The Psychology behind Loss Aversion

Yoav Tchelet
2 min readFeb 2, 2024

The moment of truth arrives.

You’re on the checkout page, credit card in hand, when it hits you — that sneaking suspicion that you’re about to make a terrible mistake.
Your cursor hovers over “Confirm Purchase”, hesitating — beads of regret form on your brow. With a heavy sigh, you close the tab and walk away.

We’ve all been there. And for sellers, it’s a nightmare. Why do prospective customers bail at the finish line?

I’m diving into the psychology behind this phenomenon — loss aversion.

All right, what gives with loss aversion?

It’s simple: losses hurt more than gains feel good. People will go to absurd lengths to avoid losing something, even if the gain is identical.
For example, losing $100 causes more pain than finding $100 brings joy.

Madness!

This cognitive bias is amplified for financial decisions. Folks freak out about losing money. Look at the $1.3 trillion insurance industry — selling people peace of mind they hopefully never use.

So, how do savvy sellers short-circuit loss aversion?

Offer free trials. Let customers test drive risk-free. Once they’re hooked, going back seems unbearable.

Reframe the downside. Remind customers of how bad sticking with the status quo would be.

Give incentives to act. Early bird discounts and limited-time offers reward those ready to leap.

Eliminate any hint of risk. Make saying “yes” a no-brainer.
Loss aversion is powerful. But with the right strategy, you can turn cognitive bias into business brilliance.

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Yoav Tchelet

Yoav Tchelet has over 25 years experience working with some of the world's largest brands, helping them scale and grow their businesses.