Winning or Losing

by Patrick Lefler   Article

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Winning or Losing – Which is more powerful?

“Loss aversion refers to the tendency of people to strongly prefer avoiding losses as opposed to acquiring gains. And this difference between gains and losses is so strong that some studies suggest that the emotions provoked by losses can be twice as powerful an as those for gains. …

Take the case of investors who prematurely sell stocks that have gained in value because they simply don’t want to lose what they’ve already gained. … I don’t think there isn’t one of us who hasn’t said over the past few years “Even though I hate the market, I’m not selling my “xyz” stock until it reaches my break-even level.” In other words, I refuse to take a loss on the stock. …

Insurance is another area where the concept of loss aversion hits home. Insurance companies don’t frame their marketing message in terms of what customers have to gain by buying their product, but rather they focus their message strictly on what will happen (the loss) if you don’t buy the policy.

… most businesses today fail to incorporate loss aversion techniques into their sales and marketing messages. Most are really good at crafting messages that highlight what prospects have to gain from buying their product. Far fewer take that next powerful step and also highlight the losses that could occur if that same product is not purchased.”

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