The Endowment Effect, Loss Aversion and Status Quo Bias

Today’s episode is a very special one, it is our first-ever edition from the vault. What does that mean? Well, for one thing, we now have TWO episodes of The Brainy Business coming to you each week, starting with this one. It is an episode from the back catalog that I think is super relevant and timely for you right now, so it got a little refresh. 

Why this one and why today? Firstly, it is because change is ever-present in our lives and businesses, and in this age of The Great Resignation, quiet quitting, returning to work, hybrid offices and so much more. Managing and leading through change is something everyone seems to be talking about these days, so this episode is one I think will help a lot of people. As you will hear in this episode, change is “not about the cookie” it is more about the way a change is presented than anything else, so you have the power to influence how others react to whatever information you are presenting. 

Remember change is in the micro-moments, so it doesn’t have to be anything big. Look for those small tweaks that could make a huge difference. 

• [00:38] Today’s episode is a very special one. It is our first-ever Tuesday episode (double the brainy!!) and our first edition from the vault. 
• [02:14] Change is in the micro-moments, so it doesn’t have to be anything big. Look for those small tweaks that could make a huge difference.
• [03:41] Melina shares the cookie story. I want you to imagine that we are walking down the street...
• [05:56] It’s not about the cookie, the change, or the price. It is about the way the information is presented. 
• [08:28] Change management is leading through change.  
• [09:02] Change and getting people to change is all about selling them on your perspective and getting them to buy in and commit even when money is not being exchanged. 
• [12:02] Our subconscious brain is like a small child. We would all like to think we have grown past this point, but much of our decision-making is still done on this level. 
• [14:25] Consider the ripples. One small decision or word on an advertising campaign or a change conversation can have a different impact on different people and it is based on their perspectives. 
• [16:30] The overall brand and campaign message needs to be consistent. You also need to identify what an individual in each of these groups is supposed to do when they see the message and what they need to hear to get them to take the next step.  
• [18:46] We often run a message for consistency's sake across everything without thinking about what those people need to hear, where they are coming from, and what matters to them. We think about the group as a whole instead of considering the individuals and what they need in that moment to take the best course of action. 
• [20:41] When confronted with change our brains are trained to revert to a place of fear and they are very good at dwelling on small items. 
• [21:56] The endowment effect: our brains favor things they own over other things. 
• [23:55] Studies show it takes double the joy felt by a gain to outweigh the pain felt by a loss. 
• [26:07] When given the choice people tend to go with the status quo and favor it very heavily…especially when there are many options presented. 
• [28:45] Change management conversations are more likely to have the brain flagged and on high alert. 
• [31:32] Be thoughtful of the way the meeting or discussion is framed or called together. If you are delivering bad news or presenting a change you want them to buy in on, you don’t want to oversell the meeting. 
• [33:58] You want to make sure the document is outlined in a way that helps them come to the best conclusion themselves so their brain takes ownership of the change you are going to propose to them. 
• [34:46] When you are proposing a big change you need to do your homework. When the stakes are high your prep work needs to be significant as well.
• [37:09] Putting in the groundwork allows you to have advocates. Having advocates is so key in branding. 
• [38:57] When people are on edge and likely to get a fight or flight response, triggering on scarcity could work against you if not done properly. 
• [42:49] Framing is everything when it comes to change management. It isn’t what you say, it is how you say it. 
• [43:49] You need to know why you want them to take the step, why it matters, and get them invested in the proposed outcome.
• [46:20] Framing the benefits and talking about the good stuff instead of helping them dwell on the bad is how you get changes to move forward. 
• [47:49] You want them to feel comfortable coming back to you with questions. You are allies in this. 
• [49:24] What tiny moments of change do you see around you for your next initiative in the way you will be presenting change?

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• Check out and get your copies of Melina’s Books. 

Get the Books Mentioned on (or related to) this Episode:

• What Your Employees Need and Can't Tell You, by Melina Palmer
• Nudge, by Richard Thaler and Cass Sunstein
• Thinking Fast and Slow, by Daniel Kahneman
• Quit, by Annie Duke
• How Minds Change, by David McRaney

Top Recommended Next Episode: What Your Employees Need and Can’t Tell You (episode 225)

Already Heard That One? Try These: 

• The Truth About Pricing  (episode 5)
• Loss Aversion (episode 9)
• Endowment Effect (episode 139)
• Status Quo Bias (episode 142)
• How to Sell From the Stage (episode 6)
• Herding (episode 19)
• Social Proof (episode 87)
• Reciprocity (episode 23)
• Framing (episode 16)
• Priming (episode 18)
• Scarcity (episode 14)

Other Important Links: 

• Brainy Bites - Melina’s LinkedIn Newsletter 
• The Endowment Effect, Loss Aversion, and Status Quo Bias