🏺 Endowment Effect:
We value things more highly just because we own them.
People will overvalue something that they own (or perceive to own, even if it's just having access to a product), regardless of market value.
i.e., once they've test driven the car, and synced their phone to the bluetooth, they'll want it more.
There are plenty of studies affirming the irrationality of ownership, but my favourite are those on Capuchin monkeys—which shows how broad the research is on this.
Through a series of experiments with bartering, it was demonstrated that Monkeys and Chimpanzees will value identical tokens differently, depending on which they own.
✅ Churn
If people feel like they own something, or have invested into personalising an experience, they're typically less likely to churn.
On the other hand, if the process of personalising (i.e., creating) an account is too time consuming, they may churn sooner.
✅ Feature usage
"I should use Apple TV more, because I'm already paying for it".
✅ Perception of value
The foundation of the endowment effect is that people attribute a greater perception of value to things that they own.
✅ Happiness & enjoyment
Riding a rental bike, and the exact same bike you own is a different experience. You may get more pleasure out of knowing that it's yours, and you're the only one who can ride it.
✅ Purchases
✅ Sharing & referrals
Free trials
This cognitive bias is one of the reasons why free trials are often so effective.
People invest time into their account (e.g., profile pictures, setting themes and colours), and then they don't want to lose access to the benefits that they have.
Early user personalisation
Services will often try to get you to personalise a product or service, before committing to a purchase. This leverages the endowment effect.
For example, Warby Parker will let you view any pair of glasses on your face—virtually—through a pretty impressive augmented reality lens.
Seeing the glasses rest upon your own nose, will help them feel like yours, even before you've bought them.
One more: on the Converse website, you can customise almost everything about your shoes, before you order them, and even before you create an account.
People may find it hard to abandon their shoes in the checkout, and lose their perfect design forever.
API for automatic personalisation
In an internal experiment, Typeform found that by auto-branding their forms after the user entered their URL, they boosted conversion rates from free to paid plans by 5%.
