Want to try Netflix for a month for free? That one month free trial must eat away a lot of Netflix's profits, right? Wrong. In fact, that one month free trial might be the very reason why Netflix continues to gain customers.
A psychological phenomenon known as loss aversion is at play in deals like these. People are more likely to respond to a situation if they are going to lose something rather than if they were to gain the same thing. Still doesn't make too much sense? That's okay, I'll let Kahneman's 1990 study do the talking.
Kahneman gave participants a mug, some chocolate, or nothing. Then he gave his participants the option of keeping their items or trading them with other participants. Surprisingly, 86% of the participants with mugs chose to keep them and only have of those who started with nothing chose the mugs. 10% of people given chocolate traded for them.
There's a tendency to want to keep what you have, so that should explain why you never cancelled your Netflix membership after the free month trial!
A psychological phenomenon known as loss aversion is at play in deals like these. People are more likely to respond to a situation if they are going to lose something rather than if they were to gain the same thing. Still doesn't make too much sense? That's okay, I'll let Kahneman's 1990 study do the talking.
Kahneman gave participants a mug, some chocolate, or nothing. Then he gave his participants the option of keeping their items or trading them with other participants. Surprisingly, 86% of the participants with mugs chose to keep them and only have of those who started with nothing chose the mugs. 10% of people given chocolate traded for them.
There's a tendency to want to keep what you have, so that should explain why you never cancelled your Netflix membership after the free month trial!