When a real estate agent came to appraise my property, she called my house “cute”. Without meaning to, she patronised me and the home I’d worked so hard to afford.
Clearly, her frame of reference was different to mine and this subtle slight was enough to put me off working with her.
Little did she know – yes, my turn to patronise – that sitting beneath my reaction was an important behavioural bias: the endowment effect.
This is our tendency to place a higher value on something just because it’s ours.
We see it play out when selling homes, cars, furniture...that mug you made in pottery class…
The market may think it’s worth “x” but as owners we think it’s worth “x times a thousand”.
Knowing about the endowment effect is important in a number of ways:
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Letting a customer handle a product makes it more likely they’ll go on to buy because they feel a sense of ownership (beware when you’re test driving cars!);
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Encouraging customers to trial a digital product, inputting their logo and data, improves the odds they will upgrade to paid;
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Colleagues can hold on to a project or idea more than seems reasonable simply because it’s “theirs”, so you need to help them distance themselves first; and
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Inviting an objective party to appraise what you’re trying to sell is a smart thing to do. It’s even smarter to listen to their answer!
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