The next time you're on a long train journey look out of the window at the fields flashing by. If you're lucky you might spot a series of faint ridges. What you're looking at is a Medieval survival strategy and, more relevant to most readers, a way to boost your marketing effectiveness...
Peasants in the Middle Ages used to purposefully create deep ridges and furrows in their arable land. This meant that if there was a particularly wet year the crops on the ridges survived whilst if there was a drought the crops in the furrows prospered.
They did this because they were loss averse: they knew that whilst a surplus of food was favourable, a lack of food was fatal. In fact this attitude to risk has been a facet of human development for so long that evolutionary psychologists think that we're hard wired to be loss averse.
The academic evidence
Loss aversion, the idea that we fear losses far more than we appreciate the equivalent gain, is of interest as academic research has shown it still affects modern consumers. One of the simplest experiments demonstrating the bias was conducted by De Martino, from the University of Cambridge, and published in Science in 2006.
He paid respondents $50 for taking part in an experiment. At the end of the experiment he gave them two options: they could either keep $30 or gamble the entire sum, with a 50:50 chance of keeping it all. 43% of the subjects chose to gamble.
However, he then ran a slight variation of the experiment. Participants could either lose $20 of the $50 or, just as in the first scenario, gamble the entire sum. From a rational perspective keeping $30 or losing $20 of the original stake is the same thing.
However, from a behavioural perspective the loss is made much more prominent in the second scenario. As expected in the second scenario more people sought to avoid the loss and 63% gambled, an increase of 24%.
The marketing application
Interesting. But how relevant is it to marketing? One of the repeated critiques of behavioural economics is that it's of academic interest rather than being directly applicable to marketing problems.
Zenith therefore surveyed 834 respondents to see if loss aversion influenced advertising claims. Half were told they could save £100 by switching to a new energy provider whilst the remainder were informed they stood to lose £100 if they didn't switch.
The number who said they were very likely to switch rose from 7.4% in the first scenario to 10.7% in the second. A rise of 45% - remarkably close to De Martino's finding. Once again emphasising the potential for loss makes a proposition more motivating.
These findings are interesting as most advertising claims about prices communicate the savings. However, marketers can boost their effectiveness by re-framing their offers.
Rather than stressing savings they should emphasise the risk of loss involved with not taking up the offer.
The great thing is that this type of re-framing can be tested easily, and at limited cost, in search copy. If it works there then it can be rolled out to other communications. For marketers prepared to learn from Medieval peasants, the rewards could be plentiful.
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