Losses count more than gains

A recent article by Crawford Hollingworth published in the Marketing Society website looks at how we respond disproportionately to gains and losses. The technical term is loss aversion.
Generally gambling research shows that most people would need to be offered at least double their stake to take on a bet with a 50:50 chance of winning or losing. In other words on a coin toss, most people would want to be offered £20 to gamble £10.
Andre Agassi apparently said that the pain of defeat is more intense and lasts longer than the joy of victory.
Research amongst other sports shows that athletes seem to perform better to avoid losing or dropping back than when faced with opportunities to extend their lead. Tiger Woods once commented that par putts are more important than birdie putts because “you don’t ever want to drop a shot”. But in normal strokeplay competition each putt actually counts exactly the same.
As individuals, this suggests that there may be occasions where we miss out on big benefits because of the fear of loss – in business, are we more concerned with not losing than with seeking competitive advantage?
In our sales and marketing, we need to be aware that our prospects and customers are probably wired this way too. When we are communicating, messages around fear and loss may be more potent. Sales experts often talk about the need to identify and offer a solution to ‘pain’, rather than promise ‘pleasure’.
We also need to recognise that this psychological phenomenon will make people resistant to change – does the benefit of what we are offering outweigh the risk by at least 2:1?