Have you ever wanted to trade in your phone or car and been disappointed in the price you’ve been offered? That’s the Endowment Effect – the bias where we tend to attach more value to an item simply because we own it.
First studied by Richard Thaler, the Endowment Effect shows that people tend to overvalue things they already own, compared to identical items they don’t. Ownership doesn’t just change what something is, it changes what it means to us. This bias affects how much we think something is worth, how reluctant we are to give it up, and how attached we feel, even if we only own something temporarily.
Marketers can benefit from this theory to design user experiences that feel more meaningful and personal. It’s a fine balance between value, personalisation, and friction.
Free trials are a good example of how this bias works. If someone begins to feel like they own a product, they are more likely to keep and justify paying it. Once they’ve signed up, marketers can then leverage loyalty and subscription models to adapt to what customers want and make them less likely to switch. This is why Netflix and Spotify have made their way onto so many people’s monthly subscription lists; they’re not just using a product, they’re using their version of it.
There’s other clever ways you can integrate the Endowment Effect into your marketing to make customers feel like your product is really theirs. For example, letting people customise a product adds ownership, and it doesn’t stop once a product has been added to their basket. Sending a ‘you’ve left something in your basket’ message can subtly reinforce that ownership.
How can you leverage this effect in your customer’s journey? It starts with allowing people to interact with your product early on such as virtual try-ons and personalised quizzes. A subtle language change can also imply ownership. For example, rather than saying ‘choose a plan’, change the wording to ‘choose your plan’ – it’s not just a plan, it’s theirs. Finally, follow up with what they have to lose, not just gain, to trigger the Endowment Effect. For example, use messaging such as ‘this offer ends in 24 hours’ and ‘don’t lose your saved progress’ to trigger action.
The Endowment Effect shows us that ownership creates emotional weight. People don’t just buy products, they buy a piece of themselves reflected back. If you want someone to value your product or service, don’t just tell them about it. Let them take some ownership because once something feels like theirs, it’s much harder for them to let go.