How Loss-Aversion Can Make You Win, or Lose, in Marketing
YouTube’s psychological trick that brought them 20 million premium subscribers
I was on the subway listening to a podcast when the Youtube Premium ad popped up. Accustomed to unwanted interferences, I quickly pulled my phone towards me to hit that skip ad button. Except, this time, something I saw on the screen made me freeze:
The message box didn’t include the usual signal to skip ad. This time it said, skip trial.
Does this mean I only get the free trial once? What if they know I turned it down? Google tracks everything. Should I give it a shot, then? Come on, Nabil, keeping your phone screen lit 24/7 is ridiculous — you know it drains your battery and steals your time. Hurry! The free trial is slipping through your fingers.
All Youtube had to do was pick the right word to make me, and 20 million other premium subscribers, care. We didn’t want to miss out on our only chance for a free trial.
That feeling? That’s loss aversion in a nutshell.
Loss aversion is our tendency to focus more on what we might lose rather than what we might get. In short, it’s the fear of losing things —and it’s a strong fear.
Research has shown that losses hurt twice as much as gains make us feel good, which means that losing $5 has more emotional impact than gaining $10. And the stronger the emotion, the stronger the impact.
Youtube knew that the mere thought of losing something could alter your thinking and behavior patterns. Dismissing an ad doesn’t feel like a loss but skipping the free trial? That definitely feels like you’re giving up on something.
I can hear you now. Wait, Nabil, isn’t this manipulation? It feels unethical. This could hurt my business image. What the heck am I reading?
As a consumer and as a marketer, it’s essential to know how loss aversion works. On one level, understanding this marketing ploy can help you make better buying decisions. On another level, it will enable you to decide whether or not you want to employ the tactic yourself.
Leveraging Loss Aversion Is Like Using a Hammer
Like with many other powerful tools, loss aversion can be misused. Picture it as a hammer and you as the carpenter. Putting loss aversion to good use will help you build your brand on a solid foundation. Hammering mindlessly, however, will, at best, damage your structure — at worst, destroy it.
The best way to damage your brand is to lie to your customers. You know what they say:
You can fool all people some of the time and some people all the time, but you can’t fool all the people all the time.
Unfortunately, many marketers miss this piece of wisdom and abuse loss aversion. Let’s take a look at an example.
I subscribe to Mindvalley. It’s an online platform that offers lessons about a variety of subjects revolving around self-help and growth. Mindvalley’s founder, Vishen Lakhiani, isn’t only one of the coaches, but he’s also the active voice of Mindvalley’s marketing emails.
As I’m writing this article, I’d received two promotions in my mailbox:
Both emails indicated a 24-hour window of opportunity to take advantage of the offer. Except when I went to their website two weeks later, I found both masterclasses still available:
I hate being lied to — and I believe all clients feel the same way. Since trust is the foundation of every deal, abusing loss aversion can only backfire.
Unfortunately, the Mindvalley example is just one among countless others. Another widespread example is fake timers.
If you’ve spent enough time shopping on the internet, chances are you’ve already seen this kind of banner:
Many of these timers are fake. They reset every time you refresh the page or use a different device. Just another way to get your customers skeptical about your promotions and, more importantly, you.
Your brand name is only as good as your reputation.
Strengthening the latter is about added value and trust — and yes, loss aversion can foster both when used properly.
How to Use Loss Aversion Like a Good Carpenter
Leveraging loss aversion properly and responsibly boils down to managing two elements: added value and formulation.
First, specify your added value
What exactly are you offering? Whether it’s a product, a service, or a lecture, articulate your business's added value — be specific and concise.
For instance, the added value of this article is: Explain loss-aversion to help marketers make wiser purchase decisions, and if applicable, to use it responsibly.
It’s common to struggle with defining a specific added value, especially early on in the business journey. One widespread method that helps with that is to get in your customers’ shoes and ask yourself: If I bought this product, what changes for me? In short: So what?
I edited this article six times to answer that two-word question. Usually, the edits come after harnessing feedback on the first draft. From there, I iterate on my work to make it as specific as my current skills allow it to be.
Adapt the same pattern to your business: Create, reach out to your peers to test your ideas and products, adjust, and repeat.
Second, use a loss aversion tone.
Let’s keep this article as an example. Chances are, the or Lose part of the title nudged you into clicking. You see, I could’ve used a title like How YouTube Sold 20 Million Premium Subscriptions. But as you know now, your mind concerns itself more with what you might lose as opposed to what you might gain. So I came up with a title that harnesses this psychological trait while still managing to avoid clickbait — remember the reputation thing?
Click-baiting is tantamount to making fake promises, and we don’t want this type of negative image. Besides, you have endless responsible formulations at your disposal. All you have to do is partake in a bit of creative wordplay using the following blueprint: What exactly are your clients losing if they miss your content or product?
Here are three varied examples that can inspire you:
Product promotion: Instead of managing all of your expenses in one tool will make you relax, you can say: You can’t have a clear view of your finances unless you manage all of it in one place.
Mailing-list: Instead of subscribe for more, you can say: Don’t miss my weekly hand-picked digest by signing up here.
Negotiations: Instead of I provide a cross-discipline set of skills, you can say: It would be difficult to find another freelancer who can bring both graphic design and marketing expertise to the table.
Also noteworthy, if you set out to make promotions and sales, you can use timers and urgent mail offers — just make sure time limits and availability warnings are real. In other words, don’t lie — just don’t.
Loss aversion is a marketing superpower. And as Uncle Ben told Spiderman:
With great power, comes great responsibility.
Your role as a mindful marketer is to use loss aversion responsibly to grow your business and strengthen your brand.
Whenever you set out to promote a product or negotiate a deal, remember to formulate your arguments in a way that highlights what can be lost rather than what can be gained.
Also, hey, you’ll forget what you just read in less than 24 hours. So, maybe you want to screenshot the takeaway — yes, I just used loss-aversion on you.