How Xerox created a $10B market with one simple psychology principle

It's easier to say yes when you have nothing to lose.

In 1959, Xerox launched their groundbreaking 914 office copier.

It was the first commercial copier and getting it adopted was - to put it mildly - an uphill battle.

To most office managers in the 1950s, copiers felt expensive and unnecessary.

First, the price was a huge barrier.

The 914 cost an incredible $27,500 in 1959 - the equivalent of about $300k today.

But it wasn’t just expensive, it was hard to use.

Banks refused loans to Xerox, calling the machine "too complicated."

In short, buying this product was a big risk.

The 914 should have failed spectacularly.

But Xerox had a psychological insight that would transform their business and create a $10B market.

Instead of requiring businesses to make a massive upfront investment,

Xerox decided to de-risk the product by offering a lease option:

Offices could rent the 914 for just $25 per month.

They’d get 2,000 copies included, and could purchase more copies for 10 cents each.

This pricing model completely changed how buyers perceived the 914.

Suddenly, there was minimal risk.

If it all went wrong and nobody used this newfangled copying machine, office managers could just end the lease and send it back.

By 1965, Xerox machines were producing millions of copies a day.

The success of their strategy is down to a principle called Loss Aversion.

It says people hate to lose.

And we’ll go to great lengths to avoid risk, because risk implies there’s the possibility of loss.

In fact, the psychological pain of loss is 2x that of the joy of gain.

Think of it this way:

• If I find $20 on the sidewalk, my happiness is about a 4 out of 10 - happy, not not overjoyed.

• But if someone steals $20 from me, my pain is an 8 out of 10 - my whole week is ruined.

By shifting from a high-risk, high-cost purchase to a low-risk lease model,

Xerox removed the psychological barrier - Loss Aversion - that was blocking sales.

I helped one of my clients - a DTC business that was struggling to find its first buyers - using a similar Loss Aversion approach.

They have a really interesting hybrid business model that people had never seen before in their market.

Like Xerox, their biggest barrier was a high initial cost for an unproven product.

Buyers saw it as risky.

We didn’t fix their sales by leasing the product, but we did take a page from Xerox’s de-risking playbook.

After talking to their potential buyers and leading some concept testing for the brand, I discovered something interesting.

People said they were about 2x more likely to buy if two things were present:

• A payment plan

• A 30-day money back guarantee

Now, behavioral science tells us that buyers often say one thing and do something completely different, so we knew we’d have to test this approach with real customers.

We found that people were more likely to buy the more “de-risking” elements we offered (but there was an upper limit).

When people hesitate to buy your products or services (especially if it’s a new product or your buyers don’t know you very well) you need to make sure you’re de-risk your offer.

There are lots of ways to de-risk a product or service, but which strategies are most effective for you will depend on your industry, marketing, brand, and buyer.

Every day I help my clients de-risk their offers using principles like Loss Aversion, so they can grow sales and profit.

I do it in my community, Choice Hacking Pro (now full), and in my one-on-one coaching.

To learn more about working with me in one-on-on coaching, reply to this email with the word “DETAILS” and I’ll send you the info on how it works.

But if you’re not ready for one-on-one coaching just yet, a good place to start growing your business is by taking one of my 5-star courses.

👉️ My most popular course, “Behavioral Science & Psychology 101 for Marketers” is now 50% off in my annual Memorial Day sale.

You can get the course for just $149, but only until tomorrow night.

The best part? Since all my courses come with Lifetime Access, if you purchase the course on sale now you can take it whenever you want.

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Until next time,
Jen