Responding to Loss Aversion

One interesting chapter in Yes! 50 Scientifically Proven Ways to Be Persuasive by Noah Goldstein, Steve Martin (no, not that one), and Robert Cialdini, talks about the law of loss aversion. That is, that human beings are more sensitive to potential losses than to potential gains.

In other words, people are more motivated to avoid losing what they have than they are to try gaining something more.

An example used by Cialdini, et. al. is that of New Coke. In the 1980's, Coca-Cola discovered that people liked the sweeter taste of Pepsi than they did the taste of Coke. So Coca-Cola developed a new formula - New Coke - and, like good marketers, ran taste tests. Folks liked the taste of New Coke better than the taste of the Old Coke (and when they were told which was which, an extra 6 percent of testers liked the New Coke better than when they tested blind).

So Coca-Cola yanked the old Coke from the shelves, and released New Coke.

The result? Disaster. Angry consumers. Public outcry. (Even more so than when Facebook updates its look periodically.) Coca-Cola soon got rid of the New Coke and returned the original formula to the stores.

Why did this happen? Because although people may have liked the New Coke, they would not take it at the expense of the Old Coke they knew and loved.

Has this happened to you as a consumer? You discover a favorite breakfast cereal, or ice cream shop, or hair care product, and the manufacturer discontinues it? Oh, the hurt and agony!

Why are humans wired this way? Is it a generally positive desire for life? - we don't want anything to "die" or be suddenly and permanently no longer accessible to us? Or is it a foolish and selfish impulse? Or is it neutral?

And how should marketers respond to this? They seem to already make use of this principle when they announce specials like, "Limited Time Only!" or "Don't Miss This Opportunity!" Those announcements seem like a reasonable thing to do. Warn your customers if something is about to become scarce or unavailable, so that they can get it while they can.

(But don't be manipulative with it. I remember some distinct instances of price-gouging on things like gasoline and plywood during hurricane season in Florida. It's not cool. Don't be a jerk. Customers don't like it.)

Are there other proper responses to the law of aversion? Like reserving one last batch of your discontinued product, and selling it to discount stores where your most fanatically loss-averse customers can still find it for a little while? Or offering the last batch only to your most loyal - and loss-averse - fans (you know - the ones you're supposed to be building relationships with through your social media platforms)?

How can your company respond to the law of loss aversion in a way that benefits both yourself and your customers?