Why and how to use loss aversion in email marketing (plus 4 examples)

Avoiding loss and pain can be a potent motivating force. Here are tips for using this psychological approach in your email campaigns.

As customer acquisition keeps getting more expensive, it makes sense to market more effectively to the customers you already have. Using psychological approaches in your email campaigns can motivate customers to act instead of making do with hastily written copy and a “Buy now” mindset. Knowing which approach to use — now, that’s the hard part!

This ties into one of my goals for my MarTech columns in 2023 — sharing strategies and tactics to help you find more opportunities already lurking in your email database and using your email marketing resources more efficiently.

Using psychology to address your ecommerce customers’ motivational drivers will be one of those approaches. I’ve built many email campaigns around psychologist Robert Cialdini’s seven principles of persuasion:

• Social proof
• Reciprocity
• Authority
• Liking
• Commitment and consistency
• Scarcity and loss aversion
• Unity

We talk a lot about social proof (seeking assurance or guidance from others that we’re making the right decision), reciprocity (getting value in exchange for giving value) and authority (seeking expert advice).

Loss aversion, in which we act to avoid losing out on something important, doesn’t get as much attention, but it can be remarkably helpful when used appropriately and with the right audience.

What loss aversion can — and can’t — do for you and your customers

We don’t focus as much on loss aversion when structuring email campaigns. In part, that’s because we’re trained to focus on motivating customers to act by showing them the benefits of action — what’s in it for them — instead of the costs of not acting.

What loss aversion can do

It appeals to a basic human need to avoid pain — here, losing out on something important. A study by psychologist Daniel Kahneman has shown that the pain of losing is psychologically twice as powerful as the pleasure of gaining. That’s why avoiding loss can be a potent motivating force.

It’s a cognitive bias many of us share. We respond better to sticks (“Act now before you miss out”) instead of carrots (“Act now and get these great benefits”).

What loss aversion can’t do

A better way to frame this is to talk about what loss aversion isn’t. It’s not a tool you should use to try to manipulate your customers into doing something they don’t want to do or acting against their interests.

That just creates disgruntled customers, who likely will regret their purchases — something that can rub off on their experience with your brand and affect your customer lifetime value.

Loss aversion works best when you use it to help your customers avoid a negative outcome, such as:

• Paying more because of a price increase.
• Losing a beneficial feature.
• Missing out on products your data tells you they purchase regularly.

Loss aversion, urgency and scarcity

These three concepts often get treated as if they are the same. They aren’t, although they often work together in email campaigns (as shown in the Leesa example below).

Urgency is strictly time-based but there may not be a loss involved.

Scarcity drives demand for items that are selling out quickly or are a limited offer, like:

• Low-priced airfares or cruise cabins.
• Limited-edition products.
• Or anything that can’t be replenished after it’s gone.

Loss aversion reminds customers of exactly what they could lose by not acting on time. Tactics like revealing new higher prices for airfare or a subscription service can be more effective than a campaign whose central message is “Our sale ends tonight.”

What are the specific consequences of not acting? That’s a loss aversion mention.

Having said all that, is loss aversion just a fancy word for FOMO (fear of missing out)? Not quite, because FOMO also includes the social pressure of knowing others will benefit by buying or signing up for an experience.

You can speak to your customers’ fear of loss by giving them options to conquer it. See my advice below for campaigns that address loss avoidance.

Test before you invest

This is a crucial point. Unless your brand appeals only to a homogenous set of customers, you can expect to have a customer base made up of people with diverse values and motivators. It might tilt more toward price-sensitive shoppers rather than impulse buyers or social-proof-seekers. Or it could represent the entire spectrum of Cialdini’s seven persuasion principles.

If you’re unsure, set up a series of A/B test campaigns to help you understand what motivates your customers to act. Not just to open and click on emails but to buy, upgrade, join your community or engage with everything you offer.

This kind of testing will involve more than just testing one subject line or call to action against another. You should adopt a holistic approach, which considers everything from the inbox view (from name, subject line, preheader, send time) to the offer, email copy, images and design.

This reduces the need to test individual elements because you are testing the campaign as a whole. You just have to make sure each element works together to support the persuasion principle you’re testing, which is defined within your hypothesis.

A sample hypothesis: Loss aversion vs. benefit-led copy

All good testing begins with a hypothesis, which is your statement of what you predict your test will reveal. Here’s one I have used in several campaigns where we were trying to uncover our customers’ primary motivation:

• “Loss aversion copy is a stronger motivator for conversions than a benefit-led copy because people hate losing out more than they enjoy benefitting.”

3 tactics to use loss aversion

Even if you find your customers do act more to avoid loss than to gain benefits, you should use loss aversion sparingly and only under certain conditions. Otherwise, a steady diet of “Don’t miss out/Act now or lose” messages will drain your campaigns of motivational potency.

Your customers who respond to loss aversion best might also come to suspect you’re not being totally honest with them if you continually hammer home an “Act now or miss out” message.

You can appeal to these customers by helping them find ways to avoid a loss. These three campaigns get that point across without saying, “Don’t miss out.”

• Jump the queue: Let them pre-order limited quantities or popular merchandise.
• Try before you buy: Loss-averse people don’t want to risk spending money on something that could cause pain. Instead of pushing them to buy, reassure them that they’ll spend their money wisely on your products.
• Discount the risk: A discount, rebate or coupon can induce a cautious person to take a chance on a potentially risky product. Use this approach conservatively, and test it against another loss-aversion tactic like pre-ordering, because it can reduce your profit margin.

Loss-aversion email examples

1. VIP ordering 

Subject line: Don’t miss out, Pre-Order the Ariel Bag!

What it does right

It gives customers the chance to get their orders in on a signature brand product before it goes on general sale. The email impels action by giving customers a deadline to order, letting them know when the product will ship.

What it could improve

Add copy that reminds customers why merchandise like this usually sells out or specifies what the “popular demand” was. Did it sell out previously? Is it a limited-run production?

2. Loss + scarcity + urgency

Subject line: 2 days till price increases take effect

What it does right

This campaign combines everything a loss-aversion message should have:

• Loss: Hesitating means paying more for popular products.
• Scarcity: Price-sensitive customers could have fewer choices of affordable products.
• Urgency: The subject line and email copy emphasize the price-change deadline.

The email also takes a bold approach by expressing the message in the text without a strong hero message. It wraps a transparent explanation for the price increase (a sensitive topic in inflation-ridden 2022) in a statement of company values and customer appreciation.

What it could improve

The copy and tone are spot-on but will customers read the details without an image to capture their attention? I don’t know the answer to that, but on the day after they sent this email, Leesa sent a final price-increase reminder that used a short copy and a strong hero image.

3. Beat the price increase

Subject line: Reminder: Join Today To Avoid Ellie Price Increases

What it does right

This is a classic loss-aversion email for subscription services, but it works for other ecommerce models as well. It reminds buyers about what they receive now, what they will lose by not acting and how soon they need to decide. It’s also clear why the service is changing.

What it could improve

Stronger visual imagery, such as examples of previous subscription boxes, could help customers understand better what they can expect and what they could lose by canceling.

4. Loss aversion with a side of scarcity

Subject line: Sold out in the UK and going fast in AUS – Advent Calendars 2022⚡🎁

What it gets right

This campaign illustrates how scarcity and FOMO can be key elements in a loss-aversion campaign. The copy lets customers know what others have done already and frames the benefits of acting quickly by letting customers know what else they can get by acting quickly. Plus, the call to action is simple and direct.

What it could improve

If the Advent calendars are really selling as quickly as the email claims, how about giving me a deadline to act?

Next steps

As I mentioned earlier, a loss-aversion campaign requires special handling and a unique understanding of your customer segments to know when to use it (and when not to use it).

A customer who doesn’t care much about buying hot new products or isn’t price-motivated probably won’t jump on an email that plays on FOMO or avoiding price increases.

That’s why testing is so crucial. It will help you discover what motivates different segments of your customer base so you can structure campaigns that speak to those motivations. You can layer personalization data on top of these campaigns to make them even more relevant.

If you need more help setting up a testing program, see my earlier article, 7 common problems that derail A/B/n email testing success.

Campaigns like this take time and effort to set up correctly, but the payoff is huge — customers who help you build your business because you took the time to understand and speak to them appropriately.

Originally posted on MarTech