In a far, far away land, there’s a town called Lemon Tree…
In Lemon Tree, you open a stall selling lemons.
Your cost of each lemon is $1. If you sell a whole lemon for $1.50, your gross revenue is $1.50 and gross profit is $0.50 per lemon. Nothing to boast about.
You wisely decide there’ll be better profits selling by the slice than a whole lemon. Therefore, you slice the lemons into 6 slices and sell each slice for $0.50 each.
This has effectively increase your gross revenue from $1.50 to $3. Your gross profit has gone up from $0.50 to $2. Now, we’re talking…
Later, you realise the lemon can be sliced further into 10 slices instead of six and if you lower the selling price to $0.40 per slice, you’ll make $4 revenue and $3 profit. Sounds “WOW!”
But wait…
In each instance of price inflation people paid exorbitant amounts for lemon and lemon slices that shouldn’t have been worth anything like the going price.
The cost of a lemon rose from $1 to $1.50. This time, 10 lemon slices will give a lower profit of $2.50 instead of $3 the last time.
There were lesser buyers to sell to and lesser profit margins to be made.
You have to do creative selling to boost flagging profits.
Instead of 10 slices, you decide to slice the lemon into 20 slices and sell at a lower selling price of $0.30 per slice to entice more buyers. Doing this will give $6 revenue and a gross profit of $4.50. “A business sage!”
For buyers, the quantum price of a lemon slice may have gone down 40% (from $0.50 to $0.30) but the size of each lemon slice has also shrunk 70%!
It’s no longer a lemon slice. It’s “bits & pieces”… of a lemon.
Offer 8% discounts to sweeten the deal. Create a ton of hype marketing for your lemon slice and watch the buyers flow in!
A $0.30 lemon slice is “sweeten” to $0.276. Your gross revenue is $5.52 with a gross profit of $4.02 for 20 slices. Hey look! More profitable than selling 10 slices at $0.40 each!
Ever visited the lemon markets where you see chickens and chickens only pecking the ground and lemons are as plenty as chicken eggs?
For Lemon Tree in bad times, a BIG slice of lemon can be bought for as low as $0.20 each!
Simply put, prices today in Lemon Tree are set artificially low for a bigger mass market of “financially-impaired” lemonade drinkers eager to own an exclusive piece of lemon slice.
It’s a perfect example of how the world and the economy operate. The fools work, slave and buy garbage, while the so-called winners enjoy “the good life”.
It all starts at a subconscious level. They show us something we want and charge us a lot only to get a small piece of it. The best marketers are those who know very well what the people need and want, but instead of giving it to them in its true form – they sell garbage.
Just how developers are cashing in on $1 million or under properties today. They know they can’t sell expensively under current market, so…..
One of the oldest tricks real estate developers use is squeezing a piece of land to its maximum allowable plot ratio for optimal economic profit. (I mean their profit and NOT yours)
It’s not uncommon to see today’s 3-bedroom properties built for less than 1,000 square feet and costing less than $1 million price quantum. It’s also not uncommon to see less than 500 square feet properties selling like hot dogs either. They give the marginal buyer just enough to afford a private property.
This technique increases the profit of the developer significantly, and as you already know – property showrooms are “The Greatest Manipulation” of this world – you never know how the end product will turn out to be and every purchase is like playing Russian Roulette.
That’s one primary reason for the past 15 years, every of my successful investment or personal purchases are ONLY re-sale properties of meaningful sizes. But this is another post for next time.
While smaller price quantum won’t hurt you nearly as much as a bigger price quantum, it’s still a “scam” that uses the same principles: the real value is much less than the promised worth – In this case, buyers bought a lemon (slice) and they don’t know it.
And it makes you wonder, why today’s property buyers still fall for the oldest marketing trick in the world.
What trick is it?
Ready?
“For whatever product you’re marketing (even lemon slices), create a ton of hype about it and be exclusive. Period.”
Source:http://www.crei-academy.com/of-lemons-and-lemon-slices/
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