Combating Loss Aversion

Real Estate Sales Representative with Coldwell Banker Graham & Assoc.

This was originally posted on by business blog at, but I thought the underlying principle could be useful and applied to our real estate business...though you may not want to ask your sell to do a money back guarantee or 30 day free trial. But you may want to give it some thought and see how this could be applied to either your sellers, or to your business as you recruit clients.

Loss Aversion Definition - Peoples tendency to strongly prefer avoiding losses to acquiring gains.

Concept: Psychologist quantify the pain of loss to be twice as strong as the joy of gain.

For instance: Lets say your stock portfolio is up this quarter netting $10,000 in gains: You are pretty happy.

Next quarter your stock portfolio is down, losing $5000 in value. You are devastated (and probably ready to find a new investment adviser).

How does this affect your business? Loss aversion applies to all of us; you as well as your customer. Your customer has a finite amount of money, which can either be saved, spent on your product or service, or spent on something else. You are competing for that dollar against all other options they have.

They hate to lose. They don’t want to walk away feeling like the made the wrong decision by spending their dollar on your offer and not the other options. If they fell they make the wrong decision it will far outweigh the feeling of joy or satisfaction they will get from your product of service.

This could keep them from making a purchase in the first place.

How to Counter Act Loss Aversion: Make them feel like a winner.

Offer a guarantee of free trial (two potential options).

A money back guarantee will help alleviate their fear of loss because they know that they could simply return it if the do not like it.

A free trial will allow them to test the product before buying. If they like it they will buy it knowing that they are getting good value for their money.

New Year. New You.


Comments (0)