Know-How Exchange : Strategy

They're also known as "wow" products.

The smaller, rarer, or more desirable the item and the larger its price tag (thereby limiting its affordability for the average person), the bigger the "wow" factor becomes.

"Wow" drives hype, hype creates attention, attention creates desire, desire drives up the price.

It's a simple formula but it works like magic.

Often, "Wow" products are intentionally offered in short supply in order to artificially increase the cycle of want and desire.

In turn, this helps drive up prices, which then drives more hype, which, in turn helps stimulate demand and rise the price even higher. When you introduce intentionally managed scarcity (as you'd find in De Beer's control of the flow of rough diamonds into the market), you drive up the desire and the drive even more.

It's for this reason that Liz Taylor's diamonds got so much press in their recent sale. Likewise the purchase of an $88 million dollar Manhattan condo by Ekaterina Rybolovleva, the 22 year old daughter of the Russian billionaire Dmitry Rybolovlev. The release of the original iPhone did the same thing. Likewise sales of great paintings do the same thing.

When "less" (scarcity) meets "more" (higher price) ordinary or average people who will never experience that kind of transactional power are made to think "wow".

Toy companies often employ the "wow" tactic in the lead up to Christmas. The item is shown as being available through press and TV but is intentionally offered to stores in short supply. This then creates publicity. The PR serves to stimulate yet more demand, which drives traffic to the stores. When stores can't (or won't) fulfill the demand and as the deadline of Christmas gets ever closer, the demand to meet the deadline is then met by parents buying some other toy in order to satisfy THEIR customer (their child).

Then, and almost as it by magic, mere days after Christmas, supplies of the in demand toy suddenly become available, which means the parent then treks BACK to the store to spend more money and the store (and the child) both get the benefit.

It's these kinds of associational comparisons that stimulate desire—the whole notion of keeping up with the Jones's—and that drive the cycle of debt. In most cases it's the creation of debt that drives the growth of fiscal systems, NOT the accumulation and growth of capital.

The thing to remember about "wow" products is this: they are all constructs. Because the vast majority of them do not—strictly speaking—NEED to exist, nor, generally speaking do they significantly improve the qualities or value of people's lives, it becomes necessary to create them.