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.