When I was younger, I had a huge collection of Barbie Dolls. These dolls were priceless to me and filled up three giant storage tubs! When I turned 13, I knew that is was time to sell my Barbie’s because I hadn’t played with them in so long. So, my parents and I went to a yard sale to sell them. To my surprise—and dismay—my parents sold all three of my large bins of my beloved Barbie’s for a mere $100! I was so upset because I thought they would be well be worth hundreds!
According to the endowment effect, we tend to value the things that we own more highly than they are actually worth. As in my case above, we want more than the actual value of our items when we have to sell them. A recent study at Duke University also supports this effect. Students who had won basketball tickets valued their tickets at $2,400, whereas those individuals who had not won tickets valued the tickets at $170.
Marketers use the endowment effect all of the time. Because people tend to attribute more value to things simply because they own them, marketers want their customers to attribute the highest possible value to their product. Marketers can help to increase their customer’s ownership in a product through creating strong brand names, asking for involvement on social media, and encouraging feedback and suggestions of their product. All of these things help to increase awareness of the product and demonstrate valued customer service, which helps to increase customer ownership value.
An example of the endowment effect used in marketing is in car sales. Car salespeople are adamant about people taking a test-drive before a purchase or often times they offer a money-back-with-no-questions-asked option. This is because studies show that once you purchase a product, that because this item is now “yours,” so you are far less likely to take it back to the shop. This is even true even if the product is not up to your standards. You now value the product more than what you bought it for simply because you own it.
Do you feel like this effect is true? Have you had any instances of this in your life? Be sure to comment below!