you're gonna get really fat by not doing this thing, that psychologically will make you do that thing so much easier and quicker than me talking about, oh, Shawnee, if you come to the gym, you're gonna get really strong, you're gonna get really fit,

and you are gonna feel great. Yeah, okay. Yeah, you're no, and you are going to feel great. Yeah, okay. Yeah, you like that. You may, you may go, but you won't go as consistently and as quickly. If I told you of all the stuff, like if I said, well, you're going to get fat, you're not going to look as good. Skin's going to get bad. Get bad.

You're not going to your mood. You're going to have, you're going to get, you're going to get depressed. You're not going to have a great mood. I, if I focus on all those things, you'll go way quicker. You'll be alone forever. You'll be alone forever. I didn't say that.

That would get me there fast. Okay, and that's why I was going through all these negotiation techniques. It says here, in negotiation, individuals may be more motivated to make concessions to avoid perceived losses rather than gain something. So when negotiating, emphasizing what the other party may lose by not agreeing to the terms can be a much more powerful persuasion or customer retention. That's why subscription models crush.

You see how everybody now are now doing subscription. Every company, every business are basically creating their businesses around these subscription models. And this is for the same reason because they basically employ loss aversion by offering discounted rates for continued membership or reminding customers about the benefits they'll lose if they cancel. And it's true, like if I think about all the subscriptions that I have, that I have, I never use, by the way. I never use any, like I use Netflix. I use what else do I use for what else would I use? I don't know what you subscribe to.

Very few do I actually use in subscription, right? But the idea of like me not having it and then I would be missing out on something that they have, and then I won't have it. It's like kind of like FOMO. It's FOMO. I was the entire time you've been talking, I'm thinking like this is literally Gen Z FOMO marketing. That's the whole idea is like getting people to see that like they might miss out. That's the whole concept. Because I see it is.

It's an idea. It's basically loss aversion technique is equivalent to FOMO. Because a lot of times when I don't go to an event or a party or something that I was invited to or should go to, the reason what makes me go is because of what I would be missing, not based on what I would be gaining. Like I never think, oh, well, I'll see a lot of people that I haven't seen. I'll I will talk a lot of people that I haven't seen. I will talk to some great people. I'll socialize.

I'll have a couple of non-alcoholic drinks because I don't drink. I would think, oh, my god, who would be there that I would not get a chance to meet? Or what am I missing? What's going to happen? What drama will happen? Or what am I going to be missing out on versus what

I would be gaining. And if you really think about like why you do the things that you do, you'd notice that that's kind of why you're doing what you're doing a lot of the times. So like the subscription models, like I was going through a bunch of them, like all these like, I don't know, even like supplement companies, I'm like, what if I run out of this thing and I'm not going to get it or I don't want to spend the $4 it's going to cost me to buy them singularly. I'd rather pay for it all year and save 67 cents on each bottle. Like that's really what I think.

Yeah. Yeah. I'm trying to think of like how clothes gets marketed to me because I'm a big shopper when it comes to clothes. By the way, in lieu of our last podcast before, my system, not resolution, is to purchase higher quality items and less cheap items. My way of doing that is limiting myself to like one to two items a month that are actually good quality pieces instead of like a lot of shopping.

But I'm thinking when I'm being sold those things, I'm not necessarily buying it because I love the outfit. I'm buying it because I don't not want to look like the person wearing the outfit that I'm seeing wearing it I don't not want to look like the person wearing the outfit that I'm seeing wearing. I'm like, I have to I can't I can't miss out on looking like that for for a day, do you know what I mean? Or for like a time like it's just such a right. It's like it's like a thing of it's crazy. It's scarcity. So

crazy. It's a scarcity or lack of Yeah, that is basically motivating your behavior versus what you'll gain from that behavior. 100%. Like when a salesperson, and that's what the meeting was really about. I was saying when someone sells me something, a really good salesperson, what they do really well is they embed in me all the things that I will lose or lose out on if I don't do the thing versus play up the positives. And that's when they get me every time, right? Like, oh, you know, like right now the membership even at the

fitness is no initiation fee. Let's just say. I was like, there's a number of like, like, class things that I wanted to like buy. I was like, oh, if I and the deal and I had to stall myself because I thought, okay, save 10 or $15 a month. But if I sign up in four months, like, does that matter? 15, I'm going to sign up now for 15. It's like crazy. I'm going to give you a great example.

I actually fought that. I fought that one, but they worked hard. Oh, they almost got me. This is a really good example. And Noah, my husband, makes fun of me all the time about this. He says it's it's girl math.

Oh, yeah. Girl math is the best. And I use it all the time. All the time. For an example, Rakuten. Rakuten, I think it's called Rakuten, right? Like it's that app that, you know, you get back a percentage

of money for every dollar you spend. Okay. So like, and it changes all the time based on the day. you know, you get back a percentage of money for every dollar you spend, okay? So like, and it changes all the time based on the day, right? So like for an example, if I'm going to Bloomingdale's or if I'm shopping online at Bloomingdale's, you know, one day I could save 2% on Rakuten or I get 2% of my money back or I'll get some days 10% something in my brain must be like flashing when I see the number going to 10% or 12% I think 3 I'm like oh my god I'm gonna be making so much money so I'll buy a bunch of stuff that I don't even need like spend

hundreds and hundreds of dollars on crap I don't need because I'm saving technically my even though I'm not saving I'm making back 10% when really I'm not making a damn thing back I'm just spending a lot of money and then I'll get a check in the mail for like 10% with it. It's just like so ridiculous. And that's why those companies are so good and they get you every time. They really do. Yeah, they're they're marketing. I always knew marketing did wonders on me. But even as a kid, my dad had an ad agency. I grew up learning about marketing tactics and not to be sold. And yet here I am sitting buying everything.

I'm like, oh, that's great. That's nice. That works, you know? 100%. You're making seven touch points with me. You could just get me on like one ad. No, it's 100%. Like people who are amazing marketers are really good at understanding human psychology and what makes a brain tick. So to me, like

those to me, like marketers are the best psychologists in the world bar none, because they know how to get your brain to act, to react, what you're going to react to. They know what you're going to do 20 steps before you even do it. And so, you know, I just want to, I guess the purpose of me talking about this is number one, if you are a marketer or if you are someone starting a business, understand what this loss aversion technique is. I think it's really helpful when you're trying to acquire customers. And if you're a customer and not someone who's starting a business, be mindful and cognizant that this is a really brilliant technique of what works and what you should be very aware of so you don't make, you know, silly decisions and choices. That's

it. 100% and also use this as motivation. If you're not motivating yourself with the positive that you're going to get from something, then motivate yourself with the negatives you're not going to get by not doing that thing or you're going to get by not doing that thing. So if getting to the, if being fit doesn't get you to the gym, but potentially getting out of shape gets you to the gym, then use that, use that fuel. If it's not making the money that gets you to your job

or like inspires you, then maybe it's not having any money that gets you motivated, you know? Well, I think everything is about that, right? It's about thinking of what will happen if you don't do it versus what happens if you do it. I think that's all that motivates, it works for me every time. Obviously it works on you, works on a lot of people.

Just keep that idea in your head, that technique in your head, and let us know. Comment. You know what? That's a great thing. Like, if you guys, whoever's watching this, listening to this, give me in comments some examples of where this actually, this tactic worked on you, or where you have used

this tactic to help in your situation. I think I'm always fascinated by this stuff. This to me is super fascinating. So let me know, leave a comment and let me know and happy 2024.