I was at dinner last week with blogger/designer extraordinaire Zana Bane of Garbage Dress, Digital Fashion Editor Mary Lee and designer Norisol Ferrari and Zana mentioned a promotion that she just got from a cool little shoe brand, Miista. Last week Miista ran a promotional program called “Cheaper with a Tweet”. Essentially how it works is that the more people tweet about something, the price drops. The amount of price drop is calculated using a person’s Klout score (the higher the score, the more the price drops). As the price goes down, people can buy until they are all gone.
I realize that other people have toyed around with this in the past and I have seen economics papers written on variable pricing models, but I just found this fascinating. First, it was really well done and fun. Second, it was a great way to find the clearing price for end of season product AND drive traffic to other products on the site. They paid for advertising through in-kind discounts and engaged and energized a loyal base while gaining exposure to new customers.
To me, pricing is one of the most fascinating facets of commerce and, especially in fashion and luxury, pricing is as much art as it is in science. There are all sorts of crazy elasticity curves that describe the relationship between demand and price. I am going to refrain from an economics lesson here, but I am convinced that for more than a handful of luxury goods of finite supply, there is an inverse elasticity curve (more demand at a higher price – crazy but true!).
But once the price is determined, all creativity goes. The price is the price and depending on demand, it holds or it is discounted as the season progresses based on the judgment of the brand or the retailer (obviously, some brands don’t discount at all, no matter what). But for years, fashion and luxury brands have given celebrities free or discounted product with the hope/commitment that they would wear the product and be photographed in the product, thus promoting the brand. In an abstract sense, the brands are making a conscious decision to buy (the hope of) publicity for the cost of the product. The celebrity provides credibility and aspiration for the brand and so it is usually a good deal for everyone.
In the world in which we currently live, everyone is a celebrity to some number of people. Perhaps its just one person, or maybe its millions, but almost everyone provides some level of influence greater than zero over some number of people greater than zero. So, as a brand, if I can harness that “celebrity” to influence other people to buy my brand, I should be willing to pay for that in some way. If I can influence one person, it might be too small to measure, but if I can move an entire audience, someone might be willing to give a 100% discount or more! 10 years ago this influence could not be measured quantitatively, but now it can. Klout and other services are beginning to provide real numbers to measure this influence and brands such as Miista are beginning to leverage it.
What does the future hold? Perhaps a different price for everyone on the planet based on your ability to influence others to purchase the brand? Sure, why not? One of our brilliant CEO’s has been drafting a way to do that already. But services like Klout measure influence in a really limited manner based on criteria that might not be important for brand. Justin Bieber has an incredibly high Klout score, but he would be a negative influence for me in men’s fashion – he has no clout with me at all. But someone like Brad Pitt would (hey, would not want to aspire to look like Brad Pitt?!!). But Brad’s score is a 41 while Justin’s is a 100. For me, JB is 1 and Brad Pitt is a 92 in Men’s Fashion. But Brad’s clout would change for me in other industries – in venture capital, Brad is probably a 5. So a one size fits all approach won’t work in gauging influence. I believe that in the future, a core competency of any brand will be its ability to gauge who are there actual and potential influencers.
Influence is an economic bargain: if you (my customer) influence others on my (the brand’s) behalf, I will give you some economic reward for doing so. That compensation may be reflected in the price I charge you for my product. There are so many subtleties that remain to be worked out (e.g. how do selective discounts impact other customers) but the promise here is really unlimited and it will be an amazing step forward in deepening the relationships between brands and their customers.
So congrats to Miista for making a fun and interesting first step here. I look forward to keeping an eye on this brand and the other creative things they will do.