It's Divine Because its Mine

Picture this: you have your favorite pair of jeans that fit you just perfectly.  Would you be willing to trade them for something of equal market value?  The answer is probably no.  The Endowment Effect is the idea that we tend to value things more highly when we own them.  If we have to sell our items, we want more for them than they are really worth.  A study was conducted at the University of California-Berkeley that tested the Endowment Effect on people using coffee mugs.  It found that students who had won free coffee mugs valued the mugs at $10. Those who had not won mugs would pay $5 for one.  Therefore, the value of the mugs doubled for those who owned a mug.  A study was conducted at Yale that sought out to find if the Endowment Effect existed in a real market.  It found that when bargaining over a trade-in vehicle, a consumer was superior if he or she owned the vehicle for a longer time.  Thus, this proved that the endowment effect did exist in the marketplace, leaving the door wide open for marketers.  There are a few ways marketers can use this effect to their advantage:

• Use vivid imagery: if the consumers can picture themselves using something, they almost feel they already own it.
• Allow for trial: this could range from a test drive, to an in-store display, or a free two-week trial.  When the customer can be hands-on a use the product, they gain a sense of ownership.
• Post-purchase Consumer Involvement: Encourage consumers to write reviews on your product or service or contribute their recommendations through social media.  This will make your customers feel satisfied with their purchase decision, and increase their sense of ownership.

Overall, the Endowment Effect is a power influencer of buyer behavior, and poses another great opportunity for marketers.