Do Your Web Visitors Own Your Conversion Rate?

Has a friend ever asked to borrow something that had a high personal value to you? Maybe you kept that object in pristine condition or maybe it was somewhat rare or maybe it’s just sentimental to you because of who gave it to you or how you got it. I don’t doubt this situation has at one point happened to you and at the time I’m sure you were very concerned for what condition the object would be returned to you in. The reason why you had such concern about this transaction is because you own the object and your friend does not. So you start to worry and wonder. Would he or she treat the object with as much care as you do? Would they damage it?

This situation describes something called the endowment effect.

The endowment effect states that people place a higher value on objects they own over objects that they do not.

It’s easy to see how the endowment effect has been present at one point or another in our lives and it’s quite easy to see how this effect exists in the offline world. But let’s take a look at how the endowment effect relate to websites? And specifically how it relates to your online conversion rate?

Online the endowment effect extends from things we own to things we feel an ownership towards. Any website where you have to sign up or create an account has the potential to use the endowment effect to increase conversion rate. The single act of signing up is only the first in a series of future conversions. Think of this customer or member as now entering a post conversion funnel. After a prospect gets over that first hurdle of membership is where you can take advantage of the endowment effect.

Now this may not work for all types of sites but with a little lateral creative thinking it can be applied to almost any website as long as you frame endowment around your conversion goals.

Here’s an example. Amazon.com has gotten me over the first conversion hurdle yeas ago. I frequently purchase from them and I have an Amazon account. Over the years they have taken me further down the post conversion funnel and got me to create a wishlist, a gift organizer, rate over 200 items so recommendations will be more relevant to me and even create 2 Listmanias, one on web analytics and one on persuasive web design. With each addition to my Amazon account I have gained more and more ownership over the Amazon website, and the endowment effect has made me place a higher value on conducting transactions on Amazon vs. bareness and noble.com.  (bn.com) thus increasing the amount of sales and conversions I complete on Amazon.com

Let’s take a look at another example, this time using Netflix.

Netflix, does a great job of creating a sense of ownership through the endowment effect. Similar to Amazon’s wish list I have my Netflix queue of movies and countless movies I have rated all in the effort for Netflix to become more valuable to me. So much so that I would not switch and have blockbuster.com deliver movies to me, even if it were cheaper. In order for Netflix to keep me as a customer I need to continue to fill my movie queue

The key to using the endowment effect online is to develop tools that make your product or service more valuable to your market that is also in line with your micro conversions.

Both of these sites much more valuable to me personally because they gave me a sense of ownership of them. More importantly they both built tools to enforce the endowment effect around key conversion goals of their sites.

Every tool I’ve described from Amazon (the wishlist, the gift organizer, rating items and lists) all support a conversion. When I’m ready to buy I start my browsing at my wish list. During the holidays I start my browsing at the gift organizer and search for similar items that I have bought family members in the past. Both actions lead to a conversion. Similarly on Netflix my movie queue is what keeps me from switching to another movie mail order company. Presumably my queue will never be empty and thus I’ll have no reason to look to blockbuster.com. Each movie I add to my queue is a micro conversion that supports the endowment effect and increases my sense of ownership of their service.

How can the endowment effect be designed into your product or service to increase your conversion rates?

 

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