PEOPLE RESIST TO WITHDRAW FROM SOMETHING IF THEY INVESTED TIME AND MONEY
Description
The sunk cost effect is the general tendency for people to continue investing in something that clearly isn't working if they invested time and money.
Research:
One experiment from 1985 showed that people were more inclined to do less enjoyable things if they thought the financial value of it is greater or if they already paid for it.
Sunk cost fallacy as a similar pattern has been proven by many other experiments over decades.
Subscription services, like the men’s Dollar Shave Club, use the Sunk Cost Effect to their advantage. When people have already invested in a subscription for a service, they’re more likely to continue using the service and recommend it to others. Brands that offer subscription services to their customers can increase their revenue by 500%.
Application
Subscription Services
Encourage customers to continue subscribing to a service by highlighting the benefits they've already received and the enhancements or exclusive content they would miss out on if they unsubscribe. By emphasizing the investment customers have made so far, marketers can play on the desire to make that investment worthwhile.
Loyalty Programs
Design loyalty programs that reward ongoing engagement and purchases. The more customers invest in a loyalty program (time, purchases), the less likely they are to abandon it, as they would feel that leaving the program would waste the effort and resources they've already invested.
Progress Bars for Purchases or Engagement
Use progress bars in apps or websites to show how much a customer has already engaged with a service or how close they are to achieving a reward. This visual representation of their investment encourages customers to continue engaging to not "lose" the progress they've made.
Content Marketing and Educational Investments
Create educational content or training programs that customers invest time into. The more time and effort customers put into learning about a product or service through webinars, tutorials, or courses, the more likely they are to continue using the service or product to justify their initial investment of time.
Examples
