Have you ever bid on something on eBay?
I have. We buy stuff all the time – I love it!
My buying strategy tends to be:
Establish I like the item that is for sale.
Establish a top price that I will NOT go beyond to acquire said item.
Start bidding low.
As soon as bidding hits my limit, instantly break it and continue to bid!
This behaviour has the same psychological effects as buying a house at auction, and is the reason why sellers will usually get a higher price. It’s also the reason that money back guarantees work so well for retailers online.
When shopping, we’re unnaturally drawn to special offers like 30-day money-back guarantees. We’ll happily buy a new digital SLR on the basis that we can always return it even though, more often than not, we keep it. On auction sites like eBay we will set ourselves a limit for an item one minute, then, the next, and with a rueful smile, we’ll break this limit when a higher bid comes in.
Digital marketers argue that ownership – whether it’s real, partial or virtual – has a strange effect on us.
Six quirks of ownership
Dan Ariely, in his book Predictably Irrational argues that ownership has 6 strange effects on us:
- Ownership increases perceived value to us: As soon as we acquire something we start to develop an attachment to it. Just the sheer fact of ownership increases how much we value it – we seem to develop a relationship with objects.
- We tend to focus on losses: When selling we tend to overlook the money we’ll be gaining and focus on the object we’ll be losing. Our natural aversion to feeling bad then motivates us to place a higher asking-price on the long-cherished house, car or record collection than the market will bear.
- We assume others share our perspective: Surely potential buyers understand how strongly we feel about our dusty old vinyl records? No, they don’t care – in fact they’re far more likely to notice how badly we’ve stored them or what poor taste in music we have.
- Effort increases perceived value: A table I have bought and struggled to build myself has more value to me than the same table I bought, for the same price, ready assembled. Expending our own effort means we’ve invested ourselves in an object, so it has more perceived value to us. Other people don’t recognise this (and there’s no reason why they should).
- Virtual ownership: We can even start feeling we own something before we actually do. Dan Ariely argues that the prices people are prepared to pay on auction sites like eBay are often inflated by people’s imagined ownership. Once we place our first bid we start to fantasise about ownership. Consequently when other bids come in we ignore our previously stated maximum because we’re now starting to value the item more, since we’ve been thinking about owning it. This is the BIG reason why selling your house at auction works so well. Once you’ve imagined yourself owning the house and placed a bid the “eBay effect” takes over.
- Partial ownership: Marketing executives know the power of ownership so they use all kinds of tricks to encourage partial ownership because it often leads on to full ownership. We don’t usually return our furniture within the 30-day money-back guarantee period because we’ve grown attached to it – it’s ours.
How to use this
Sell with a guarantee – they work.
Let your customers get a free trial so they can take it home and use it
Get your customers emotionally involved in your product by getting them to visualise and associate your product with their life (copy writing done well does this).
Whenever possible show that other people want your product and that you have a limited amount of them to sell.
Final thing, don’t make it too easy to take a free trial. Make your customers jump through a few hoops and they’ll keep your product for longer and value it more too.
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Neil