The Ownership Economy 2022 - How Behavioral Science Can Boost Conversion Rates

The Ownership Economy 2022 - How Behavioral Science Can Boost Conversion Rates

In recent years, the ownership economy has emerged as a powerful force in the digital landscape. This new paradigm not only allows users to become owners of the products and services they use but also has the potential to create positive social change through the wider distribution of wealth-building assets. With over 15,000 projects in the ownership economy, ranging from user-owned financial markets to user-owned social networks, it's clear that the transformation of users into owners is shaping the future of the internet.

The market capitalization of tokens in the ownership economy is already significant, with over 19,000 tokens tracked by CoinMarketCap having a total value of $1.76 trillion. While this may seem impressive, it pales in comparison to the market capitalization of global stock markets, which exceeds $100 trillion. Bitcoin and Ethereum, the two largest cryptonetworks, have market capitalizations of $725 billion and $337 billion, respectively.

One key aspect of the ownership economy is the concept of user ownership. By giving users ownership in a product or service, creators can jumpstart growth and incentivize participation. However, sustaining user ownership is more challenging than acquiring it. Simply giving users ownership is not enough to ensure that a product succeeds. It must also have strong product-market fit, solving a widespread need for users. Additionally, the presence of liquidity, or the availability of a counterparty for transactions, is a significant motivator for users when choosing a marketplace. It's important to consider whether ownership actually crowds out intrinsic incentives to use a product and causes users to engage in a more transactional manner.

To boost user loyalty in the ownership economy, new token distribution designs are being implemented. Axie Infinity, a popular game in the ownership economy, has achieved strong player retention over time, indicating that engagement is not solely driven by novelty. Traditional liquidity mining programs, which reward users with tokens for providing liquidity, have not contributed to long-term sustainability. Instead, new token incentives focus on contributor growth rather than just deepening liquidity. Lockup periods and vesting mechanisms are being used to encourage long-term engagement.

The ownership economy also fosters richer ecosystems of projects and contributors. Shared ownership reinforces network effects and creates a disincentive for users to switch to other blockchains. This permissionless nature attracts users, creators, and developers to these projects, leading to a vibrant and collaborative community. CC0 NFT projects, in particular, extend the definition of ownership by enabling free use of assets, increasing their reach and value.

One of the key advantages of the ownership economy is that it allows users to become owners earlier and participate in value creation. Web3 companies that launch a token do so on average 2.7 years after founding, while VC-backed companies typically go public after approximately 5.3 years. Ownership is becoming a keystone of new experiences across all categories of software products.

Now, let's shift our focus to how behavioral science can be leveraged to boost conversion rates in the ownership economy. User interviews can be helpful, but small samples can be noisy and lead to misdirection. Instead, we can use the concept of the endowment effect to increase the perceived value of a product. When people feel a sense of ownership, they are more likely to value it. By making users feel closer to completing a task or action, we can deliver a bigger immediate benefit. Designing products that allow users to quickly feel ownership can increase conversion rates.

It's crucial to catch users at the moment of maximum momentum, which is typically on day one of their interaction with a product. By designing features and a mental model that align with their expectations and goals, we can drive higher opt-in rates and engagement. To drive a specific behavior, it's important to reduce barriers and increase immediate benefits. Humans are inclined to follow the path of least resistance and respond to immediate incentives.

Based on these insights, here are three actionable pieces of advice for boosting conversion rates in the ownership economy:

1. Design products that allow users to quickly feel psychological ownership. By creating a sense of ownership from the start, you can increase the perceived value and engagement with your product.

2. Catch users at the moment of maximum momentum, typically on day one of their interaction. Align the features and mental model of your product with their expectations and goals to drive higher opt-in rates and engagement.

3. Reduce barriers and increase immediate benefits to drive the desired behavior. Humans are more likely to take action when the benefits are immediate and the path to achieving them is clear and easy.

In conclusion, the ownership economy has the potential to revolutionize the way we interact with digital products and services. By giving users ownership and leveraging behavioral science techniques, we can boost conversion rates and create a more engaging and valuable experience for users. Whether you're a builder in the ownership economy or a marketer looking to increase conversion rates, understanding the principles of user ownership and behavioral science will be crucial for success in this new era of the internet.