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Greed or Fear: Why People Pay $10 for Pie

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Have you ever wondered why people make the buying decisions they do? The people who made lots of money during the California Gold Rush were entrepreneurs who provided something the miners needed, wanted and just HAD to have.  In some cases it was just a piece of pie.  That's right.  It has been documented that one enterprising entrepreneur sold slices of pie for $10 a piece.  By the standards of the 1850's this was outright greed.  Even factoring in cost of supplies, labor and shipping the cost of a pie with a "fair" profit couldn't have been more than $2. 

So, why was someone able to charge $10 for the same slice of pie that cost 50 cents  in Boston or in St Louis.  The miner paid $10 for the pie because he had to have it.  Do you think that things have changed much since 1850?  The truth is...they haven't.  People still make buying decisions for exactly the same reasons today that they did over 100 years ago.  I repeat... People make buying decisions for the same reasons they did over 100 years ago.

 The first Iphone rolled out and was sold for over $600.  Do you think you could have bought a cell phone with virtually the same features for a lot less than $600?  Of course you could.  In fact, you could have bought a cell phone that had more features than the Iphone.  But, if you were one of the people who bought an Iphone you bought it because you had to have it.  You bought it for exactly the same reason that the miner bought that pie for $10. 

Gold Nugget Tip:  People as a group are predictable.  The psychology of marketing has been pretty thoroughly mapped and what behavioral psychology tells us is that people make the buying decision for emotional reasons almost every time.

The two main reasons people buy something is because of lust (or desire) and because of fear.  The lust for something is one reason people bought the pie or the Iphone.   This called by behavioral science the desire for gain.  By purchasing the Iphone you are gaining the latest cool fashion in cell phones and you gain the prestige of being an innovator.  Innovators like being first to get something.  Another way to think of lust is greed.  Unfortunately, that's why get rich quick (GRQ) schemes are so successful.  Its a direct appeal to an emotion (lust or greed) that is hard for people to resist.  The same emotion that drove thousands of people to participate in the gold rush is the same emotion that drives people to participate in the GRQ folly. 

Behavioral science tells that fear of loss is another really huge factor that motivates people to buy things.  Fear that someone else would eat the pie they desired  drove the gold miner to buy the pie for more than he would have in St Louis.  For a perfect example of this look at E-bay.  Have you ever been in a bidding war on E-bay?  You get caught up in the desire to own that item at any cost.  You  become afraid that someone will outbid you.  The next thing you know you are the proud owner of an overpriced collectors item. 

What does this have to do with Marketing?  Simple!  If you provide something that people desire, lust for and/or are afraid to do without you don't have to sell them, persuade them or make them buy your product or service.  All you have to do  is prove to them that you have what they want, that you will provide it at a price that they are willing to pay, and that you will make every effort to deliver it in a timely manner.  So stop selling and persuading and start delivering.    

Gold Nugget: Appeal to the desire for gain or the fear of loss to motivate a prospect.   

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