Optometry marketing and Loss Aversion

Loss aversion can be one of the barriers to growth in Optometric marketing strategy. The concept of loss aversion was described by Kahneman and Amos Tversky in the 1979 paper “Prospect Theory, Analysis of Decision under Risk”. Loss aversion is the belief that a person has in his mind that losses are perceived as far greater than the equivalent gains. This causes an overly cautious approach to businesses in deciding on new products, new decisions, new marketing strategies, etc. It also results in patients being reluctant to try new products that Optometrists present on regular basis.

Kahneman and Amos Tversky suggested that for decision-makers, losses have twice the psychological impact as their equivalent gains. When it comes to decision-makers and entrepreneurs, we frequently refer to Steve Jobs’s lack of loss aversion characteristic. He rarely feared trying new ideas and technological innovation. He was a visionary who was able to revolutionize the smartphone industry on many occasions due to his lack of loss aversion.    

When it comes to customers being presented with new products or offers, they weigh losses much more than the gains based on a perceived reference point. When they are presented with a new product that is more expensive than their reference product, they are more likely to worry about the additional expense rather than appreciating the better quality of the product. When they are presented with a new product that is less expensive than their reference product, they magnify their perception of the poorer quality of the new product to a greater extent than the money saved when compared to their reference product. Thus their loss is more magnified than their gain and therefore losses and gains are not equally perceived.   

In Optometry, we are constantly introducing new products to the market. In marketing those products we should reduce the fear of loss and be less loss averse in order to be able to capture the benefits of a growing product line. We should also understand that loss aversion can have a strong effect on customer decisions. It makes them unwilling to spend even a small amount on testing a new product or an alternative. Therefore, it should be clear to the customer which product attributes and features are analogous to the competitive product and which features are different and better. This enables them to make well-informed decisions and benefit from an effective trade-off between potential losses and gains.  

Marketers often rely on the loss aversion theory to build their marketing messages and campaigns. We see it illustrated in those messages that set “urgency”, limited time offers, or convince you that you will feel a lot of regret for not taking an action. Those methods of using loss aversion in marketing have to be avoided as possible. Novemsky and Kahneman in “The Boundaries of Loss Aversion” pointed out that loss aversion is only suitable when people believe there’s something to lose. Therefore, when building your marketing campaign you should only have recourse to real loss aversion, without urgency, and clearly explain benefits.