Have you ever been shopping and put something in your cart just to think about it? You weren’t sure if you were going to buy it, but you wanted to walk around with it for a bit to see if your mind changed. Did you end up buying it or putting it back on the shelf?
It turns out that the intent to own, or owning, an item can create emotional bonds that people don’t want to break.
It’s down to a behavioral science principle known as the Endowment Effect.
What is the Endowment Effect?
The Endowment Effect says that ownership, or the intent to own, creates emotional bonds between a person and an item. In other words, people place a higher value on things they own or intend to buy.
This effect has been widely documented with bottles of wine, mugs and pens, even lottery tickets and housing prices. Even some non-human species have shown Endowment Effect-like behavior when studied in captivity.
An everyday example of the Endowment Effect happens when people sell their homes. Often they overestimate how much the house is worth because they’re emotionally invested in it.
The Effect of Ownership on Price & Value
Professor Dan Ariely described this effect through the lens of Duke University basketball.
If you’re unfamiliar with Duke basketball, all you need to know is the Duke-UNC game is the biggest of the year. And that it takes place in an area of the United States where basketball is a religion.
To score tickets to the big game, students camp out for weeks. They then enter a lottery for a chance to win tickets.
Ariely reached out to students who’d won tickets and those who entered the lottery but didn’t win. Both had invested the same amount of pain, time, and effort to enter the lottery. But some had won, and others hadn’t.
Would ownership affect how much the students thought the tickets were worth?
The results were interesting.
- Students who lost the lottery said they’d pay an average of $170 for a ticket.
- But students who won the lottery and already owned the tickets, asked 170% more for the same ticket .
The lottery winners overvalued their tickets because they were emotionally attached to them.
Lesson: The more emotions are associated with a product, the more people value it.
And once someone owned the Duke-UNC tickets, they begin fantasizing about the game. Lottery winners were creating what Ariely dubbed “pre-memories” of the game. It felt like selling their tickets would cause them to miss out on these fun, future experiences.
How to Apply the Endowment Effect
There are lots of ways to apply the Endowment Effect in marketing and advertising. For example:
1. Money-back Guarantees & Warranties
Brands know that if you use their product, you’re less likely to want to give it up. Guarantees can also help lower the risk of trying a new product and make customers willing to spend more.
For example, the outerwear brand Canada Goose famously offers a lifetime warranty on its products and will repair coats themselves.
2. Free Trials
A free trial helps customers feel that they’re using and owning a product, even if it’s just temporary. They’re less likely to give up the product after the trial because they now feel emotionally bonded.
For example, Casper, the mattress brand, offers a 100-night trial so people can try the product in their homes.
3. Free Return Policies
Studies have shown that people are reluctant to return something once they’ve bought it. A free returns policy can not only trigger the Endowment Effect once people take an item home, it can also attract more customers to buy in the first place.
For example, Costco, the bulk retailer, offers a famously lenient returns policy. It doesn’t matter if you’re missing a receipt or you bring back something that’s ten years old, they will refund 100% of your money, no questions asked.
4. Haptic Imagery
Haptic Imagery describes an image (or words) that encourages the “mental visualization of touch.”
Images that show people interacting with a product or copy that features “touching” language can trigger the Endowment Effect, like this ad from Kentucky Fried Chicken that plays off of their “finger-licking good” tagline (and also uses the Generation Effect for good measure).
Consumer Electronics brands commonly use haptic imagery to make potential customers imagine owning their products. Apple, for example, has moved away from product-only visuals to products-in-hands imagery in its ads.
When Apple was advertising in the late 90s and early 2000s, they focused on the products themselves. Most commercials featured an iPhone or a Mac spinning on an all-white background, whereas now these products are more likely to be shown being used and touched by people.
5. Sampling & Product Experience
Whether snacking on a sample of cheese or touching a cashmere sweater, experiencing a product through sampling can help people feel like they already own the product. In fact, simply touching a product can trigger this feeling of perceived ownership that signals the Endowment Effect.
Companies know that sampling can drive a host of benefits — from kickstarting new customer habits to driving sales. A study of grocery store sampling practices showed they drove product sales by as much as 2,000%.
6. Try Before You Buy
People who try on or test your product are more likely to buy it. Changing rooms, for example, can drive sales because they give people a chance to “practice” owning clothing items.
It’s also why car test drives are so successful. On average, people only test drive 1.9 cars before they feel confident enough to buy a car, and 84% take a test drive before making a decision.
That’s because once we get into a new car and test it out, we imagine ourselves driving it everyday creating those "pre-memories" that we talked about earlier. We’re less willing to give up those pre-memories once we’ve started creating them with a car.
10 Real-World Examples of the Endowment Effect
If you’re interested in apply this effect, here are ten examples to get you started (click to skip to the example):
Get free case studies, every week.
Join the Choice Hacking newsletter to get a behavioral science and psychology case study in your inbox every week.
I'll also send you my eBook "5 Psychology Principles That Can Perfect Your Experience."
1. Sephora: Virtual Artist
Beauty retailer Sephora has an industry-leading customer experience built on the Endowment Effect. In this example, the Sephora Virtual Artist kiosk allows customers to try on a new look using items available in the store. Like sitting down at a beauty counter and getting a makeover, this experience gives people a taste of owning and using the products.
2. Walmart: Augmented Reality
Walmart is the latest in a string of furniture retailers to introduce Augmented Reality into their customer journey. People can now select furniture items on their Walmart app and project the item into their personal space, increasing that sense of ownership.
3. Olay Regenerist Ageless: Show people touching your product
This example from Olay Regenerist, a beauty cream, shows a model applying the product onto her face with her hands is a type of Haptic Imagery. Viewers feel they’re touching the product as they watch the model’s hands use the cream.
4. Pizza Hut: Show people enjoying your food
Have you ever noticed that Pizza Hut always shows people touching and eating their pizza in ads? And that when you see it, you might get a little… hungry for a slice?
Consider how this example from Pizza Hut compares to an ad from a company like McDonalds, which doesn’t generally show people eating or touching its food:
The effect of these two ads is likely to be very different, all because one shows someone touching and eating its product and another focuses on displaying its product in a sterile environment.
5. Beauty Tutorials: Sephora
In this example from beauty retailer Sephora, Lady Gaga demonstrates her “everyday artistry” makeup look using her Haus Labs brand. Beauty tutorials and try-ons allow customers to start feeling that “intent to own” because of their use of Haptic Imagery.
Think with Google found that 66% of recent purchasers of beauty products said, “YouTube allowed them to visualize the product they’re going to buy.”
6. Unboxing Videos: Haptic Imagery
Unboxing videos aren’t usually created by the brands that are featured. But encouraging content creators to do an unboxing of your product can be powerful.
According to a Google Consumer Survey, 62% of people who view unboxing videos “do so when researching a particular product.”
7. Samsung: Haptic Imagery
Samsung mobile phone ads often show their products being touched, felt, and used. Below is an example of Samsung using haptic imagery to evoke the Endowment Effect in one of its ads.
8. Warby Parker: At home try-on
Warby Parker, the American optometry brand, built its direct-to-customer business on an “at-home try-on” offer. Because glasses are so personal, Warby Parker knew it would be difficult to get people to buy them without trying them on. Its solution was sending people five frames to try on for free.
9. Amazon Prime: Try Before You Buy
Amazon Prime offers a “try before you buy” service in select countries that allows people to choose clothing, shoes, jewelry, and accessories that are sent to their homes, where they can try them on for seven days and return the items they don’t want for free.
10. Carvana: Virtual tours
Used car marketplace Carvana offers 360-degree virtual tours of its inventory. By asking people to touch, feel, and manipulate their cars, the platform is more likely to trigger the Endowment Effect.
The effect is even more likely to kick in if people use tablets or smartphones to shop. Studies have found that touch interfaces can trigger the Endowment Effect more often than those that don’t require touch.
Be Aware When Applying the Endowment Effect
You should be aware of a few things if you want to apply the Endowment Effect:
- First, it works best in what are called “self-enhancing” cultures. Those are cultures in which people think highly of themselves are more individualistic.
- The Endowment Effect also works best with items that make us feel good about ourselves. For example, if people are asked to give up an exercise machine they never use (that reminds them that they’re out of shape), they won’t value it as highly as an item that raises their self-esteem (like an expensive purse that makes them feel good for having a high-paying job).
The Bottom Line
If you want to apply the Endowment Effect to your marketing and customer experience, start by asking yourself:
- Pre-purchase: “Do we give customers enough opportunity to see other people interacting with the product?” Consider changing your advertising or brand guidelines to include human hands or people using the product.
- “Do we evoke ownership in our product descriptions and images? Do we allow customers to “touch and feel” or try-on the product themselves?” Consider where in your experience customers could try on or trial your product. Can you offer in-store tests?
- Purchase: “Do we offer a low risk way for customers to sample or try on the product?” Consider offering a money-back guarantee to get customers touching and feeling the product.
My Weekly Podcast
This story-driven podcast explores how the world's biggest brands use psychology and behavioral science, all in around 10 minutes.
Ever wanted to know how you can use psychology and behavioral science to "grow like the greatest" brands? Now you can with these video case studies.
From psychology and behavioral science to solving "impossible problems," my books can help you create more meaningful marketing and customer experiences.
Want to learn how you can apply behavioral science and psychology to your work? Check out my pragmatic (and affordable) courses.