The endowment effect is important because it affects so many different areas. However, it is particularly significant in marketing and sales concerning buying, selling, and valuation in general. Classic examples of how to use the endowment effect include test drives, trial months, trial subscriptions, and other product samples. Indeed, the endowment effect does apply to things that we only own temporarily or do not yet own. This fact can and should be used in marketing. But does this also work in e-marketing and e-commerce in which there may not be any goods that can be physically owned?
The endowment effect is weaker when it comes to digital products, virtual samples, and products that only consist of an app or software as a service. It is thus recommended to provide the customer with something they can “own” whenever possible and as soon as possible. So, when it comes to digital goods, it makes sense to design the marketing structure in such a way that the users interact with the product as much and as intensively as possible during a free trial phase.
E-commerce is simpler when it deals with physical products. Just by delivering the good to the customer, it is possible to attain significant price increases due to the customers experiencing the value themselves and not wanting to lose possession afterward. This also makes it clear why words like “my” and “your” are used so much in marketing. Before actually owning something, the customer needs to be able to imagine owning it. It is useful to provide visuals and examples that can give customers an impression of their future products in advance. For example, this can include videos, images, and texts which give information about the product’s manufacturing process and history.
In contrast, you are more likely to succeed in realistically assessing market values (e.g., for real estate or motor vehicles) if you also understand the psychological impact of the endowment effect. Additionally, the extent to which the endowment effect is quantified is often not entirely apparent. There is a clear tendency for possessions to be overvalued. This is also one of the reasons why it is important to hire experts or appraisers for valuations. This allows you to avoid incorrect assessments due to the endowment effect. After all, external experts are in a position to make a more objective assessment of value than the owner since they do not own the asset.