Fear of Losing: Using Competitive Instincts to Your Advantage
The Winner’s Curse is a term used to describe auctions whereby the winner will overpay because he/she overestimates the item’s actual market value. This tendency to overbid is due to factors like incomplete information or other market participants. Recent research show that people also overbid because of the fear of losing in a social competition.
A team of NYU neuroscientists and economists conducted brain imaging studies and discovered that the striatum, a part of the brain’s reward circuitry showed an exaggerated response to losses during an auction game. When a group was told that they would lose $15 if they failed to win an auction, they consistently bid higher than others who were told they would win $15.
The difference lies in way the auction was framed. When simply reminded of what they had to lose instead of what they stand to gain, participants responded with higher bids.
While there have been investigations of overbidding which have attributed the phenomenon to either risk aversion or the ‘joy of winning,’ it was the use of imaging data which allowed us to distinguish between these conflicting explanations and actually arrive at a new and different one, the ‘fear of losing.’…We were able to use neuroimaging results to highlight the importance of framing, and specifically the contemplated loss, as an explanation for overbidding during experimental auctions.”
This ‘fear of losing’ seems to be triggered by competition with others and perhaps, attachment to the value of the item. A interesting takeaway point: instead of only highlighting the benefits or promise for a product/service, it would be beneficial to indicate what the buyer might potentially lose by not making a purchase or taking action.
People implicitly understand that they’re dealing with other consumers because of factors like exclusivity and scarcity. The one who acts swiftly will get to purchase and enjoy the benefits of the product, while others may not. The call-to-action is much intense in an auction, because the actions of others occur in noticeable real-time. Competition is in the forefront of the mind.
This study reminds me of how much competition is almost intrinsic to human society. You see competition between individuals, groups and countries in business or sports. It is perhaps, both an evolutionary necessity and a learned behavior that one develops in order to survive or thrive within a social environment.
We are all familiar with the pleasure of competition. Many of you have bought items from Ebay, an online auction marketplace. Often, your decision to make or abandon a purchase is rushed along on a subtle but tangible undercurrent of excitement during the process and a feeling of minor elation for having won an item at a favorable price.
Could there be a way to transplant the fear of losing and the pleasure of winning into a non-auction scenario? Perhaps the use of a competition as a backdrop where each consumer’s individual drive can play out against others. Make them interact and challenge one another within a superstructure that helps YOU fulfill specific end goals.
Let the Competitive Instinct Flourish Within a Social Environment
Image Credit: Swamibu
Businesses or marketers should think about how to create a social environment which encourages the natural competitive instincts of their audience. Interaction within this sphere motivates each individual consumer/participant. This helps to increase the level of audience engagement and automatically enhances the value of the product/service/site.
Social news sites like Mixx.com proudly highlight their top users by displaying them on a leaderboard or giving them specific awards/badges. This symbolic segregation of a group of users from others and the conferring of exclusive emblems of acknowledgment enhances the visibility/reputation of these individuals. This becomes something others can strive towards.
Not everyone will lust after awards or a higher user ranking. In fact, most casual users won’t care or bother to go after greater recognition. But owners of these communities know that there will always be a segment of hardcore users (the more competitive or goal-oriented ones) that will work extra hard so they can improve their score or rank higher on the leaderboard.
This addicted 1% of users enjoy a sense of achievement and are often enough to generate enough activity to make your site grow. This effect is even more prominent when the community itself is the main attraction. Take the example of video games with online features: players will gladly pay for a monthly Xbox Live subscription or WOW account so they virtually cooperate or compete with other individuals. Inter-user competition becomes an value add-on.
Such a social environment is not very difficult to create: there are a few fundamental elements involved. For starters, users should be able to interact freely with one another, through the site’s main features or separately in an standalone environment. Also, bind user profiles and on-site activity to awards, rankings, points, recognition, rewards and achievements.
Allow people to form sub-groups to pursue a diverse level of interests. Facilitate inter-user contact and interaction by organizing open competitions or one-off events that everyone can join. These special events can be plotted on an established calendar of regular activities which involve the community or its sub-groups.
The general theory is simple enough: Think about creating social environments that are conducive for your overall business objectives. Apart from simply marketing your site, we should look at giving our audience the ability to connect (and compete) with each other.
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Great post, Maki. Letting users fulfill their natural tendencies through a social site is one of the best strategies for success. Everyone loves distinction and having a say. Groundswell talks about this as well, and I think it is a key insight into why certain social media sites succeed and others fail.
What about the competitive instinct to yell “FIRST!”?
The sense of competition within the social media environment can be very grueling. More feeds, more clicks, more votes, more time = less life.
I think most times, being first is just something that allows yourself to gain some pride. It can be stupid stuff, but being the “best” is still the “best.” Maybe it comes from just an instinct that allows us to find the best possible mate? It’s a far stretch, but one I’ve heard before.
As Brett said though, enjoying social media on the side, and striving to be well known and regarded, is grueling. Users will burn themselves out as they find it more like work than an enjoyable hobby. So if you create such a site, be careful of just how much you are asking of the user base.
Great read though. Enjoyed it.
This is the reason why special offers have a limited time. Most businessmen such as online blogging coaches knows this idea of fear, not getting the offer. They knows that human always have the tendency to sourgrape into an exaggerated marketing presentation. They even play it more in adding time limit. Then, they even drop the price in the last week so consumers are expected to rush in to buy. It is funny, because after the time is over, the seller/marketer will extend it for another two more weeks. Duh. And still people fell on it. :p
very nice post, this gave me some food for thought.
The only thing that I would like to add is an emphasis on the room for interactions. In my humble opinion, one should not provide public or private space, but public AND private spaces for interactions.
Too many get caught in the competitive spirit on social sites for satisfying the inflated ego, this can be detrimental to experienced in the real life.
Slow Down n relish every moment.
well, Competitive Instincts are really time consuming and 2ndly this race would never end ….
One can’t really set a goal in this race.. everyday more competition, new ideas and new plans …
I like this entry a lot. If you have a site that gets better with content, then such a dynamic will really do wonders for you and for those you cater to.
Great post and definitely clears up the “what you’ll get” vs “fear of loss” … I guess both methods do work … but it’s very interesting to know that they’ve studied the brain and have seen that we react stronger for fear of loss. I think that describes me too … *sigh* … and I’ve done the same exact thing on eBay too. I’ll be at the drawing board with this one before I roll out my next offer. Thanks. *SmiLes* Suzanne
Maki,
I have always considered the fear of losing a great marketing tool. However, I never connected it to building a community. Great thoughts!
Stumbled…
Great post, a lot of businesses set up offers like this to gain customers on a short term basis. Clubs are the same way by promoting lines causing a sense of scarcity, which is why people can gain an edge of competitiveness and are willing to spend hundreds of dollars for a VIP table. This format can also be a great influencer technique used towards persuasion.
Craig
http://www.budgetpulse.com
I think you should always pinpoint what the customer is going to lose if they did not purchase your product. This could even pertain to your blog because telling people what they would lose if they do not subscribe is a good way to get someone to subscribe. I know Tim Ferris has a page for the seven reason to subscribe to his blog. That is kind of a way to show what a person would not get if they do not subscribe to your blog. They only get the information if they do subscribe. I think you get the picture though.
Franklin Bishop
Maybe bloggers could limit the number of comments to every post — a big blog like doshdosh could say “only the first 25 accepted comments will be shown” A smaller blog might say “only the first 10 accepted posts will be shown” This might actually increase the number of comments.
Or, perhaps every 10 posts or so you could have a post only available to an RSS feed or email reader.
Although your post is well written and well researched, I would like to take a contrarian viewpoint.
Although the EuroAmerican worldview centers around competitiveness, most other world cultures do not. In fact, putting oneself above the good of the others, e.g., the family or the community, is frowned upon.
Many world religions, Buddhism, etc., say that the ego’s need for superiority is what puts it at high risk of suffering. Children raised in cooperative cultures, such as traditional Native American students, are put at a disadvantage when they enter EuroAmerican public schools where getting the highest grade is placed above helping students who help each other learn.
When I worked in the brokerage industry at Merrill Lynch, ALL recognition was on a competitive basis: who made the most cold calls, who sold the most dollar value of the latest hot tax shelter. To such extent that brokers would pander themselves and tell untruths just to get ahead of rivals on the weekly list that was posted in the mailroom.
There was little cooperativeness and the good of the customer was not a consideration. Often a broker’s work would be sabotaged by others in order to ’steal’ a good client. In the end it created an unhealthy environment of paranoia and mistrust.
I would suggest that rather than encourage an environment of competitiveness for our Blogs, that perhaps we might look to the Internet and Blogging as an opportunity to create a community. We might instead present the message to folks that working together to build a better world, rather than get ting ‘theirs’ before somebody else does, is a more healthy way to go.
Namaste. G.
Wow!! what a psychology play. That brings a whole new idea to me. I think that it will be more intense if it involves the property auction.
Hi, Thanks for these great tips,,
but I think this will change if you are working with small blog with few readers like mine, Isnt it?
Thanks so much and I am waiting the next article.
Larbi.
Fear is sometimes also consider as a test for ourself, whether how we going to overcome it. Losing is also one lesson that we wouldn’t want always but learning from how we lose is a thing that improve our life.
Nice post to follow with.
“Be greedy when others are fearful” - The Master himself, Warren Buffet
This makes perfect sense when we know that people buy things on an emotional basis. Thanks for the article. I really enjoyed it.
Interesting analysis.
We have been integrating these psychological strategies and concepts in our Advertising campaigns.
Competition can be mesmerizing and addictive for some consumers
@Grace
I disagree. A community will be hard to form on good will. Even on open source projects you will find the core developers who get the fame work hard to maintain that position. Having a tribe where a few of the members participate heavily will make the tribe that much more focused.
@ Melanie
You know, I’ve see that on most popular blogs and it always intrigues me. I never get it on doshdosh though, I’m apparently not there yet.
@ Alexa
I think some evolutionary theorists do see competition as a very basic form of survival instinct. It is a response to the environment and its threats. But over time I see competition is being used as a means to define one’s individual identity… being the best at what you do gives meaning, but yes… it can be a grueling test of one’s abilities.
@ thatwasshot
Yup, I agree. Reduced prices, bundled offers and the illusion of scarcity can drive people to act.
@ Senile Simian
That was what I intended to mean in the post, there should be both private and public space for communication and relationship building
@ Diwant Vaidya
Definitely. It’s a great way to get one’s audience more engaged in what’s already on your site. When people interact or compete, they generate activity. Activity attracts participation. Participation creates more activity.
@ Suzanne Franco
You’re welcome. I think its quite interesting as well. To think that emphasizing loss over gain might be more effective at getting people to act or make a purchase. ..
@ George
Nice to see ya around. I think a community is a best place to put this into action, since people are constantly observing and feeding off each other’s actions on the site…
@ Franklin Bishop
I vaguely remember seeing the subscription page for Tim. And I think that’s a great idea, especially when one has to commit so little: RSS feeds are free and it only takes a few clicks, not to mention that you are in full control of the opt-in/out process.
@ Ted Murphy
That sounds interesting. It pushes people to comment but I don’t like putting the pressure here. That makes me think about the degree to which one wants to induce competitiveness within a blog format, where there’s a limited amount of features to help readers locate and communicate others.
@ Grace
I think there’s certainly an ugly side to competition. Like you said, people can become unethical in their goal to trump their peers or reach the top. But I think the competitive instinct is itself capable of producing camaraderie or mutual respect as well. Let’s take the Olympics for example, athletes compete intensely with others and there’s something that stops them from going over the edge and unleashing hate upon a peer: One could call it sportsmanship.
I think these people have a genuine love for their chosen sport and recognize that other individuals are enjoying it passionately as well. They recognize that these individuals have put time and effort into improving their skills and respect arises on the basis of that.
In the context of this article, I am mainly focusing on creating this sort of an environment, where competition serves a purpose of allowing users to be more engaged within the community. Competition can and will often lead to cooperation. Users will interact with others, share their experiences and form groups/relationships. It also depends on whats at stake.
In reality, I think there will always be a few people who are pathologically addicted to winning and they’ll do it at any cost. But I doubt these handful of individuals will ruin or harm the experience of others who see competition as only a form of recreation/leisure.
@ Arab Publishers
Yes, the dynamics are different for a small blog. While I mainly wrote with a non-blog community/business in mind, I think there are ways to implement it. Just takes a little strategy.
@ Garrett
You’re welcome! I’m glad you enjoyed it.
@ David Cheong
If we don’t learn from our mistakes, we’ll only make them again.
@ Everyone else
Thanks for your comments!
I really enjoyed this post for a host of reasons, but it particularly resonated as I’ve been thinking about how best to create a greater sense of community for my clients, especially to help handle fears in uncertain times, but also how likeminded people might support each other, share contacts, ideas etc beyond that of the usual type of forum. I’m finding people are running scared right now and adding a competitive element might be the answer to encourage them to take stock and think beyond the ‘paralysis analysis mode’. Won’t bore you here further talking out loud, but your post has really got me thinking so much appreciated.
I was also really interested to read about the brain imaging study and more people fearing losing in social competition. Since various psychometric tests can reveal people’s motivation direction - whether they move towards what they want or away from what they don’t want - I wonder how different such results would be if set in a competitive context. Interesting.
Thanks for the thought provoking post, much enjoyed.
Tam
Interesting post. As motivating as it can be, I’m wary of using fear to move and influence people. The current political ad campaigns abound in this practice and it simply isn’t helpful - or generous. I think we (as human beings) are a rather fragile lot and it doesn’t take much to manipulate us once our insecurities are exposed. I.e. “Afraid of losing your home? Afraid of being attacked? Afraid of losing your rights? [Uh, yes to all of these.] Then how could you possibly vote for him??”
This psychological practice seems to pervade political campaigns, though it’s present in plenty of other ad campaigns. Here’s just one example I posted about Nissan if you’re interested.
This is a great post. I dont really care about competition too much as long as I am doing what needs to be done and I also find it hard to compete at social networking sites. There are a lot of people who do though. Interesting article.
Very helpful article, thanks and keep Posting!
Maki, I totally agree with you on “If we don’t learn from our mistakes, we’ll only make them again.”, not just only learn but also must try to find out why is that happening and how to avoid the mistakes occurs again.
Yet another excellent post! you must be some kind of a “philosophizer” (from ben stiller in dodge ball movie) I know exactly how to use it too!
salon.com kinda does this by having the “editor’s choice” comments, or the editors fave comments. dont know if the posters try to be an editor’s choice, but it probably makes them feel good if their posts start regularly coming up as editor’s choice.
Sometimes the fear of losing will make some take short cuts to achieve success i.e. taking steroids, insider trading, voter fraud etc.
So, you must balance your competitive nature with a sense of honor.
It’s hard for some.
This could be also interpreted that people underbid when they are relaxed about achieving their goals.
Hi Maki aka Doshdosh, I salute you with your feed readers which now counts over 20,000. Wow!!!
You right very good articles. I don’t have any knowledge on HTMLs so I cannot personally migrate to a paid host with wordpress platform.
May I also invite you to visit my site? My site has also been rated as the number 1 search result in Google for the key phrase ‘Aspiring Entrepreneur’ but definitely not garnering as much page views as you do. About just 2% maybe of your total page views per month.
I’ve been talking about investments, entrepreneurship, personal finance, money management and achieving financial freedom.
I really need to do SEO’s to really promote my blog and garner more visitors. I hope to read more of your posts especially regarding SEOs.
Great post, we must always look for new ways to be more competitive and improve our results through testing other methods that offer better results.
“He has not learned the first lesson in life who does not every day surmount a fear.”
- Ralph Waldo Emerson
Great article. Marketing is about human psychology. Fear is the #1 motivator that causes people to buy. So how do we take advantage of this? As the article states, emphasizing the bad things that will happen if someone fails to purchase your product is usually stronger than emphasizing the good things that will happen if someone does purchase your product.
People buy because of fear. People fear death. They fear getting old. They fear going broke. They fear missing out. Fear comes in many forms and is the most powerful motivator causing people to buy. Always try to work fear into your marketing literature. I drink orange juice and take a multi-vitamin pill every morning not because I like the taste or want to be super healthy but because I fear getting sick if I do not. I take my car in to have the oil changed every 6 months not because I want my car to run well but because I fear my car breaking down if I do not.
The reason fear is the most powerful motivator to get people to do what you want stems from the basic need for survival. If you can scare people into buying your product out of fear they will die, you will be guaranteed to increase your sales. “Buy this nicotine patch, this nicotine gum, instead of buying smokes, and live longer” is the basic sales pitch. Nicotine patches and nicotine gum as a solution to breaking a smoking addiction in order to live longer is very powerful sales copy.
OnStar used fear to make billions. Their best pulling ad was an actual recorded call of a little girl saying, “We just had an accident and my Mom isn’t moving, please help!” This planted the idea in peoples minds that what if that happened to me when I was driving? What would my daughter do if we did not have OnStar?
The tragedy that results in market cycles can be used to make money. I wrote a sales letter for a property management company that advertised their single family home services with the headline, “Afraid Of Losing Your Home To Foreclosure?”
Anger is a subset of fear. On 911 Americans, across the country, went out and bought American flags to hang on their houses and cars. Fear lasted about 3 days after the attack, then anger took over.
Anger can be a very powerful motivator. People hire a lawyer to sue because they are angry at someone. People will go to war because of anger.
Always consider both fear and anger and which is stronger. For example:
“Afraid Of The IRS?”
“Angry At The IRS?”
In this case, anger is the slightly stronger emotion and is the one you should use in the context above. Here is another example:
“Afraid Of A Fire?”
“Hate Fires?”
Fear is slightly stronger than hate (anger) in the example above and should be the one you use.
Always consider both fear and anger as one emotional category and test both, in the context of your product or service, to see which is stronger.
Perhaps the most famous use of fear in advertising ever was Tony Schwartz’s legendary ‘Daisy Ad’ for the Johnson campaign. Schwartz suffered from agoraphobia, an abnormal fear of open or public places, and so he understood the controlling power of fear very well.
The ad was broadcast on Sept. 7, 1964, during NBC’s “Monday Night at the Movies.” It showed a little girl in a meadow (in reality a Manhattan park), counting aloud as she plucks the petals from a daisy. Her voice dissolves into a man’s voice counting downward, followed by the image of an atomic blast. President Johnson’s voice is heard on the soundtrack:
“These are the stakes. To make a world in which all of God’s children can live, or to go into the dark. We must either love each other, or we must die.”
A combination of fear and vanity marketing is often used by plastic surgeons. The idea is to appeal to peoples’ vanity by exposing their fear of aging.
Kevin Trudeau combines self-improvement with fear in his sales copy: “Natural Cures They Don’t Want You To Know About!” The first sentence in his sales copy reads, “The revolutionary book that talks about the reasons you are sick and how the American Medical Association, Federal Trade Commission, the Food and Drug Administration, and the pharmaceutical cartels are suppressing information about natural remedies and natural cures for virtually every disease.”
As the great Abraham Maslow wrote, “Practically everything looks less important than safety.”
People buy a little to gain something, but they buy a lot when they fear losing something important if they do not. If guns were outlawed by Congress and the public was told that, after next Friday, they could never purchase a gun again, gun stores across the country would sell out in short order. Even people who never considered owning a gun would rush out and buy one because of their fear at missing out on a last chance opportunity. Last chance sales copy is always very powerful.
Very useful article, this makes us review what we have done and see if there are ways to improve on the results obtained from our efforts.
Competition is a good thing as it keeps us focused on finding more productive means.
I think people just have a natural tendency to compare themselves to one another, and when it comes down to it, they’d like to be ranked higher. If you can offer your readers or clients something that makes them better, then go for it. Personally, I know I have an inherent competitive streak. Using that to push yourself forward can really help, if you put the right amount/type of work into it.
Hi Maki,
I’ve been following your blog for quite some time now…mostly to catch up more on what you have to say about social media. Been busy for weeks and haven’t been visiting. Now I come back to your site again, and here’s this great post.
From my own observations, I have to agree that most people are afraid to lose. In an auction, obviously overbidding is bad for the pockets. However, in most cases, being afraid to lose is actually a good thing. For example, an entrepreneur may be so afraid (or hate) losing that he or she fights hard to succeed.
In any case, thanks for the great info. Looking forward to more good stuff from you.
Darren Chow
“Apart from simply marketing your site, we should look at giving our audience the ability to connect (and compete) with each other.”
This social concept is one I am actually just implementing into my SEO business. I had a blog directly on my site that discussed our services, but since put it on its own URL and opened it up to comments, DoFollow links etc to promote a more social atmosphere.
i already read your blog for long time ago. ALl post interesting and yup, sometimes we need to do something to get our advantages. If we keep afraid, nothing we can do with that..
It’s really good!
It was always interesting to me how my ebay auctions would typically sell higher than the lower Buy it Now prices. I always wondered why auctions, which were so much less convenient than BIN end in higher prices, which means the winner not only pays more but spends a lot more time and energy. I guess this explains it.
Very interesting view of how psychology correlates with marketing practices. The whole concept reminds me of gambling: Many people are aware that as a general rule, “the house always wins” and yet the thrill of the play keeps people coming back in hopes that the return will at some point, be rewarding. Imagine a black jack table with your top 3 competitors in attendance. I can’t see anyone walking away from that sort of opportunity at any cost… The bragging rights alone!
This is an interesting phenomenon, although, broken down into simpler terms it makes total sense. When we already have something in our possession, we take ownership, so it hurts more when someone takes it away. If we never had something in our possession, there’s no ownership – it isn’t personal. That’s why a product or service that helps you not lose your car (it’s mine and you can’t have it) is more appealing than a product or service that helps you obtain a car (I don’t have that car, it’s not mine, so anyone can have it). Ownership makes the difference.
Nice entry. Markets are still expanding online, higher bidding is a little obvious at some point.
Barry Schwartz (in his book The Paradox of Choice) gives an example of why you’ll buy more options when you make a car purchase if all the options are listed first and then you have to take away what you don’t want vs. adding options. I have a whole chapter on Fear of Loss and how it can be applied to persuade at web sites in my book Neuro Web Design: What makes them click?. Although competition may be involved, I think fear of loss, like many unconscious processes, is a shortcut. A way for our brains to say, “PAY ATTENTION! This is is important”. A way to help scan and sort through everything going on around you and focus on what’s important. That’s what the unsconscious mind is all about.
Susan Weinschenk, Ph.D.
http://www.whatmakesthemclick.blogspot.com
It´s amazing how much you can learn from your competition.Most business owners visit the competition to see how they have done a certain thing and point out everything the competition has done wrong.It is important to know what marketing techniques your competition are using to make sales or how their website or blog looks, do they have a newsletter, are they showing up on search engines on which keywords and so on.Take some time to learn from your competition online, because they are learning from you as well.
@Lance Jepsen Author of Internet Marketing -
Rather broadly, I think ego outranks fear as motivator in regards to marketing.