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Former Netflix CEO: “They're Lying To You About Hard Work!” Building a $278 Billion Company Wasn’t Built On Hard Work!
The Diary Of A CEO with Steven Bartlett
Avoid Loss to Retain Customers
Customers are particularly sensitive to feeling like they have lost something, which is a phenomenon explained by Daniel Kahneman's concept of loss aversion. This means that when customers incur fees, such as late fees for movie rentals, the perceived loss feels far more painful than the initial cost. For example, a $4 late fee can feel like a loss of $12 due to the negative emotional response associated with feeling penalized. This reaction can significantly tarnish the overall customer experience, especially if the final interaction with the service involves additional charges that act as an unpleasant reminder of loss, like being told they owe money upon returning a movie. Businesses must be aware that the peak-end rule suggests that customers will largely remember the most intense part and the conclusion of their experiences. Thus, ending a service interaction with a penalty diminishes customer satisfaction and retention. To retain customers effectively, companies should minimize feelings of loss and create more positive concluding experiences.
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