Mind Hacks On The Endowment Effect

Mind Hacks is continuing its excellent coverage on the neuroscientific implications of advertising, marketing and consumerism with a short post about the endowment effect.

The endowment effect is the old workhorse of marketing: your brain comes under its sway every time you make a purchasing decision based on a money-back guarantee or a rebate. The idea is that companies depend on the endowment effect in that a perk or discount a customer will most likely never cash in on will be calculated subliminally as a good consumer decision, simply by its presence.

Or, as Mind Hacks writes:

You can see why car-salespeople are keen for you to take a test-drive before you purchase, or why shops are happy to offer a money-back-with-no-questions-asked option. You figure the money-back option into your cost-benefit calculation about whether to take something home, but once you’ve got it home your preferences realign – that item is now “yours”, so you’re far less likely to take it back to the shop, even if it doesn’t turn out to be as good as you thought when you bought it.

Which is one of the reason we’re so loath to post rebate deals in our Morning Deal Round-Ups. Well, that and the fact that you can time how long it takes for the average customer to get a rebate check by the half-life of iron.

Link: The Endowment Effect and Marketing