Sunk Cost Fallacy to Increase Marketing Return on Investment

Sunk Cost Fallacy refers to the tendency of individuals or organizations to continue investing resources into a project or decision, despite knowing that the resources already invested are irretrievable and will not yield any benefit in the future.

By understanding the human psychology behind sunken costs, we are better placed to predict and influence customer behavior.

Here are some strategies to consider:

Continually remind customers of their ongoing relationship with your brand: This works particularly well with frequent flyer programs and other loyalty offerings. For example, using phrases such as “a valued member since 2003” will further instill a sense of loyalty and increase the likelihood that the customer will continue using a certain product.

Remind customers of their initial investment and provide a prompt for ancillary purchases: For example, when a customer orders a pizza online, adding the message “treat yourself to dessert for only another $5” can dramatically increase your overall sales figures.

Suggest customers that there is only minimal effort required to complete a purchase: For example, on hotel booking websites phrases such as “finalize your booking with just two more clicks” are frequently utilized.

Effectively tapping into the sunken cost bias can increase customer engagement and subsequent conversions. By prompting customers to recollect their investment, it is likely that they’ll continue their engagement with your brand.

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