For example, shoppers sometimes buy too much food and then over-eat just to “get their money’s worth”. Similarly, a shopper may have a £20 discount voucher and then spend £200 that they were never intending to spend just so that they can use their £20 voucher having initially decided it had value.
If the costs outweigh the benefits, the extra costs incurred (inconvenience, time or even money) are held in a different mental account than the one associated with the in-store special offer transaction (Thaler, 1999).
When it comes to what this means for shopping, in-store and online, there are a number of considerations:
1. Take a deposit – once a shopper has made a financial investment toward a purchase, the Sunk Cost Fallacy means they tend to not see that deposit as part of the cost, focusing instead on what remains to be paid.
2. Shopper investment – once you can get shoppers to invest time, effort and/or money, they will be more likely to purchase. If only so that they don’t lose their initial investment.
3. The free incentive – shoppers are significantly more likely to complete a ten-stamp card for a free coffee once two spots are stamped. More so than an eight-stamp card without any spots stamped because the Sunk Cost Fallacy means they already feel they have made a significant start on their card meaning they focus on the completion of the remaining 8 stamps.
As with all things in marketing, getting the best results from Sunk Cost Fallacy is a balancing act. You’ll have to consider your brand image and business ethics, marketing goals and the opportunities your products or services provide for exploiting the Sunk Cost Fallacy phenomenon.