3 Ways to Build Happiness

We can lead happier lives. While we like to believe that happiness is a choice, it isn't. If happiness were a choice we could snap our fingers and be happy. We could simply think the right thoughts. We could simply move to the cheapest place on earth and give all our money away and live on meager food. However we can't, and even if the idea of being happy enough to be able to do that sounds idyllic, most of us couldn't do it. That's because we depend upon family, friends, food, shelter, and jobs, and many of those things also depend on us.

True Causes of Happiness

In reality our happiness depends mostly upon our circumstances. The real causes and conditions are the meat and potatoes of our circumstance, and if we can work towards improving them then we can find lasting happiness. As Maslow first pointed out, our happiness depends upon five major things:

1. Physiological Needs
2. Security Needs
3. Social Needs
4. Self-Esteem Needs
5. Self-Actualization Needs

We serve ourselves best when we focus on doing things that will meet those needs. The following basic guidelines useful in helping us get there: invest in quality, invest in community, and minimize major expenses.

Invest in Quality

Quality is one of the best things you can do to improve happiness. Quality is not to be confused with simple luxury or durability, although it does contain those elements. Quality things last longer and therefore reduce your overall expense. This makes it easier to save money and meet more of your physiological needs. Further you can count on it more, and this increases your security. Thirdly, it will increase your self-esteem because quality is aesthetically pleasing. Often quality also promotes socialization because we are more motivated to share quality things than lower quality things.

Invest in Community

Do things that will help you be social and connect more to others. If you have a choice, live closer to a town center. It is harder to be happy when you are isolated from friends, family, and people. Try to help others when possible, and accept from others as well. Build relationships and care.

Minimize Major Expenses

Try to minimize your major expenses. This may seem at odds with quality, but it is not. For example it is generally better to buy a nicer home that is small than a bigger home which is low quality.

When you can minimize major expenses you improve your ability to meet your physiological needs because you are spending less. You also improve your security because you can more easily afford your lifestyle and save money. Being more secure you are less likely to do things like impulse buy or overeat. By reducing your expenses you have less to stress about and this makes it easier to socialize. It also makes it easier to be spontaneous and this helps with your self-esteem needs and with self-actualization.

While it is useful to minimize your smaller impulse buys, like the latte at Starbucks, this will generally have a smaller impact on your happiness. Fretting about every minor financial decision adds a great deal of stress.

Understaing the Basics of Pricing

In business understanding pricing is a very important part and perhaps the most critical part of your business model. Below is another excerpt from the book Growing Happiness that provides an introduction into pricing. Much of what I know comes from the book the Strategy and Tactics of Pricing.

 
Capitalism also tends to focus on supply and demand curves and the idea that prices find a point that balances the supply and demand. This is important because part of capitalist theory falsely rests on the idea that market forces will dictate supply and demand, and the services offered. In other words, if something sells cheaply, more people will buy it, and if it is higher in price, fewer people buy it. Simultaneously, suppliers will be less interested in producing something less expensive and be more interested in something they can sell for a higher price and better profit. When these two impulses combine the price of something will reach an optimum point that balances the needs of the suppliers with the needs of consumers. This is what we traditionally call the market.

This sounds reasonable, but unfortunately this theory is not true. Consider the leading companies in quantity of sales, companies like Apple, Sony, Starbucks, Oracle, Verizon, and Microsoft. Then ask yourself for a moment if they have the lowest price. There are cheaper phones, MP3 players, database solutions, cell phones, and coffee.

The relationship between price and quantity sold simply does not exist. What is true, however, is the relationship between perceived value and price. The higher the difference between perceived value and price, the greater the sales will be. To this end, clever marketers spend a great deal of time emphasizing value.

To better understand this concept, we first have to understand some basic points about pricing theory. The goal of selling a product or service is to maximize profits. How much profit is a combination of the price and the quantity sold. When customers determine a fair price, they make the following mental calculations. We usually do this quickly and subconsciously.

1. What is the alternative?
2. How does this choice compare and constrast with the alternative?
3. Is the price justified based on this comparison?

For example, a thirteen-ounce tub of Vaseline costs about $4.50. A tiny 0.35 ounce tube of Vaseline Lip Therapy is about $1.99. In other words, Vaseline Lip Therapy is about sixteen times costlier than Vaseline in a jar, even though they are essentially the same product. Why don’t consumers protest? Why are sales of Vaseline Lip Therapy high? This is because the perceived competition to Vaseline in a jar is a store brand that costs about $3.99. The competition to Vaseline Lip Therapy is Chapstick, which is about $1.40. By packaging Vaseline more like a lip balm, they sell more and at a higher price for a much greater profit.

Even with commodities such as oil or gold, business people are quick to point to differences in price, and they will often note where the commodity comes from. For example, American versus foreign oil. Or Iranian gold versus Egyptian.

At retailers like Walmart, where price seems to sell, if you look closely at what is really attracting consumers, it is the perceived value. They sell products with a relatively high perceived value at lower prices. It’s not that the cheapest DVD player is selling best, but that a Panasonic DVD player costs less at Walmart than at many other retailers and that, in turn, draws consumers.

Suppliers are not motived by price to increase volume. They are motivated by profit—both financial and emotional. Suppliers that have other motives will not last long. This difference is key. Starbucks could sell coffee at cheaper prices, but they enjoy providing a quality experience in their stores. Starbucks employees are highly motivated because the company respects them. The chain has higher prices than many competitive stores, and they outsell everyone else.

Suppliers are interested in maximizing the difference between perceived value and price. There are many ways to increase the perceived value, including advertising and positioning. The perceived value of a product no one knows about is zero. One of the reasons companies like Apple and Oracle have done well is they have focused on communicating value to people who did not know that these products existed or did not think that these products had value for them. Competitors of these companies abounded, but most people were unaware of them.