Guide to The Sunk Cost Fallacy in Marketing: Description, Psychology, and Examples

What Is The Sunk Cost Fallacy?

The Sunk Cost Fallacy is the tendency for people to continue investing in a decision based on previously invested resources (time, money, or effort), even when logic suggests they should cut their losses and move on. This powerful cognitive bias explains why customers stick with services they barely use, continue with ineffective solutions, or remain loyal to products simply because they’ve already invested significantly, making abandonment feel like accepting a loss.

At its psychological core, the Sunk Cost Fallacy works because humans are loss-averse – we instinctively feel losses more acutely than equivalent gains. When faced with abandoning an investment, our brains interpret this as accepting a loss and trigger an emotional response that overrides logical decision-making, making it far more likely that we’ll continue with a failing course of action rather than admitting our past investment was wasted, which would damage our self-perception as competent decision-makers.

For marketers and advertisers, understanding this bias gives a real competitive edge. By purposefully and strategically structuring onboarding processes, milestone tracking, and investment visibility that help customers recognize their commitment while delivering genuine ongoing value, you can build stronger relationships and reduce churn in ways that other persuasion techniques simply cannot match.

How The Sunk Cost Fallacy Works (The Psychology Behind It)

The Sunk Cost Fallacy operates through several interconnected psychological mechanisms that marketers can leverage ethically:

Loss Aversion and Framing Effects

Research by behavioural economists shows that people are approximately twice as sensitive to losses as they are to gains. When customers have invested time, money, or effort into your product or service, abandoning it feels like a loss – even if continuing isn’t the best choice.

Cognitive Dissonance Reduction

When people make investments that don’t pay off, they experience mental discomfort. Rather than admit the mistake, they often continue investing to justify their original decision. This self-justification mechanism keeps customers engaged longer than pure logic would suggest.

Personal Responsibility and Commitment

Academic research demonstrates that people are more likely to escalate commitment when they made the original investment decision themselves. This is why customer onboarding processes that require active participation tend to increase retention rates.

Neurological Basis

Recent neuroimaging studies have identified specific brain regions associated with sunk cost behaviour, including the anterior cingulate cortex and insula – areas involved in error monitoring and emotional processing. This suggests the bias operates at both cognitive and emotional levels.

Real-World Examples of The Sunk Cost Fallacy

Beyond Marketing: Where Sunk Costs Shape Decisions

The Sunk Cost Fallacy appears across numerous contexts:

• Personal Finance: Investors holding onto losing stocks to avoid realising losses
• Relationships: People staying in unsatisfying relationships due to time already invested
• Education: Students completing degrees they’ve lost interest in because of money already spent
• Healthcare: Patients continuing ineffective treatments due to prior investment
• Politics: Governments funding failing projects like the Concorde supersonic jet

Verified Marketing Applications

Health Club Memberships DellaVigna & Malmendier’s research in the American Economic Review found that health club members who paid annual fees attended more frequently than monthly members, even when the annual fee wasn’t cost-effective. This demonstrates how upfront investments create psychological commitment.

Software and Freemium Models Users who invest time learning software platforms and building data within them are significantly less likely to switch to competitors, even when better alternatives exist. This switching cost effect combines sunk cost psychology with practical barriers.

Loyalty Programmes Customers who accumulate points or rewards over time are more likely to continue purchasing to avoid “losing” their accumulated progress. However, research suggests this effect combines sunk cost psychology with loss aversion rather than being purely sunk cost-driven.

How The Sunk Cost Fallacy Affects Consumer Behaviour

The Psychological Triggers

When the Sunk Cost Fallacy activates, several things happen in consumers’ minds:

1. Emotional Investment Increases: The more time, effort, or money invested, the stronger the emotional attachment becomes
2. Rational Evaluation Decreases: Past investments cloud judgement about future value
3. Switching Costs Feel Magnified: The prospect of “starting over” elsewhere seems overwhelming
4. Commitment Escalates: Rather than cut losses, people often double down on their investment

Neurological Response

Brain imaging studies show that sunk cost decisions activate regions associated with emotional processing and error monitoring. This suggests the bias isn’t purely rational – it’s deeply emotional, making it particularly powerful in marketing contexts.

Behavioural Patterns

Customers affected by sunk cost thinking typically:

• Rationalise continued use even when dissatisfied
• Persist with services longer than economically rational
• Upgrade or add features to justify initial investment
• Resist switching to competitors despite better offers

Case Studies: How Marketers Use The Sunk Cost Fallacy in Advertising

Verified Case Study: Health and Fitness Industry

The Strategy: Gyms structure pricing to encourage annual memberships with upfront payments and onboarding processes requiring customer effort.

The Psychology: Large initial payments create sunk costs, whilst personalised fitness assessments and goal-setting sessions increase perceived investment.

The Results: Research shows annual members attend more frequently than monthly members, even when the annual fee isn’t cost-effective. The upfront investment creates psychological commitment that drives behaviour.

Key Takeaway: Requiring customer investment (time, effort, or money) upfront increases long-term engagement.

Theoretical Application: Google Ads for Service Businesses

The Concept: Ad copy that acknowledges users’ prior investment in solving a problem, then positions your service as the logical next step.

Example Test:

• Control Ad: “Get Professional Marketing Help – Free Consultation”
• Test Ad: “Already Spent Hours on DIY Marketing? Get a Professional Assessment – Free Consultation”

Expected Outcome: The test ad leverages sunk cost psychology by acknowledging prior investment, potentially increasing click-through rates and conversions.

Important Note: This is a theoretical application based on psychological principles. Businesses should test this approach and measure results, as direct academic evidence for PPC applications is limited.

Practical Applications for Google Ads & Lead Generation

Google Ads Copywriting Strategies

1. Acknowledge Prior Investment Reference the time, effort, or money prospects have already invested in solving their problem:

• “Spent months researching accounting software? Get expert guidance now”
• “Tired of DIY website attempts? Let professionals handle it”

2. Visual Reinforcement on Landing Pages Use images that subtly remind visitors of their prior efforts:

• A financial advisor might show a partially completed budget spreadsheet
• A marketing consultant could display a half-finished marketing plan

3. Progressive Commitment in Forms Break lead capture forms into multiple steps, starting with low-effort questions:

1. “What’s your biggest business challenge?” (Multiple choice)
2. “How long have you been dealing with this?” (Dropdown)
3. “What solutions have you tried?” (Text box)
4. “Get your personalised action plan” (Contact details)

Landing Page Optimization Techniques

Service-Based Positioning Frame your service as the logical continuation of work prospects have already started:

• “Invested in skills training? Now land your dream job with our career coaching”
• “Already researching legal options? Get expert guidance to move forward”

Lead Magnet Strategy Offer resources that build on existing customer investments:

• A web design agency offering “Website Audit for Businesses Already Avoiding Common Mistakes”
• An accountant providing “Tax Optimization Guide for Business Owners Who Track Expenses”

Small Business Implementation

Low-Cost Strategies:

1. Content Reframing: Repurpose existing blog content to acknowledge reader research efforts
2. Email Sequences: Reference the time subscribers have invested in learning about their challenges
3. Consultation Positioning: Frame initial consultations as building on prospects’ existing knowledge

Realistic A/B Tests:

• Measure impact of “continuation” vs. “starting fresh” messaging
• Test standard vs. sunk cost-acknowledging headlines
• Compare single-step vs. multi-step lead forms

Why Marketers Should Care About The Sunk Cost Fallacy

The Strategic Advantage

Understanding the Sunk Cost Fallacy provides several marketing benefits:

Increased Customer Lifetime Value: Customers who feel invested in your solution stay longer and spend more over time.

Reduced Churn Rates: The psychological barriers to switching become higher as customer investment increases.

Higher Conversion Rates: Acknowledging prospects’ prior investments can increase their willingness to take the next step.

Competitive Differentiation: While competitors focus on features and benefits, you can connect with the emotional investment prospects have already made.

Ethical Considerations and Responsible Use

The Ethical Framework:

• Transparency: Always be clear about service limitations and cancellation policies
• Genuine Value: Ensure continued investment leads to real benefits for customers
• Respect: Avoid exploiting customer vulnerabilities or creating false obligations
• Long-term Thinking: Build sustainable relationships rather than short-term gains

Warning Signs of Misuse:

• Making cancellation unnecessarily difficult
• Gradually increasing costs without proportional value
• Using high-pressure tactics to exploit sunk costs
• Providing substandard service while relying on switching costs

Best Practices:

• Focus on creating genuine value that justifies continued investment
• Be transparent about terms, conditions, and costs
• Respect customer autonomy and decision-making
• Build trust through consistent delivery of promised benefits

How to Implement The Sunk Cost Fallacy in Your Marketing Strategy

Step-by-Step Implementation Guide

Phase 1: Audit Current Customer Journey

1. Map touchpoints where customers invest time, effort, or money
2. Identify opportunities to increase early engagement
3. Analyse current churn points and switching triggers

Phase 2: Design Investment Opportunities

1. Create onboarding processes requiring customer participation
2. Develop progressive engagement sequences
3. Structure pricing to encourage upfront commitment

Phase 3: Test and Measure

1. A/B test sunk cost-acknowledging messaging
2. Compare single-step vs. multi-step conversion processes
3. Measure impact on customer lifetime value and churn rates

Common Pitfalls to Avoid

Over-Reliance on Psychology: Don’t substitute psychological tactics for genuine value delivery.

Ignoring Customer Satisfaction: Sunk cost effects won’t overcome consistently poor service.

Ethical Blindness: Always consider whether your tactics serve customer interests alongside business goals.

One-Size-Fits-All Approach: Different customer segments may respond differently to sunk cost strategies.

A/B Testing Ideas

Email Subject Lines:

• Control: “Improve Your Marketing Results”
• Test: “Don’t Let Your Marketing Research Go to Waste”

Landing Page Headlines:

• Control: “Professional Web Design Services”
• Test: “Already Researching Web Designers? Get Expert Help Now”

Call-to-Action Buttons:

• Control: “Start Free Trial”
• Test: “Continue Your Journey”

Related Psychological Biases & Effects

The Sunk Cost Fallacy connects to several other cognitive biases marketers should understand:

Loss Aversion: The tendency to prefer avoiding losses over acquiring equivalent gains – the foundation of sunk cost psychology.

Commitment and Consistency: People strive to appear consistent with previous actions and commitments.

Escalation of Commitment: The broader tendency to increase investment in failing courses of action.

Anchoring Bias: Initial investments can serve as anchors that influence subsequent decisions.

Endowment Effect: People value things more highly simply because they own them.

Understanding these related biases helps create more comprehensive and effective marketing strategies that work with, rather than against, natural human psychology.

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Ready to Apply Sunk Cost Psychology to Your Marketing?

The Sunk Cost Fallacy offers powerful opportunities to build stronger customer relationships and increase lifetime value – when applied ethically and strategically. The key lies in creating genuine value whilst acknowledging the psychological investments your prospects have already made.

Remember: the most effective application of this bias focuses on helping customers build on their existing efforts rather than exploiting their reluctance to abandon past investments. When you frame your services as the logical continuation of work they’ve already started, you’re not manipulating – you’re providing a valuable bridge between where they are and where they want to be.

Start by auditing your current customer journey for natural investment points, then test sunk cost-acknowledging messaging in your ads and landing pages. Measure the results carefully, and always prioritise long-term customer satisfaction over short-term conversion gains.

FAQs About Sunk Cost Fallacy

What is the Sunk Cost Fallacy?

The Sunk Cost Fallacy is the tendency to continue investing in a decision, project, or relationship due to previously invested resources (time, money, effort), even when future costs outweigh expected benefits. This cognitive bias occurs because people feel compelled to justify their past investments rather than cutting their losses and making rational decisions based on future prospects alone.

The fallacy is driven by loss aversion – the psychological discomfort of accepting a loss – and our desire to avoid feeling that previous investments were wasted. Essentially, we throw good money after bad because we can’t bear to admit our initial investment was a mistake.

How does the Sunk Cost Fallacy affect decision-making?

The Sunk Cost Fallacy clouds rational decision-making by shifting focus from future potential to past investments. Instead of asking “What’s the best path forward?”, people ask “How can I justify what I’ve already spent?”

This leads to several problematic patterns:

• Escalating commitment to failing projects or relationships
• Ignoring better alternatives because switching feels like admitting failure
• Throwing good resources after bad to protect previous investments
• Delaying necessary changes that would ultimately save time and money

Research shows this effect is stronger when people feel personally responsible for the initial decision, making it particularly challenging to overcome in business and personal contexts.

What causes people to fall into the Sunk Cost Fallacy?

Several psychological mechanisms drive the Sunk Cost Fallacy:

Loss aversion is the primary cause – we feel the pain of losses roughly twice as strongly as equivalent gains. Abandoning a project feels like crystallising a certain loss, whilst continuing offers hope of eventual success.

Cognitive dissonance also plays a role. When our actions (continuing to invest) conflict with evidence (the investment isn’t working), we experience psychological discomfort. Rather than change our behaviour, we often rationalise why continuing makes sense.

Social and reputational factors compound the effect. Admitting failure can damage our self-image or professional standing, making persistence feel safer than cutting losses, even when persistence is objectively irrational.

Is the Sunk Cost Fallacy a cognitive bias or logical error?

The Sunk Cost Fallacy is classified as a cognitive bias – a systematic error in thinking that affects decisions and judgements. It’s not simply a logical mistake but a predictable pattern of irrational behaviour rooted in human psychology.

Unlike random errors, cognitive biases like the Sunk Cost Fallacy occur consistently across different people and situations. They’re built into how our brains process information, making them particularly difficult to recognise and overcome without conscious effort.

However, some scholars argue that in complex real-world scenarios involving reputation, relationships, or strategic considerations, honouring sunk costs might occasionally be rational – though these are exceptions rather than the rule.

Who first discovered the Sunk Cost Fallacy?

The Sunk Cost Fallacy was formally introduced to behavioural economics literature by Richard Thaler in 1980, building on earlier economic theory. Thaler’s work helped bridge the gap between traditional economics (which assumes rational decision-making) and psychology (which recognises systematic biases).

The concept gained broader recognition through the work of Daniel Kahneman and Amos Tversky, whose Prospect Theory (1979) explained the underlying loss aversion that drives sunk cost behaviour. Their research demonstrated that people systematically violate rational economic principles in predictable ways.

Earlier researchers like Barry Staw (1976) had documented similar patterns under the term “escalation of commitment,” focusing particularly on organisational decision-making contexts.

What research studies prove the Sunk Cost Fallacy exists?

Several landmark studies have validated the Sunk Cost Fallacy:

Arkes & Blumer (1985) demonstrated that people are more likely to persist in failing courses of action when they’ve already invested resources, even when continuation is clearly irrational.

Garland (1990) showed escalation of commitment in project management, finding that higher sunk costs led to greater resource allocation despite negative prospects.

Recent neuroimaging research by Navajas et al. (2021) used fMRI to identify the brain regions involved in sunk cost decisions, implicating the anterior cingulate cortex (conflict monitoring) and insula (negative emotion processing).

Studies consistently confirm the effect across cultures and domains, though research also shows that accountability and external feedback can reduce susceptibility to the fallacy.

How does the brain process the Sunk Cost Fallacy neurologically?

Neuroimaging research reveals that the Sunk Cost Fallacy involves specific brain regions associated with conflict monitoring and emotional processing.

The anterior cingulate cortex (ACC) becomes active when we face the conflict between continuing (to justify past investments) and quitting (the rational choice). This region typically signals when our actions conflict with our goals.

The insula, which processes negative emotions and physical discomfort, also shows increased activity. This suggests that contemplating sunk costs literally feels uncomfortable, driving us to avoid the psychological pain of admitting losses.

These neurological findings help explain why the Sunk Cost Fallacy is so persistent – it’s not just a thinking error but an emotional response that feels physically uncomfortable to overcome.

Are there any studies that challenge the Sunk Cost Fallacy theory?

Whilst the Sunk Cost Fallacy is well-established, some research highlights important nuances and limitations:

Contextual factors matter significantly. Studies show the effect is weaker when people are held accountable for their decisions or receive external feedback. Some researchers argue this suggests the “fallacy” might sometimes reflect rational strategic thinking rather than pure irrationality.

Methodological challenges exist in distinguishing true sunk cost effects from other factors like reputation management, learning effects, or genuine strategic persistence. Real-world decisions often involve complex considerations that laboratory studies can’t fully capture.

Cultural variations have been observed, with some studies suggesting the effect may be stronger in individualistic cultures where personal responsibility is emphasised.

However, these challenges refine rather than refute the basic concept – the tendency to honour sunk costs remains a robust and well-documented bias.

What famous historical examples demonstrate the Sunk Cost Fallacy?

The Concorde Fallacy is the classic example, named after the supersonic passenger jet. Despite clear evidence that the project would never be commercially viable, British and French governments continued funding development for years to justify massive prior investments. The project ultimately lost billions.

The Vietnam War is often cited as a large-scale example, where escalating commitment to justify previous losses led to prolonged conflict despite diminishing prospects for success.

In business, Theranos continued operating and raising funds long after internal evidence showed their blood-testing technology didn’t work, partly to justify the hundreds of millions already invested.

These examples illustrate how the Sunk Cost Fallacy can affect not just individuals but entire organisations and governments, leading to massive resource waste on a societal scale.

How did the Concorde project illustrate the Sunk Cost Fallacy?

The Concorde project perfectly exemplifies the Sunk Cost Fallacy in action. By the late 1960s, it was clear that the supersonic passenger jet would never be commercially viable – operating costs were too high, environmental concerns were mounting, and market demand was limited.

However, the British and French governments had already invested enormous sums in development. Rather than cutting their losses, they continued funding the project for another decade, ultimately spending over £15 billion (in today’s money) to avoid admitting the initial investment was a mistake.

The project’s name even became synonymous with the bias – economists sometimes call it the “Concorde Fallacy.” Only 20 aircraft were ever built, and the programme never came close to recouping its development costs, making it a textbook example of how sunk cost thinking can lead to massive resource waste.

What movies or TV shows feature the Sunk Cost Fallacy?

Whilst not explicitly named, the Sunk Cost Fallacy appears frequently in popular media, particularly in storylines about failing relationships, business ventures, or personal projects.

Breaking Bad showcases escalating commitment as Walter White continues deeper into criminal activity partly to justify previous actions and investments. Each episode sees him “in too deep” to quit.

The Gambler (various film versions) explores how people continue gambling to recoup losses, throwing good money after bad in classic sunk cost fashion.

Mad Men frequently depicts advertising executives and clients persisting with failing campaigns or strategies because of resources already invested, rather than pivoting to better approaches.

These narratives resonate because they reflect a universal human tendency – we’ve all experienced the pull of sunk costs in our own decisions.

Can you see the Sunk Cost Fallacy in gambling behavior?

Gambling behaviour provides one of the clearest real-world examples of the Sunk Cost Fallacy in action. The phrase “chasing losses” perfectly captures the sunk cost mentality – continuing to gamble not because the odds have improved, but to justify money already lost.

Slot machine design deliberately exploits this bias. Near-misses and small wins create the illusion that a big payout is imminent, encouraging players to continue feeding money into machines to justify their previous investment.

Poker players often stay in hands longer than optimal because they’ve already contributed to the pot, even when the odds clearly favour folding. Professional players learn to overcome this bias by focusing solely on future expected value.

Research shows that problem gamblers are particularly susceptible to sunk cost thinking, often viewing each loss as a reason to continue rather than a signal to stop.

How is the Sunk Cost Fallacy different from loss aversion?

Whilst closely related, the Sunk Cost Fallacy and loss aversion are distinct concepts:

Loss aversion is the broader psychological principle that losses feel roughly twice as painful as equivalent gains. It affects all decisions involving potential losses, not just those with prior investments.

The Sunk Cost Fallacy is a specific application of loss aversion where past investments influence future decisions. It only occurs when we’ve already invested resources and feel compelled to continue to avoid “wasting” those investments.

Think of loss aversion as the underlying engine and the Sunk Cost Fallacy as one particular way it manifests. Loss aversion explains why we hate losing £100, whilst the Sunk Cost Fallacy explains why we might spend another £100 trying to get the first £100 back.

Both biases can occur simultaneously, compounding their effect on decision-making.

What’s the difference between Sunk Cost Fallacy and confirmation bias?

The Sunk Cost Fallacy and confirmation bias are distinct cognitive biases that can reinforce each other:

Confirmation bias involves seeking information that supports existing beliefs whilst ignoring contradictory evidence. It’s about how we process information, regardless of prior investments.

The Sunk Cost Fallacy specifically involves continuing investments to justify past decisions. It’s about resource allocation driven by previous commitments rather than information processing.

However, they often work together. Someone experiencing the Sunk Cost Fallacy might also engage in confirmation bias, seeking evidence that their continued investment is justified whilst ignoring signs of failure.

For example, an entrepreneur might continue funding a failing startup (Sunk Cost Fallacy) whilst only paying attention to positive customer feedback and ignoring negative reviews (confirmation bias).

Is the Sunk Cost Fallacy related to the escalation of commitment?

The Sunk Cost Fallacy and escalation of commitment are closely related concepts, often used interchangeably, but with subtle differences:

Escalation of commitment is the broader phenomenon where commitment to a failing course of action increases over time, even in the face of negative feedback. It can be driven by various factors, including social pressure, ego, and organisational politics.

The Sunk Cost Fallacy is more specifically about continuing because of resources already invested. It’s one of the key drivers of escalation of commitment, but not the only one.

Think of escalation of commitment as the observable behaviour (increasing investment in failing projects) and the Sunk Cost Fallacy as one important psychological mechanism that causes this behaviour.

Both concepts highlight how past decisions can trap us in suboptimal courses of action, making them crucial to understand for better decision-making.

How does the Sunk Cost Fallacy compare to anchoring bias?

The Sunk Cost Fallacy and anchoring bias both involve past information influencing current decisions, but they operate differently:

Anchoring bias occurs when we rely too heavily on the first piece of information encountered (the “anchor”) when making decisions. It affects how we evaluate options, regardless of whether we’ve invested in them.

The Sunk Cost Fallacy specifically involves continuing investments because of resources already committed. The initial investment acts as a psychological anchor, but the bias is about justifying past decisions rather than just being influenced by initial information.

For example, anchoring bias might make you negotiate a salary based on the first figure mentioned, whilst the Sunk Cost Fallacy might make you stay in a job because of the time you’ve already invested in the company.

Both can occur simultaneously, with initial investments serving as anchors that make abandonment feel even more costly.

How do marketers use the Sunk Cost Fallacy to influence customers?

Marketers leverage the Sunk Cost Fallacy through several well-documented strategies, though ethical applications focus on highlighting ongoing value rather than exploiting past investments:

Subscription models often use free trials that require initial setup time. Once users invest effort in learning the platform, they’re more likely to continue with paid subscriptions to avoid “wasting” that time investment.

Loyalty programmes create artificial sunk costs through accumulated points or rewards. Customers become reluctant to switch brands because abandoning the programme means losing accrued benefits.

Multi-step forms on websites leverage the bias by making users more likely to complete lengthy processes once they’ve started, as abandoning feels like wasting the time already invested.

However, ethical marketers focus on delivering genuine ongoing value rather than simply exploiting psychological biases to trap customers in disadvantageous relationships.

Why do subscription services rely on the Sunk Cost Fallacy?

Subscription services naturally create conditions that trigger the Sunk Cost Fallacy, making them particularly effective business models:

Initial setup investments in learning the platform, customising settings, or importing data create psychological barriers to switching. Users feel they’d “waste” this effort by cancelling.

Content libraries and progress tracking (like Netflix viewing history or Spotify playlists) represent time investments that users are reluctant to abandon.

Annual payment discounts encourage larger upfront commitments, making cancellation feel more costly throughout the subscription period.

Freemium models get users invested in the platform before introducing paid features, leveraging the time and effort already spent learning the system.

However, successful subscription services combine these psychological factors with genuine ongoing value – the best retention comes from satisfied customers, not trapped ones.

How does the Sunk Cost Fallacy impact customer loyalty programs?

Loyalty programmes are specifically designed to create artificial sunk costs that increase customer retention:

Points accumulation makes switching brands feel costly because customers would “lose” their accumulated rewards. This is particularly effective when customers are close to reward thresholds.

Tiered status systems (like airline frequent flyer programmes) create additional psychological investment. Losing “Gold” or “Platinum” status feels like wasting the effort required to achieve it.

Personalised offers based on purchase history make customers feel the brand “knows” them, representing an investment in the relationship that would be lost by switching.

Research shows customers near reward thresholds spend more money than those further away, demonstrating the power of sunk cost psychology in driving behaviour. However, the most effective programmes balance psychological retention with genuine value delivery.

Can businesses ethically leverage the Sunk Cost Fallacy in pricing?

Businesses can ethically apply sunk cost principles in pricing by focusing on genuine value creation rather than customer exploitation:

Ethical applications include:

• Offering setup services or onboarding that genuinely improve customer outcomes
• Creating customisation options that add real value whilst increasing switching costs
• Providing educational content that helps customers succeed with the product

Unethical applications include:

• Making cancellation deliberately difficult or confusing
• Creating artificial switching costs without corresponding benefits
• Using dark patterns to trap customers in unwanted commitments

The key distinction is whether the “sunk cost” elements provide genuine value to customers. Ethical businesses use these principles to reward loyal customers and improve outcomes, not to manipulate or deceive.

Transparency is crucial – customers should understand what they’re committing to and have clear options for changing their minds.

Is it unethical to exploit the Sunk Cost Fallacy in marketing?

The ethics of using the Sunk Cost Fallacy in marketing depend heavily on intent, transparency, and customer benefit:

Potentially unethical practices include:

• Deliberately making cancellation difficult to exploit sunk cost psychology
• Creating artificial switching costs without corresponding value
• Targeting vulnerable populations who may be more susceptible to the bias
• Using the bias to keep customers in genuinely harmful or disadvantageous relationships

More ethical approaches focus on:

• Highlighting ongoing value rather than just past investments
• Providing clear opt-out options and transparent terms
• Using the bias to encourage beneficial behaviours (like completing educational courses)
• Ensuring that customer retention strategies genuinely improve outcomes

The most ethical approach is transparency – helping customers understand their decision-making biases whilst providing genuine value that justifies continued engagement.