It is a good bet that when you bought your last desktop computer you choose one that provided you the option to upgrade down the road so you could keep up with technology. However, if you are like most people you never did upgrade, even though you paid dearly for the option to do so.
For many years I maintained an American Express card even though many places I shopped didn’t accept American Express and the annual fees were high. After all, “Membership has its privileges” and I did not want to lose mine, even though I never could find out what those privileges were. In behavioral economics, we never want to lose our options. We often keep our doors open even if we never have any intention to go back through them. It is our often irrational fear that once we close the door we’ll have the need to get back that prevents us from moving forward in a constructive way.
In another example, For many years my healthcare plan was grandfathered in and I was told that if I choose another cheaper plan, I can never go back. For several years I was not even sure what I might be losing, but the fear of loss prevented me from choosing a cheaper or better plan.
How can you use the irrational fear of loss and a person’s need to keep their doors open to drive up revenue and achieve higher margins?
