A group of friends pulled me into an interesting debate. Two events happened a couple of days ago; Starbucks announced a promotion for their hundredth store in India, and iPhone X pre-order sold out within minutes. Hotly debated was the sense in these events - why are people lining up for a coffee that's just a bit cheaper than usual, or a phone that is no longer much of the revolutionary product it once was. There was talk of cheaper CCD coffee and better Samsung phones, of price elasticity, Veblen goods, artificial shortages or just plain moronic behaviour.
I felt that all these arguments were wrong. Economists should not be involved; this is really about storytelling.
Starbucks has, over the years, gathered a loyal following of people willing to pay high prices for their coffee through a combination of ambience and aspiration. The hundredth-store sale is actually aimed at their regulars, not at new clientele choosing between CCD and Starbucks. It encourages the already committed regulars to come back that particular day and be rewarded for their loyalty. Starbucks gains because people who participate become a little more loyal (myths are made "I was there when the hundredth store promo happened") Increased sales, more experimentation with products they would not otherwise try, these are all side benefits to the main loyalty one. Indeed Starbucks would probably have lost a bit of money in the process, what with added promo costs and getting only Rs 100 from someone who would probably have paid Rs 150. Sports and rockstars have known how to exploit this for ages but many brands are quite good at this too. To create a religion, you have to build rituals and myths. Just price elasticity wont do.
And of course iPhone is very much about the myth. 95% of iPhone users say they will buy another iPhone, compared to only 53% for Samsung - certainly not because iPhone is better but because it is much better at the mythmaking than Samsung. People buy the latest iPhone minutes after pre-order starts for the same reason that people queued up for Rajnikant first day first show tickets - they belong to a fan club. You may think that a phone or a coffee is just a phone or a coffee, and that people buying into this myth are morons wasting their money, but thats because those myths are not ours. I obsess over bicycles and food, my friend Shuvam over cameras and stereos, my uncle over football; in all these cases the functional needs can be quite adequately met very quickly and with little emotional involvement. However, the emotional involvement is a big reason why we buy anything beyond our necessities. The value of bonding with Starbucks regulars over long lines on the special day is no different from attending an alumni meet and chatting with people who you otherwise share so little with that you haven't called them in twenty years. It is also no more useful than cycling 500km over desolate Himalayan roads. We all need and look for more than the direct technical benefit a product provides us; we need myths and memories from the pedestrian products that populate our lives. The best brands know how to latch on to that.
Once, before the advent of the material explosion, religion and warfare filled this need. I personally am glad we have moved on to iPhones instead.
I felt that all these arguments were wrong. Economists should not be involved; this is really about storytelling.
Starbucks has, over the years, gathered a loyal following of people willing to pay high prices for their coffee through a combination of ambience and aspiration. The hundredth-store sale is actually aimed at their regulars, not at new clientele choosing between CCD and Starbucks. It encourages the already committed regulars to come back that particular day and be rewarded for their loyalty. Starbucks gains because people who participate become a little more loyal (myths are made "I was there when the hundredth store promo happened") Increased sales, more experimentation with products they would not otherwise try, these are all side benefits to the main loyalty one. Indeed Starbucks would probably have lost a bit of money in the process, what with added promo costs and getting only Rs 100 from someone who would probably have paid Rs 150. Sports and rockstars have known how to exploit this for ages but many brands are quite good at this too. To create a religion, you have to build rituals and myths. Just price elasticity wont do.
And of course iPhone is very much about the myth. 95% of iPhone users say they will buy another iPhone, compared to only 53% for Samsung - certainly not because iPhone is better but because it is much better at the mythmaking than Samsung. People buy the latest iPhone minutes after pre-order starts for the same reason that people queued up for Rajnikant first day first show tickets - they belong to a fan club. You may think that a phone or a coffee is just a phone or a coffee, and that people buying into this myth are morons wasting their money, but thats because those myths are not ours. I obsess over bicycles and food, my friend Shuvam over cameras and stereos, my uncle over football; in all these cases the functional needs can be quite adequately met very quickly and with little emotional involvement. However, the emotional involvement is a big reason why we buy anything beyond our necessities. The value of bonding with Starbucks regulars over long lines on the special day is no different from attending an alumni meet and chatting with people who you otherwise share so little with that you haven't called them in twenty years. It is also no more useful than cycling 500km over desolate Himalayan roads. We all need and look for more than the direct technical benefit a product provides us; we need myths and memories from the pedestrian products that populate our lives. The best brands know how to latch on to that.
Once, before the advent of the material explosion, religion and warfare filled this need. I personally am glad we have moved on to iPhones instead.
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