Another classic cognitive bias that creeps up on us in marketing, is the sunk cost fallacy. It's a little hard to explain, and is related to the status quo bias I talked about last week, so I will try to simplify without causing confusion.
The sunk cost fallacy occurs when we continue a behavior or action based on previously invested resources. In effect, we have a hard time abandoning our endeavor because we have made an emotional, time or money investment. We think we are making a rational decision on the future value of the project or experience and therefore continue. And a lot of times, we shouldn't.
When marketers, or clients, succumb to the sunk cost fallacy in marketing, I see two fundamental challenges come up that can affect the campaign and business goals:
1. Failure to identify opportunities
2. Lasting impact on business
Have you ever held on to a campaign tactic that wasn't working for you because you already invested a lot of money into it? Optimism in those instances might tell you that it just takes a bit of time to get going and it will be successful eventually. Actually, in that moment you are focused on short-term goals, missing out on the opportunity to look at long-term goals and direct time, money and effort to tactics that are more effective. Changing direction can be difficult. But, short-sightedness can come at a great price. A price greater than your business is able to carry or recover from.
Make sure you look at your ideas and tactics like an investor would - and challenge your clients to do the same. If things are going according to plan, adjust your response, look at the long-term plan and realign your efforts. You can beat your own bias.
According to the sunk-cost fallacy, when we invest in a solution, it’s hard to give up on it — even when the ongoing costs outweigh the benefits.