How peddlers made humans’ fear of loss work for them

I noticed that Gerhardt Gschwandtner, CEO of Selling Power and SalesOpShop, put up a new video on youtube entitled « The Past and the Future of Selling in America ».

What’s the story?

About half way into the video, the story of the peddlers, who, in the 19^th century, sold the first mass produced clocks throughout America, is told. At the time, a clock was a substantial investment for a household. It must have been difficult to make a quick sale. That’s probably why the peddlers would ask potential customers if they would allow them to store the clock for a few months at their homes. If permitted, the peddlers would then set up the clock to use in the potential customer’s home.  When the peddlers returned back a few months later, wanting to collect their clock, most of the potential customers preferred purchasing the clock instead of giving it back. They could not live without it anymore.

What’s the point?

I recently read « How to Get People to Do Stuff » by Susan M. Weinschenk. There, I learned about the importance of fear of loss as a motivator. She writes « Our instincts are so alert and averse to loss of any kind that we are unconsciously more motivated to take action based on the fear of loss than on the anticipation of gain ». Behavioral economists have shown this effect in many experiments. To me, this effect was used intuitively by those peddlers in 19^th  century America to sell their expensive clocks.

So what?

Seeing the « freemium » concepts used so often on the internet, it looks to me as the peddlers’ wisdom has been forgotten, and empirical evidence is ignored. A « freemium » concept provides a limited set of functionality or service to the user for free. More functionality or services can then be had by paying a subscription. The underlying hypothesis of the concept being, that constant use of service and not having access to advanced features will cause frustration and ultimately make the user to upgrade to a paying subscription.

Well if you want to sell to me “freemium” has a small to succeed. The frustration created is rarely unbearable, and if it is, I rather look first for another free alternative, offering more functionality, before spending money.

To me « freemium » tries to motivate with the anticipation of gain (more functionality). I wonder how I would react though if I were given a tool with full functionality for free for a limited period of time to learn to appreciate all the marvelous things it does for me. After the trial period, I would then have the choice between giving it up or paying a full subscription for it. To me this provokes a fear of loss situation. I think I would be much more inclined to take out a paying subscription than in the “freemium” model.

What’s your opinion?

Please share your thoughts, as I am interested in knowing whether I am an outlier or if businesses are leaving lots of money on the table with their « freemium » concepts.