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Have you ever wondered what makes free trials such a great tactic to boost your conversion rates?
I mean, 57% of B2C free trials convert!
Sure, the fact that customers get to test your product before paying for it is hugely responsible for their success rate. People can use it risk-free, knowing they won’t lose their money if the product turns out to be not what they expected.
After all, can you imagine buying a house or a car without taking it for a test drive first?
There’s another reason behind it though, called the endowment effect.
The endowment effect describes how people tend to overvalue products they own or have developed a sense of ownership towards.
For example, let’s say a few months ago, you bought a concert ticket for £200. You just found out that you won’t be able to make it to the concert after all, so you decide to resell your ticket. Would you sell it at the same price, or bring the price up so you don’t lose out? Most people would go for the latter, and sell the ticket for more than they paid for it.
The endowment effect is usually explained as a byproduct of loss aversion - the fact that we dislike losing things more than we enjoy gaining them.
Put more simply, once people try a product and it becomes a part of their routine, they don’t want to go back to achieving their goal without that product.
As to applying the endowment effect to your marketing, it all comes down to inspiring a sense of ownership or personal connection to a product.
I’ve already mentioned risk-free trials, but let me say this again: once a customer gets to try a product at home, they’re much less likely to return it. Think about when you’re buying a mattress, some stores offer 100-day trials that give you plenty of time to test the mattress and return it if you don’t like it - that’s often the deal-breaker, isn’t it?
People buy products they actually want, so a 100-day trial isn’t going to cause thousands of people to buy your product just to try it for 100 days and send it back. They're still parting with money, so if they have no intention of keeping the product, a 100-day trial is very unlikely to cause them to purchase.
This also brings me nicely to another way to use the endowment effect in your marketing, which is giveaways and freebies. Once you give something away your customers will immediately be endowed with your overall product, and it’ll be more difficult to give that up when the time comes.
Now onto some more complex tactics, we have Augmented Reality shopping experiences and 3D product models. Enabling your customers to visualise products in their home environment gives them that sense of ownership and provides context behind the product that often isn’t visible in product imaginary. AR for ecommerce proves extremely useful for furniture brands, but even Warby Parker offers a virtual try-on through their mobile app.
It may also be a good idea to test your pricing, which allows you to see what will happen if you make just a slight increase or decrease to your prices. It might turn out that your customers have a different idea of what is a reasonable price for your products and that you have fallen a victim to endowment effect yourself…
