You’re ready for a vacation.
The past few years have left you a bit frazzled, and you know it’s time for some serious rest and recovery.
You want to spend a week on the beach with a Pina Colada in one hand and a book in the other.
You have two options:
- Get an Airbnb on the beach somewhere tropical
- Go to an all-inclusive resort
The Airbnb would allow for more privacy and a bigger space. But, it also means you’ll have to grocery shop, find good restaurants, and be your own bartender.
The all-inclusive resort on the other hand would come with all of that.
You could pay the fee upfront and not think about anything else but your frozen drink, your book, and the sound of the waves crashing gently into the shore.
You make your choice and book your stay.
Feeling excited, you close your laptop and breath a sigh of relief—you really need this break.
Which option did you pick?
In today’s edition of Why We Buy, we’re exploring the Pain of Paying – why paying upfront removes the pain of playing down the line.
Let’s get into it…
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The Psychology of the Pain of Paying 🧠
Even if you’re 100% certain about the purchase, the part of your brain wired for loss aversion feels a little bit like this: 😬
That feeling gets heightened when we spend cash versus using a credit card.
An MIT study of 64 students bidding on baseball cards found that students paying with a credit card would bid more than double ($61) the amount students using cash would ($29).
When you stay at an all-inclusive resort, you swipe your card before departing—oftentimes weeks or month in advance of the trip—and only go through the pain of paying once.
Each time you get a new Pina Colada or hit the buffet for some tacos, you get to feel the excitement of the experience without the nagging emotion of having spent money.
Instead of getting hits of 😬your entire trip, you feel like this 🤩
And 🤩 is exactly the experience you want to create for your buyers, right?
Inside Your Buyer’s Mind🧐
Research shows that people judge their experiences based on how they felt at the peak and at the end. Behavior scientists call this the Peak-End Rule.
Even if the whole experience was fantastic—like enjoying a meal at a Micheline Star rated restaurant—coughing up cash for the big bill at the end of it can leave a bad taste in their mouth.
When people pay for your products, as excited as they are, the loss aversion part of their brain rings a quiet alarm when they go to pay.
To get this alarm to ring a little quieter, create a buying journey that makes your customers feel less pain each time they buy your products.
How To Apply This 🤑
Alright, so how can we apply this right now to sell more?
Get people to pay before they play
All-inclusive resorts, cruises, themeparks — they’re all trying to avoid making you feel the pain of paying. Turn dozens of little purchases into one larger purchase, so you’re not constantly triggering the loss aversion alarm in your buyers’ minds.
Reimagine what payment looks like
Businesses that prioritize fun, like casinos or Disney theme parks, understand that paying is painful. That’s why they encourage guests to pay with chips or a pre-paid MagicBand. Losing a stack of chips still stings, but it’s less painful than losing a stack of bills.
And Disney’s MagicBand reduces the pain of paying since swiping a braclent doesn’t feel like paying, allowing themepark goers to stay in the moment rather than stressing about each purchase.
Break up big payments into smaller increments
Big ticket items can come with less pain when divided into multiple payments. Companies like Affirm and Klarna are adding themselves to commerce websites to make purchasing less painful and quiet the nagging loss aversion alarm.
The Short of It 💥
Loss aversion is very real and even exciting purchases can be slightly dampened when it’s time to pay.
Be purposeful about your buying experience to make people feel less loss aversion and more joy from their purchase.
And as Jay Abraham would say, feel free to steal loss aversion techniques from other industries.
Until next time, happy selling.
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