Loss Aversion and Optimism Bias in Marketing

loss aversion optimism bias

Possibly, the most optimal illustration of the loss aversion concept can be seen in casinos around all the world. There, hardcore gamblers and fun-seekers alike follow the same pattern: The initial round they play the slots in order to win. The 2nd round? It’s to recoup any losses.

The loss aversion theory teaches us that individuals would avoid a reduction in value rather than reap a reward. 

In advertising, it's a strong tool that may inspire purchases for the right demographic. By alerting customers of what they may lose from an action not taken by them now versus completing a buy is far more powerful than offering benefits. 

Make loss aversion work for you by working on your campaign with one of these tactics.

If you create ownership your audience become more prone to hang onto it. Think about the tag line for the traditional, clichéd infomercial: Try it for 1 month and send it back if you don't like it. This has been around forever because when the trial period's month is up, sending the product back feels like losing, and customers are more inclined to hang on an item. Loss aversion in its best form is when someone scrambles to buy a product just because he or she cannot be left out.

Retailers are adept by showing how many items are left in order to develop a sense of lack. You may be shopping for a brand new pair of shoes and once you select a size and color, you see the text pop up:

Hurry. Only two left.

This makes you feel anxious and you are more prone to purchase to avoid missing out on the pair of shoes you need.

Imagine you are at the drugstore and you are purchasing a bottle of shampoo. You see that your favorite brand has a promotion: One bottle is 20 percent off, but one bottle is all the regular price, however it comes along with a free travel conditioner. 

Loss aversion theory tells us that you are more prone to opt for the bottle with the free present, even when the value of the present is less than that of all the discount. That's because you do not want to miss out on the opportunity to receive a free present, no matter the value is.

What's more, a free present feels more concrete than a discount, making consumers seem just like they scored a deal with their decisions.

Lastly, probably the most efficient loss aversion advertising strategies simply outline the sense of loss a consumer may feel if she or he does not make the purchase. Frequently, this strategy focuses on not offering only the item in question but offering it beside two inferior products.

optimism bias in marketing

Optimism Bias in Marketing

Say that confidence bias may be a mere artifact, a product of the test paradigms utilized to appraise it. People say rational, impartial individuals would appear optimistic. The work by Adam J.L. Harris and Ulrike Hahn on a 2010 research paper criticized the claim that optimism bias is shown by people by rating. The paper claimed that optimism emerges as a result of a belief upgrading with neural correlates in the mind.

On a behavioral level, these studies suggest that, for adverse events, desired info is integrated into private risk estimates to a greater level than undesirable info. Nevertheless, using job analyses, simulations and experiments it has been shown that this pattern of outcomes is a statistical artifact.

To conclude, these results clarify the difficulties involved with studying human bias and cast further doubts on the status of optimism as a basic characteristic of healthful cognition. Since all risk estimates have to fit to a scale between 0% and 100%; this final quote from Thomas Friedman fits perfectly:

Pessimists are usually right and optimists are usually wrong, but all the great changes have been accomplished by optimists.

Why Consumers Will Adjust to The Ever-Increasing Cost of Streaming

The promise of streaming from the get-go was a no-brainer: streaming TV would free us from expensive, outdated cable subscriptions. But with the television streaming war getting hotter than ever, consumers are expected to make some tough choices.

With a bunch of new services that’ll join Netflix, Hulu and Amazon Prime Video on the scene, it looks like the price of keeping up with TV could soon be comparable to—or maybe even more expensive than—a cable-TV subscription.

These new platforms include WarnerMedia, Disney +, NBCUniversal and Apple, which are all hoping to grab a slice out of the lucrative streaming pie via their exclusive content.

But how much are customers willing to pay for all of their favorite services?

Unlikely Consumers Will Get Their Wishful Monthly Rate

So, how much are you willing to pay to watch your favorite shows? If you subscribe to more than one streaming service, you’ve probably picked them up gradually, which might make you less aware of how they all add up. And it’s not an incidental amount.

According to a new Hollywood Reporter/Morning Consult poll, about $21, or somewhere between $17 and $27 is the amount most people are comfortable with. Given that even a modest bundle would exceed that ceiling—it’s unlikely consumers will get their wishful monthly rate. Also: I’m not going to get into the pricing specifics, as this changes all the time and would also put a timestamp on this video. 

But in the face of this ever-escalating viewing budget, some TV fans are going back to basics. According to the Los Angeles Times, an increasing number of Americans are seeking out that old-school staple: the TV cable subscription.

But if most Americans pay $80 to $100 per month today for low quality, ad-supported, linear cable programming, it’s not a stretch to ask them to move to bundled streaming for about the same rate.

The Rise To The Top

But while convincing non-wire cutters to pay more than $21 isn’t the issue, it’s up to the streaming services to appeal to specific audiences to get them to open their wallets.

It’s clear that players with the best new “must-see content” will rise to the top and attract the most customers. Their services won’t cost $21, though - it’ll likely be less than $80 per month, but more than $30.

The reason for that is that everyone is underpricing their services right now, thanks to investor-backed roll-outs, in order to scale globally in the winner-take-all markets.

When everyone has moved over and the streaming services need to pay off their debt, prices will start to go up. This is when we can expect to see different premium subscriber tiers emerging, in which some customers will choose to pay for better content and better service.

For TV addicts like myself, the future offers an avalanche of choices, both in terms of what to watch and where to put your money. And for the media companies, it will be an all-bets-are-off struggle to guarantee its streamer is indispensable to viewers.

One way or another consumers will end up spending more on entertainment than they ever used to, and they’ll be OK with that, just like people have gradually accepted paying over a 1,000 bucks for an iPhone.

Why Nostalgia Marketing Works Every Time

In a world that seems to be evolving at break-neck speed, immersing yourself in nostalgia is like wrapping yourself in a comfortable blanket of “the good ol’ days” when things were so much simpler. 

Studies suggest that nostalgia inspires consumers to spend their money because it promises an immediate return in the form of happy memories and comfort. This is why nostalgia marketing campaigns have grown increasingly popular in recent years, as brands begin to discover the value of connecting with their customers on a more in-depth, emotional level.

Politicians have also embraced this technique. Trump promised to “make America great again”, effectively implying a return to how things used to be. In the UK, the Brexit campaigners touted a way back to how the country was before the European Union ever existed.

In any case, the public eats it up. It seems that a growing group of consumers are looking backwards and wishing things were the way they used to be.

And when it comes to marketing, that offers up a ripe opportunity.

The Power Of Emotion

Any marketer is well aware of how powerful an effect emotion can have on a campaign.

Make your audience happy, or make them sad. Pull on their heartstrings, or scare them to death. It doesn’t matter what they feel, only that they do.

Neuro-imaging studies have found that when consumers evaluate a brand, they rely more on emotion than on information.

As much as we like to think we’re rational machines, the truth is that we’re wildly irrational when it comes to making decisions. That includes purchase decisions.

This means that rather than consider the facts, we focus more on how the product makes us feel.

Facts play a part, and you need to ensure you inform your audience. If you want to seal the deal, however, you need to engage them on an emotional level.

And it just so happens that nostalgia is an extremely powerful way of doing exactly that.

Now, let me take you back. Remember when you were a child? Everything was new. Each day brought with it a new experience or situation for you to deal with. New experiences catch us off-guard, and when we’re young we’re often overwhelmed with emotions that we’ve never even felt before.

Over time, these raw emotions lessen in intensity and once we’re adults, we’re fully in control. That means it’s pretty hard for marketing to actually affect us emotionally.

Research tells us that nostalgia counteracts things like boredom. 

It also makes people more tolerant of outsiders, and more generous to strangers. In fact, nostalgia can literally make people feel warmer on a cold day. 

So in today’s highly competitive marketplace, nostalgia in advertising can allow both new, and old brands to connect with their audience on a powerful emotional level. Already, some of the most significant companies in the world have begun to show us just how useful this tactic can be.

Brands like Nike and Pepsi are already using retired designs and logos from the past, announcing them as “throwback” options or “retro” products. Shows and movies are tapping into old design features and strategies to tickle the nostalgic nerves of their watchers.

The question is, how can you create your own nostalgia marketing campaigns?

As always, the best way to learn is through examples. So I’ve handpicked some great campaigns that use nostalgia to great effect.

Spotify — Never Ending Story

Personally I don’t have a strong connection with The Neverending Story, but it’s obvious that a lot of people do. The use of the crappy CGI, the iconic soundtrack, and the use of that flying dragon-dog thing original voice actor all conspire to return viewers to their younger selves.

It’s as if we’re watching our beloved childhood movie all over again, and so we open up emotionally.

How do Spotify stop it from going too far and making it cheesy? They inject a little bit of humor into the ad.

Atreyu is now roughly 40 years old, sporting a large, bushy beard, and jokes:

“I can’t believe after all these years people are still listening to this song.”

It’s a little joke at the viewer’s suspense. Yeah, we’re taking you back to your childhood, but you regularly go back there anyway, so what’s the issue?

It’s a smart way of letting you in on the joke. The ad is no longer aimed at you, it’s for you.


After Netflix added the classic Bob Ross TV show to their lineup “The Joy of Painting”, the beloved 80s artist saw a huge resurgence in popularity during 2016. In a matter of weeks, Bob Ross became a meme, a source of cult appreciation, and a trending topic on Instagram. Technology brand Adobe took notice of this trend and decided to use it in their nostalgia marketing strategy, creating a series of tutorial videos to promote their “Adobe Photoshop Sketch” application for the iPad Pro.

The joy of sketching campaign was fantastic because it not only accessed the benefits of nostalgia in advertising, but also took advantage of the trends of the time. The company even worked alongside Bob Ross Inc to make sure every detail in the “Joy of Sketching” series was accurate.


Pepsi has also used nostalgia marketing strategy as a way of capturing their audience and strengthening emotional connections. Like Cola, Pepsi also brought back a discontinued drink from the 90s, “Crystal Pepsi”, as part of a limited-time run in 2016. The brand promoted their upcoming revival of the drink with a range of incredible advertising campaigns that built upon their existing nostalgic strategy.

One of the most appealing parts of the campaign was a game called the “Crystal Pepsi Trail”, which drew inspiration from the “Oregon Trail” game of the 70s, updated with a range of 90s call-backs like Tamagotchis and Furbies.


In an age that’s plagued by impersonal digital connections, nostalgia allows brands to leverage the optimistic feelings that come with a walk down memory lane. References to the past help to humanise brands, creating that sense of alignment that we all feel when we think about our past.

As always, successful campaigns – nostalgic or otherwise – will take work and authenticity. The key is figuring out how to identify the most important moments in your customer’s timeline and use those memories to enhance the identity of your company. Nostalgic marketing works best when companies understand their audience, keep their finger on the pulse of the existing culture, and listen to what people crave the most.


Hi, my name is Fernando, and I run this site.

Thanks for visiting. If you’re interested - or even better: invested - in the intersection of marketing, emerging tech, and futurology then this blog is for you. Welcome!

The Psychology of Color in Marketing

A brand’s choice of color is a fundamental element that reinforces both its personality and the qualities of the products and/or services it offers. Some brands are so iconic that it is possible to identify them from just a single Pantone color without an accompanying logo. Others, including Cadbury, Barbie, and UPS, have even gone so far as to trademark their defining shades. So why do brands place such importance on color and what impact does it have on the way consumers perceive them? Let’s look at some research and then some famous examples.