Last Updated on Apr 7, 2020 by James W
Consumer behavior is basically one of the best and worldwide renowned fields developed by marketing methodology. Whenever we think about buying this or that, we know for sure that we start with the product and end up with the buyer, i.e. the person who is ought to pay for the good or the service. Even though we tend to make the best in order to get this process until the last stage, there are some effects and other variables which, in turn, can actually be of great help to whoever is interested. These being said, in case you are looking forward to knowing more concerning the subject, make sure to stick with us and keep an eye onto the following lines in order to find more about the endowment effect in business and how can it affect your business too.
What is the Endowment Effect?
Having hundreds of years of history, the endowment effect is globally recalled as the way in which people tend to attribute a higher value to an object once they have it. For instance, if I buy a mug at $5, if asked to sell it I would attribute it a higher selling price – for instance, $7. This cognitive bias is basically a departing idea in how can you swift customer behavior in making people less aware of what they do and buy more than expected.
We hate losing
This is definitely a real-time fact. Since we hate to lose things, we also hate to be avoided from things that we own (even though we enjoy them or not). On the other hand, individuals are risk-adverse, gaining no incentive in keeping up with any business fields.
How can you Use the Endowment Effect in Business?
To be more practical, the endowment effect might easily be inserted in any business. When collaborating and making contracts, it is way easier to make people buy something and then determine to sell them at the same price, and you will slowly start to realise that they will be less and less happy regarding this idea. Sometimes, there are elements which are the most important to create a business that is all worth it – and this might not be essentially the best case. Still, from time to time you can make it work, with enough dedication and hard working behavior. So, what are you still waiting for?