I can barely remember the last time I saw a jogger’s legs. Just about anyone who goes jogging has fancy leggings made of “technical material.”
They can cost as much as a flight to Sydney:
People are prepared to pay a giant amount for goods and services related to sports. Willingness to pay for compression leggings is enormous – never mind that the marathoners at the Olympics don’t wear them, and neither do the 100 metre runners.
People can run in cheap clothes, but they love running so much that if expensive and specific clothes seem to be required, the expense is minor compared to the overall enjoyment.
Hanging out with your friends can also be cheap or free. But if a cultural expectation develops that it’s only appropriate to hang out in a bar or a restaurant – not in a park or on a street corner – then people don’t blink to pay.
Businesses that sell expensive bicycles profit because they leverage both these trends. If you want to do that exercise properly, and hang out with your cycling friends, you need to have a bike that won’t embarrass you or leave you lagging behind the bunch. Or so they say.
The business model is this. Find something people love to do. Something that offers them a strong benefit at a relatively low price, and great “consumer surplus.”
Then position your product as an indispensable tool to doing that. It doesn’t matter if your product is truly important – you can capture some of that consumer surplus if you can convince people it is. It might be as simple as making the stitching on your leggings high-contrast to create the impression of science.
This will work best if the activity is undertaken in public. When it comes to public consumption goods like shoes and cars, we tend to be driven by what others are doing, while we may make our own judgments about buying goods consumed privately like electricity providers and detergent. (This terrific paper ranks goods by their conspicuousness, which runs from cigarettes and clothing, down to home insurance and underwear.)
My last example for the post is popcorn. If I was to watch a movie sitting on my own couch, I would not plan to eat popcorn. But if I am invited to someone’s home to watch a film, the odds of me buying popcorn rise dramatically. Why do popcorn and movies go together? It’s a social construct – and a way to capture my willingness to pay. (1)
Are there other examples that grate on you? Leave a comment below!