Influence through loss versus Gain

When looking to influence people it is important to keep in mind that humans make rational decisions irrationally. This is not something I think, believe, or just heard somewhere or read online. No, I’m not some wacky haired presidential candidate. This is something I know for a fact from exhaustive research (if you don’t believe me do some research on your own.  You can start here with Frames, Biases, and Rational Decision-Making in the Human Brain, by Benedetto De Martino*, Dharshan Kumaran, Ben Seymour, Raymond J. Dolan) or read a book, try Influence by Robert B. Cialdini or Thinking Fast & Slow by Daniel Kahneman.

Here’s an example of the research in Frames, Biases and Rational Decision-Making in the Human Brain that impacts influence. Two different groups of people were presented with 2 different mathematically identical financial choices framed as a Gain statement or a Loss statement.

Influence Risk Avoidance Graph

Gain Group – Given $50 with a choice to

Sure Thing Choice: Keep $20 or
Gamble Choice: Have a 50% chance of keeping $50.

Loss Group – Given $50 with a choice to:

Sure Thing Choice: Lose $30 or
Gamble Choice: Have a 50% chance of keeping $50.

Now if you do the math. You’ll see that these are mathematically 100% the same. In both cases, the Sure Thing Choice equals $20.  The only difference is one is expressed as a loss and the other as a gain. People are programmed to avoid loss, 44% of the people presented the sure thing choice expressed as losing money, chose to game instead of taking the same $20 dollars guaranteed in the Gain Group.

We, us humans are programmed to avoid loss. Loss is a major factor in influence.

What this means is it is more effective to state a product ROI in terms of how much money a prospect is losing each day they delay taking action versus how much money they’d save by using your product.

This is why pitching to pain works. It is a method to influence through loss.

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