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Endowment Effect

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Image: Gabby Orcutt, Unsplash

Endowment Effect: It feels like mine - I'll keep it

When people feel they own a thing, they value it more and would rather keep it. Can you make people feel endowed with your product?

Feb 19 3 min read Patterns

Which of these two scenarios would motivate you more? (#1) Your manager gives you a post-dated check, saying “it’s yours - just meet the target.” Or, (#2) “If you meet the target you’ll be awarded the sum of [blank] as bonus.”

While both scenarios are promises to be fulfilled on condition of satisfactory work, #1 feels more like an IOU, a done-deal, than #2, and might motivate anyone more. Or don’t you think so?

We work harder to keep a thing we feel is already ours; Image: Paul Stollery, Unsplash

Well, a study by Hossain and List showed that workers worked harder to maintain ownership of a provisional awarded bonus than they did for a bonus framed as a potential yet-to-be-awarded gain.

Why? Because they felt endowed with it; as if it was already theirs, so they worked harder to keep it. Their endowment bias kicked in.

Endowment effect (or bias)

The endowment effect states that “we place greater value on objects we own over objects we do not [own], especially if sentimental value has been placed in them”. And, you know what, as soon as we own something all too soon we get sentimentally attached to it. Letting go of sentimental items, who finds that easy?

Endowment bias is also called “ownership effect” and acts like a sibling of loss aversion - as soon as we think or know we own it, we never want to lose it.

So, how can we make people feel endowed with our product they never want to opt out and would pay what we ask?

Making endowment bias work for you

  1. Offer a free trial for at least 30 days without holding back a single premium feature, so that the user should enjoy and own the product or service and want to keep it.

    You may sweeten the deal a bit more by making them beta testers of new features, or give away some other high-value item. When their trial is coming to an end, remind them of everything they stand to lose should they not retain their membership (say, ownership) of your service.

    Basecamp is excellent here. The project and collaboration software company will even offer to extend your trial by additional 15 days, as if to say “nah, we don’t think you got enough of Basecamp yet!” The nudge to extend comes in the middle of an email reminding you of all the data and settings and stuff you’re about to lose (permanently) should you not pay.

  2. Gamify your premium plan and make your new users get it for free by taking an action. Action can be to share the product on Twitter, to get their peer to try it (even free) with a custom link (with their name on it for more sense of ownership), or to test and give feedback on a certain feature.

    Trello gives away up to 12 free months of its premium Gold plan if you can get your peers to join.

    I got Trello Gold for up to 12 months in my first year of using the software just by introducing new people to it. For each new person I got to sign up I got 1 month free of Gold. It endeared me to the product and I wanted to keep using it. Only, it stopped fitting me.

  3. It’s in your design - your typeface, your typography, your color (or colors, or, better still, lack thereof), your shapes, your “feels”, your talk (or non-talk, your whitespace), you get the idea. Build sentimentaility with your product. Build love. Build ownership or a sense of some. Make them feel it is theirs.

When your product is theirs, endowment bias will work for you.


Sources:

  1. Endowment Effect (Design Patterns), UI-Patterns, accessed Feb 26, 2019.

  2. Endowment effect, Wikipedia, accessed Feb 26, 2019.

  3. Endowment effect, Interaction Design Foundation, accessed Feb 27, 2019.

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