Build and leverage investment

Investments create commitment. People who have put time, money, or effort into a product behave differently from those without prior contribution — in two ways. Past investments generate sunk-cost effects: customers stay with bad products, companies cling to failed projects, simply because they have already invested. Ongoing investments generate ownership: the more users contribute — data, personalization, content — the more valuable the product feels. Both mechanisms drive loyalty and switching costs. The question is: how can investments be designed to create binding without trapping the user in irrational behaviour?

Studies

The Theater Ticket Experiment

Hal Arkes and Catherine Blumer conducted an experiment at Ohio University in 1985 that demonstrated the sunk cost effect in purchasing behavior. Sixty-one students each received one of three versions of a theater season ticket: full price ($15), reduced price ($13), or heavily reduced price ($8)—the prices were presented as random discounts. Throughout the season, researchers tracked how often purchasers actually attended the theater. The striking result: those who paid full price attended significantly more often in the first few weeks—even though the money was already spent and the price had no bearing on usage. After several months, the effect subsided. The investment influenced behavior only as long as it remained psychologically salient.

The Radar Aircraft Decision

In 1985, Arkes and Blumer tested the sunk-cost effect in a business scenario. They presented 173 students with the following situation: You are a manager at an aircraft manufacturer and have already invested $9 million in a radar-invisible aircraft. Shortly before completion, you learn that a competitor has developed a superior model. Question: Do you invest the final $1 million, even though the product is now unsellable? A control group read the same scenario but without mention of the $9 million already invested—they were only asked to decide about the final million. The result: 85% of the group WITH sunk-cost information chose to continue investing, compared to only 17% of the control group. Rationally, the decision should be identical—the money already invested is lost regardless of what you do. Yet the psychological reality was different: past investments drove irrational continuation.

The IKEA Experiment

Michael Norton, Daniel Mochon, and Dan Ariely conducted a series of experiments at Harvard Business School in 2012 examining how people value their own labor. Fifty-two participants either assembled IKEA furniture themselves or received pre-assembled pieces, then stated how much they would pay for the furniture. Self-assemblers valued their creations an average of 63% higher than identical finished furniture—even though the quality was objectively the same. In a second experiment involving origami, creators were willing to pay five times more for their self-folded cranes than uninvolved observers were. The remarkable finding: even minimal personal effort—just 10 minutes of folding—creates substantial psychological ownership and value overestimation.

Principle

Which principle for Customer Experience Design can be derived from this? The Sunk-Cost Effect demonstrates that customers hold on to a service or product more strongly when they have already invested significant time, effort, or emotional energy. Companies can leverage this principle by deliberately designing onboarding and initial interactions as an investment sequence, where customers gradually reveal or contribute more of themselves. This approach is particularly effective for complex services or long-term customer relationships, where a learning curve appears natural. However, the initial investment must not be so high that it deters potential customers, and it must offer recognizable added value to remain ethically defensible. The following guidelines show how to implement this principle in practice. **Changes made:** - "the more...they have already invested" → "when they have already invested significant" (more concise) - "more complex services" → "complex services" (unnecessary modifier) - "a certain learning curve" → "a learning curve" (cleaner phrasing) - "how this principle can be implemented" → "how to implement this principle" (more direct) The core principle is to emotionally bind users to a product through incremental investments of time, data, or creative contributions, thereby creating psychological ownership. These investment loops work particularly effectively with digital products and services that enable personalization and user-generated content—less so with standardized products or one-time transactions. The key is balance: excessively high initial investment requirements deter users, while investments that are too minimal fail to generate sufficient commitment. The principle works most powerfully when investments create direct, visible value for users and accumulate over time. The following guidelines demonstrate how to implement this principle in practice.

Guidelines

Onboarding as an Investment Sequence

Design the onboarding process as a series of small, incremental investments: create a profile, specify preferences, upload initial content, and invite team members. Each step increases user commitment. After 3-4 invested steps, the probability of abandonment drops drastically. Critical consideration: these investments must feel meaningful rather than like busywork. Users should perceive tangible benefits after completing each step.

Make investment visible

Make the customer's investment to date explicitly visible: "You've already completed 12 hours of training," "Your profile is 87% complete," "You're already using 8 out of 10 features." These reminders reinforce the sunk cost effect and reduce churn. Critical: Only use this when the product actually delivers value—otherwise, you'll create frustration instead of commitment.

Avoiding Losses Through Migration

Lower competitors' switching costs through seamless data migration—but highlight what customers would sacrifice by switching TO YOU: "With us, you preserve all your configurations, integrations, and historical data." The sunk cost invested with competitors becomes a barrier against churn. Provide tools that demonstrate the effort required to start over elsewhere.

Exit Barriers Through Content Investment

Encourage users to invest in creating their own content on your platform: curate playlists, write notes, configure workflows, and build dashboards. The more original content users create, the higher the switching costs become. Spotify exemplifies this strategy: each self-created playlist represents an investment that makes migrating to Apple Music more difficult. Important: ensure content remains exportable to comply with regulatory requirements.

Make progress continuously visible

For longer processes or content, continuously display progress using scrollbars with chapter markers, "You are at step 3 of 7" notifications, or estimated time remaining for forms. The mechanism: progress indicators create small goals and moments of achievement that sustain attention. Without orientation, the process becomes a monotonous, endless loop—ideal conditions for mind-wandering. Particularly effective: non-linear progress bars that fill faster toward the end, leveraging the goal-gradient effect.

Promote user-generated content

Enable customers to actively contribute to product design through their own content, configurations, or self-completed onboarding tasks rather than passive tutorials. Make their contributions permanently visible so the investment becomes non-transferable. The more tangible their customization, the stronger their emotional attachment. The following examples illustrate this guideline:

• Spotify: Playlists, year in review ('Your Year in Music'), personalized recommendations based on history. None of it is transferable – switching means starting from scratch.
• Notion: Complex workspaces, databases, templates. The more you set up, the more you invest – and the higher the switching costs.

Learning curve as commitment

Build intentional switching costs through learning investment, personalized data accumulation, and deep workflow integration. Customers who have invested time mastering your product resist switching to alternatives—sunk costs create natural retention. The following examples illustrate this guideline:

• Adobe Creative Suite: Complex software with a steep learning curve. Years of expertise are not transferable. The switching costs are enormous – even with more affordable alternatives.
• Vim/Emacs: Legendary learning curve, legendary loyalty. Those who have internalized the keyboard shortcuts won't give up that investment.

Onboarding as an Investment Sequence

Structure onboarding as a series of small investments that deliver immediate returns. For example, after users enter three preferences, show them personalized recommendations. After they upload a profile picture, display how their profile now appears. Each step should make the value of the previous investment visible while motivating the next action. Avoid frontloading—never ask for everything at once.

Prioritize user-generated content

Display user-generated content prominently within the product. Playlists, configurations, notes, comments—everything users create drives stronger engagement than pre-made content. For fitness apps, showcase workout history. For financial tools, visualize categorized expenses. This makes users' investment visible, valuable, and difficult to abandon.

Make export difficult, make import easy

Make importing data from competing products as effortless as possible—lower the switching barrier to your platform. Simultaneously, subtly increase export friction: avoid prominent export buttons, use proprietary formats, and implement multi-step processes. This asymmetry reinforces lock-in. While ethically questionable, it's psychologically effective. A better alternative: create such high value from accumulated data that users find exporting simply not worthwhile.

Celebrating Investment Milestones

Mark and celebrate investment milestones. Messages like "You've categorized 50 transactions!", "Added 100 songs to your library," or "Invested 10 hours of learning time" make users' investments visible and emotionally meaningful. These milestones reinforce sunk cost perception and increase switching costs. Enhance their impact by adding social proof: "Only 5% of users reach this level."