Loss Aversion: How it influences user’s Decision in Design!
Suppose you have 2 choices to win money. Which of these would you like to choose:
Choice 1 will surely give you $900 and Choice 2 will give you 1000$ ( obviously more than the previous) but also comes up with a slight risk of gaining nothing.
What came to your mind?
.
.
.
I can bet most people chose Choice 1. Why? Because they want sure profit.
Now forget everything and let’s give you another scenario.
This time you are choosing Loss.
Choice 1 will surely make you lose $900, but Choice 2 makes you lose more but also comes with a slight chance of avoiding the big loss!
Now there are high chances you will choose the 2nd option. Which makes you think you have made the opposite decision to that of scenario 1.
Don’t worry most people think like this only. Because we are Loss Aversion.
Loss aversion — the tendency for people to prefer avoiding losses to acquiring equivalent gains.
Isn’t it magical right? But it happens most of the time and we didn’t notice. We as a human always try to avoid losing even if there’s a slight chance of it.
This is the same happens why people buy Insurance. They want to avoid higher losses even if it’s risking a few bucks every month.
Okay. Nicely explained Yash. But how can I use it in my product? I don’t sell insurance. Haha
Application 1
Let’s take Scenario 1 into our consideration 1. So now you know people always take the “Sure profit” and avoid a greater profit who have less chance. Use this while rewarding customers.
In the above case, Remember that people choose the Sure Profit. So design your CTAs like this. No one believes to win an iPhone. But they will be really happy to get sure 10% off on their first order.
Application 2
Create a sense of Loss to the customer. They always want to avoid Loss.
Look at the above example. By showing that your stock is gonna sent soon, you are creating a sense of loss to the user and they definitely want to buy this item and not wanna lose it before it is stocked out.
Application 3
Remember we love playing games where we could Save our game and continue from where we left off.
What are we doing here? Avoiding Loss.
Make your product such that it saves user data and remembers where they left off, so next time they can continue from there.
Application 4
By offering free trials you let users get the Sure Profit. You make customers attached to the benefits your product is giving them. Next, when the trial ends, they can’t resist losing the benefits and are more likely to buy the premium subscription.
What they are doing? Avoiding Loss.
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