Endowment effect
The endowment effect describes how people tend to value items that they own more highly than they would if they did not belong to them. This means that sellers often try to charge more for an item than it would cost elsewhere.
Motivation
Ability
Prompt
Description:
The endowment effect is like that funky old sweater in your closet - the one you haven't worn in ages but just can't seem to toss out. It's all about the trick our minds play, making us overvalue things simply because we own them.
Picture this: for every item you own, it’s convincing you it's worth so much more, just because it's yours. This phenomenon turns our wardrobes into treasure troves of nostalgia and our garages into museums of 'too precious to let go'.
Principles
- People overvalue what they already own.
- People tend to develop a sense of ownership and value over things they interact with regularly
- The more familiar a person is with an item, the more they tend to like it
- Ownership increases familiarity, which in turn increases perceived value
- People have a preference for keeping the status quo.
- The existing condition is preferred over a change, even if it might be beneficial
- For some, possessions become part of their identity, making it hard to let go of them
How to apply?
- Offer customization options to personalize the user experience
- Deliver regular, personalized updates
- Create digital ownership in your product
- Enable user feedback and feature suggestions
- Implement social sharing and collaboration tools
- Use virtual rewards for task completion
- Use gamification
- Provide exclusive features or loyalty rewards
- Highlight user milestones and anniversaries to celebrate loyalty
- Offer early access to loyal users
- Enable users to set personal goals
Examples:
Photoshop
Spotify
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Airbnb
Photoshop
Spotify
Airbnb
Youtube
Uber One
TikTok
Zalando
Meditation apps
AI GPT Prompt
About
Experiment with this prompt to get ideas on how to use Endowment effect for engagement and retention in your product.
Technique
Chain-Of-Thought
AI Type
LLM
Prompt
Considering [Product Name], which offers [Brief Description of Product and Key Features], how can integrating additional personalization and customization options leverage the endowment effect to increase user engagement and retention? Please explain the psychological mechanisms behind why making [Product Name] feel more 'owned' or 'personal' to a user would enhance their commitment and usage.