Well, there you have it! After so much campaigning, so many questions, debates, and emotions that moved currencies and markets, the Scottish said, \u201cNo!\u201d to independence. I won\u2019t go into deep macro-economical, sociological, PESTAL analysis, etc. I won\u2019t even get into why they Scottish chose not to go. \u00a0For me, it comes down to two words: Loss Aversion.<\/p>\n
Before I explain what I mean by that and how it has to do with Customer Experience<\/a>, however, let me first tell you where I was born. I come from Bulgaria, which is the oldest European Country still using its name more than 1,300 years after fighting the remains of the Roman Empire for its right to be. Of those 1,300 years of national consciousness, however, almost 500 are spent under the rulership of the Ottoman Empire who conquered the whole Balkan Peninsula and even reached the gates of Vienna, Austria. Needless to say, living under the Ottoman Turks (to be excused by the contemporary ones) was much different and quite harsh, to say the least, compared to living in the United Kingdom of Great Britain. \u00a0So in the late 19th century there was a national uprising. People fought hard under the banner, \u201cFreedom or Death\u201d and paid with their lives. Whole villages burned; men, women and children were executed.<\/p>\n If people had the right to vote back then I doubt many would vote against independence. I\u2019m sure there would have been such people, and those would be the ones with good positions and wealth who had a lot to lose.<\/p>\n And here\u2019s the key point, people hate losing much more than they like winning. I remember my professor of corporate finance in the business school saying, \u201cIf I\u2019ve made people lots of money in a day on the stock market, I\u2019ll barely get a few calls to thank me; but if it was a bad day, the phone won\u2019t stop ringing from people asking what\u2019s happening!\u201d \u00a0Nobel Laureate for Behavioral Economics professor Daniel Kahneman calls this notion \u201cLoss Aversion<\/a>.\u201d<\/p>\n Here are some abstracts from Wikipedia on Loss Aversion:<\/p>\n \u201cLoss aversion refers to people’s tendency to strongly prefer avoiding losses to acquiring gains. Some studies suggest that losses are twice as powerful, psychologically, as gains\u2026 <\/i>Note that whether a transaction is framed as a loss or as a gain is very important to this calculation: would you rather get a $5 discount, or avoid a $5 surcharge? The same change in price framed differently has a significant effect on consumer behavior\u2026. The effect of loss aversion in a marketing setting was demonstrated in a study of consumer reaction to price changes to insurance policies.<\/i>[2]<\/i><\/a> The study found price increases had twice the effect on customer switching, compared to price decreases.\u201d<\/i><\/p><\/blockquote>\n The basic principle of Loss Aversion is that people hate losing much more than they like winning, and the ratio is somewhere between 2:1 and 3:1. An experiment was conducted with students to bet on \u201cHeads or Tails\u201d. If they would win they\u2019d get $50. If they\u2019d lose they would have to give $50. Not many people took that bet. So they offered the next group of participants $100 if they won vs. $50 to give away if they lost and as you can imagine more people took this bet. But when the stakes increased to $150 to win vs. $50, the majority would take the bet.<\/p>\n Here is also a video<\/a> of Dan Ariely<\/a>, author of \u201cPredictably Irrational\u201d and professor at Duke University who explains and provides more examples of Loss Aversion.<\/p>\n
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