Aggregation Effect

Negative experiences feel less painful overall when they’re bundled together

We have an increasing numbness to losses as they mount, so instead of spreading out small pains over time, overall we feel better when they’re consolidated.

Lim (2006). Do investors integrate losses and segregate gains? Mental accounting and investor trading decisions. The Journal of Business.

The study

Setup

425,744 sales of US shares were analyzed by determining which had gained value and which had lost value. Both groups were further analyzed to determine whether the shares were sold in groups or on their own.

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Results

The research found that investors were more likely to sell off losing trades in groups over those which were doing well, so as to ease the pain of loss.

np_read_2490885_000000

In detail

Key Takeaways

Package the pain.

Releasing a whole bunch of bad news in one go is better than drip-feeding it across successive days. Similarly, having four fillings in one go is preferable to spreading them out one a week for a month. Less painful overall with fewer periods of worry. How you Frame pain matters too. Emphasize the short, one-off nature of the discomfort, the Fresh Start and comforting Certainty it will provide.

Consolidate smaller losses into bigger gains. 

Even small bits of bad news can trigger overweighted negativity. Consider bundling them as part of larger, positive announcements to reduce the pain felt.

Split off small gains from bigger losses.

What small victories can you hold back and share separately after a big bit of bad news? What small feature can you release separately from a significant security update?

Aggregation Effect

Negative experiences feel less painful overall when they’re bundled together

We have an increasing numbness to losses as they mount, so instead of spreading out small pains over time, overall we feel better when they’re consolidated.

Lim (2006). Do investors integrate losses and segregate gains? Mental accounting and investor trading decisions. The Journal of Business.

The study

Setup

425,744 sales of US shares were analyzed by determining which had gained value and which had lost value. Both groups were further analyzed to determine whether the shares were sold in groups or on their own.

Results

The research found that investors were more likely to sell off losing trades in groups over those which were doing well, so as to ease the pain of loss.

Key Takeaways

Package the pain.

Releasing a whole bunch of bad news in one go is better than drip-feeding it across successive days. Similarly, having four fillings in one go is preferable to spreading them out one a week for a month. Less painful overall with fewer periods of worry. How you Frame pain matters too. Emphasize the short, one-off nature of the discomfort, the Fresh Start and comforting Certainty it will provide.

Consolidate smaller losses into bigger gains. 

Even small bits of bad news can trigger overweighted negativity. Consider bundling them as part of larger, positive announcements to reduce the pain felt.

Split off small gains from bigger losses.

What small victories can you hold back and share separately after a big bit of bad news? What small feature can you release separately from a significant security update?

Aggregation Effect

Negative experiences feel less painful overall when they’re bundled together

We have an increasing numbness to losses as they mount, so instead of spreading out small pains over time, overall we feel better when they’re consolidated.

The study

Setup

425,744 sales of US shares were analyzed by determining which had gained value and which had lost value. Both groups were further analyzed to determine whether the shares were sold in groups or on their own.

Results

The research found that investors were more likely to sell off losing trades in groups over those which were doing well, so as to ease the pain of loss.

np_read_2490885_000000

In detail

Pairings

Business Models

Create 'pain bundles' at new time periods

When we aspire to start afresh in new time horizons, we often need to let go of something that's holding us back: a bad diet, indebtedness, a broken relationship...

1) Health organisations could campaign for aspirational individuals to do a weekly, monthly or yearly health purge / trade-in, where unhealthy foods are ceremoniously removed from food cupboards. Marie Kondo for food, if you will. This way, the pain of deliberating on whether to keep or lose one pack of cookies or another bag of marshmallows is reduced.

2) Future FinTechs could offer products that incentivise faster debt repayments by making it temporarily attractive to pay back more of what you owe just after payday.

"0% interest if you pay back £100 today."

The money could be made on predicting patterns of bad debt and pre-empting them by buying the debt for cheap and offering rates for any payments made by the consumer.

Bundling the financial pain around a fresh start with an attractive, timely incentive will help people to make better decisions at a time when their resources are least scarce.

Ultimately, it's far easier to make a fresh start if we can start to let go of what is stale and no longer represents who we now want to be. Packaging any loss felt from our past selves is a good strategy for enabling a more successful future.

Package your pains, don't prolong them

Packaging multiple pieces of bad news feels less uncomfortable than drip-feeding it out over time and creating uncertainty.

Where can you combine difficult decisions into one major announcement?

Connected to

Running workshops?

Aggregation Effect

is included in Box One of our physical workshop tool.
is included in Box Two of our physical workshop tool.
Box Two