You’re walking down the street. Consider two realities:

A: You unexpectedly find $10 in your pocket. 

You feel positively-surprised!

Or:

B: You left the house with $10 in your pocket.

But you reach in and it’s gone.

The pain you feel from its loss is greater than the good feeling of finding it.

Prospect Theory explains that our perceptions of value differ based on how something is framed, and losing things feels worse than getting them feels good.

As one of the grand concepts that underpinned a lot of the early ideas within behavioral science, Prospect Theory is a beast with many aspects to it, such as Loss Aversion, Framing, Certainty, and Risk.

But for now, take your practical understanding a step further by reading the Aggregation Effect and Segregation Effect Nuggets.

You’re walking down the street. Consider two realities:

A: You unexpectedly find $10 in your pocket. 

You feel positively-surprised!

Or:

B: You left the house with $10 in your pocket.

But you reach in and it’s gone.

The pain you feel from its loss is greater than the good feeling of finding it.

Prospect Theory explains that our perceptions of value differ based on how something is framed, and losing things feels worse than getting them feels good.

As one of the grand concepts that underpinned a lot of the early ideas within behavioral science, Prospect Theory is a beast with many aspects to it, such as Loss Aversion, Framing, Certainty, and Risk.

But for now, take your practical understanding a step further by reading the Aggregation Effect and Segregation Effect Nuggets.

Prospect theory is explained with a graph. Negative losses and positive gains recorded on the horizontal are set against a vertical intensity of feeling for those losses or gains.

As we gain more, we feel less for each gain. In contrast, even a small pain (shown in red) feels a lot more negative than an equal-sized gain feels good.

Package pain. Consumers will feel less overall pain from any costs incurred when you package and deliver them all together rather than when they're felt as separate, smaller pains.

Spread out rewards.

Instead of offering larger, chunkier benefits to consumers, break these down into smaller pieces, spreading them out across time.

$10 given 4 times feels more valuable overall than $40 given once.

Offer mixed product bundles.

We feel less good with each thing we consume. Therefore, the first can of soda tastes better than the fourth.

This means we'd get more complimentary value from a bag of chips instead.

Look for ways to offer relevant, mixed product bundles to offset diminishing consumer sensitivity.

129 people were split into 2 groups, with half asked to either write about a time when they felt nostalgic or a neutral event. After writing, everyone was given $5 to distribute between themselves and a random other.

The results showed that on average, neutrals only gave away $1.43, whereas nostalgics gave $2.

Understand what nostalgia means for your target audience. Brands, products and campaign messaging can all gain from referring to the past to loosen our wallets. Nintendo are now rereleasing their 1985 NES console, for example.

Use to promote social behaviour. Since nostalgia causes a reduction in one’s desire for money,  it can instead be used to increase charitable donations or promote participation in a charitable event. 

Digital nostalgia is growing, as our online history of archived experiences deepens. The opportunity to capitalize upon this powerful effect will only increase. e.g. Facebook is now reminding us of our past experiences, using nostalgia to keep us emotionally bound to their network.

408 people were shown one of three versions of a shampoo advert. The control just had the words “Say bye-bye to your dandruff” with an image of a couple. The two metaphor versions both had “You may erase anything unwanted” with either an eraser (implicit) or the bottle of shampoo (explicit) rubbing out words on a blackboard.

Results showed greater purchase intentions for the product with either metaphorical ad.

Leverage our existing understanding of the world for new ideas or concepts. Complicated ideas are best understood through existing ones. What analogies can you draw that your customers can relate to?

Easy metaphors aren’t always best. Research has found that metaphors with a little complexity are fun and act as a mild problem to solve. Use with Curiosity and Humor.

Reserve this for known brands or products; for new or abstract technology, keep metaphor complexity low.

Metaphors come in different flavors:

Juxtapositions: two images next to one another;

‍Fusions: mixing two concepts into a single one; or

‍Replacements: switching one thing for another. 

Just make sure that you harness real world understanding to help ground your new idea.