Avoid Framing Your Marketing Message as a Loss

As one of contemporary psychology’s most cited research, Prospect Theory by Kahneman and Tvesksy proposed that people are generally “loss averse”.  Their research demonstrated that people feel two times more painful when an event is coded as a loss than as a gain.  Simply put, a $5 loss from a coin toss gamble is similar in psychological magnitude as a $10 gain from the same bet.  Hundreds of consequent research by academics have repeatedly proven that this theory holds in many different domains.  How can small business owners apply this Nobel Prize winning theory to their management?

Imagine that you are about to decide to have a surgery for a non-life threatening condition, though it makes you very physically uncomfortable.  Your doctor advises you that the surgery “only” has a 10% chance of making your condition worse.  How do you feel about the operation?  Now, imagine the doctor told you that the surgery will completely cure your condition with a 90% chance.  While both messages are delivering the same fact, because of the loss aversion effect, people will more likely commit to the procedure when offered the latter message.

Likewise, small business owners should craft their message to mostly reflect positive aspects of their business (“99% of customers are satisfied”) than negative results (“only 1% of customers are dissatisfied”).  Especially when dealing with statistics and numbers, remember to reflect the theory of loss aversion - because you may find yourself giving out twice as much giveaways to cover one ill-advised marketing message.