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Endowment Effect
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People overvalue things that they own.
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Introduction
People will overvalue something that they own (or perceive to own, even if it's just having access to a product), regardless of market value.
i.e., once they've test driven the car, and synced their phone to the bluetooth, they'll want it more.
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Deeper dive
There are plenty of studies affirming the irrationality of ownership, but my favourite are those on Capuchin monkeys—which shows how broad the research is on this.
Through a series of experiments with bartering, it was demonstrated that Monkeys and Chimpanzees will value identical tokens differently, depending on which they own.
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Potential impacts
Churn
- If people feel like they own something, or have invested into personalising an experience, they're typically less likely to churn.
- On the other hand, if the process of personalising (i.e., creating) an account is too time consuming, they may churn sooner.
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Written by Peter Ramsey
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