Happy Groundhog Day!
And just like the 1993 Bill Murray movie by the same name, marketing can sometimes feel like you’re doing the same things over and over again.
But what happens when your campaigns don’t work? Do you try the same thing again expecting a different outcome?
If you want 2021 to be your BIG year… but your marketing results already look a lot like 2020, it’s time to break the cycle.
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And in related news…
In today’s edition of Why We Buy we’re taking a look at The Sunk Cost Fallacy—why we continue to do things we know aren’t working if we’ve spent resources in making it.
Let’s get into it.
“Top Marketing Newsletters You Need to Subscribe To”
Inside Your Mind 🧐
What is a “sunk cost” exactly? A sunk cost is a cost that has been paid that cannot be recovered.
An example would be all the costs associated with launching an ineffective marketing campaign (ad spend, the cost of salaries, assets & design costs). If the campaign doesn’t make enough revenue, then it is impossible for the costs to be recuperated.
This means that with every new decision you must make, you’re also trying to account for previous sunk costs. This can cloud your mind and lead to spending more time and resources on a marketing campaign that doesn’t work because you’ve already paid for it to be created.
The Psychology of Sunk Costs🧠
As much as we like to pretend we’re purely rational (especially when it comes to business), every single one of us is influenced by our emotions.
If we previously committed to something, loss aversion & commitment bias will make us feel bad about abandoning it even if new information suggests that it is no longer the best course of action.
Other examples of sunk cost include the tension of giving up on a book or movie that you aren’t enjoying after getting through half of it. On one hand, it’s not satisfying you in the way you hoped, but on the other hand, you’ve already made it half-way.
Sunk costs are everywhere.
How To Apply This 🤑
Alright, so how can we apply this right now to sell more?
Collect data to help steer decisions
Emotions will keep us throwing money and resources at a project, rather than re-adjusting the project deliverables based on new information. Be sure to collect quantitative data that will give you an unbiased measure of the success of a project.
Test early and often
Before going all-in on a project, be sure to test it with your target audience. Your target buyers don’t care if you spent $10 or $10,000 on the campaign — they only care that your product makes their lives better.
Talk to your target audience
The cheapest and fastest way to validate your marketing idea (and get new ones) is to interview your customers. They’ll tell you why they bought your product, how the buying process could be improved, and what messages really resonate with them.
The Short of It💥
Don’t be afraid to walk away from a project that is not getting you the results you expected (even if you’ve invested time and money into it). Use new information and numeric data to offset the emotional aspect of decision making. Talk to your customers early and often to know exactly what they want before going all-in on a project.
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