December 5, 2024
how to think product, place, promotion and price : Planet Money : NPR


SYLVIE DOUGLIS, BYLINE: This is PLANET MONEY from NPR.

(SOUNDBITE OF BRICE MONTESSUIT AND CHARLES CASTE-BALLEREAU’S “LOST SITUATION”)

ROBERT SMITH, HOST:

Welcome back to PLANET MONEY’s Summer School, MBA edition, where the business of business is business. I’m Robert Smith with today’s lesson, No. 4 – you are halfway to your totally free, barely adequate MBA degree. If you listen to all eight episodes and pass a short test at the end, we’ll send you an electronic pseudo diploma appropriate for printing, framing and generally just showing off with. So far this summer, we have learned how to start a business, how to conquer competitors, and how to count our money.

Today, we get mystical. We look into the dark arts of marketing and sales. It is not easy to get someone to buy something they don’t know that they need. I mean, Arthur Miller didn’t call his famous play “Happiness Of A Salesman.” Perhaps that’s why so much attention at business school is focused on this problem. There are the basics of sales – how does someone find your product; how do you convince them to buy? But sales is just one small part of the bigger world of marketing. Creating brands, creating desires – it’s easy to sell one pair of shoes to a barefoot man, but selling someone their 23rd pair of sneakers, well, that takes marketing.

Teaching our class today is a professor of marketing at the legendary Wharton School at the University of Pennsylvania. Barbara Kahn, thank you for being with us.

BARBARA KAHN: Yeah, it’s my pleasure.

SMITH: So I feel like marketing is one of these things that – the word is always around. People are always saying, Robert, you got to market yourself better. But what does it actually mean from a business perspective, marketing?

KAHN: Yeah, it is a word that everybody seems to think they know. But there are some principles of marketing. They’re very, very simple, and people can learn them easily, but they’re very hard to implement. And I would say the very first principle, the thing that defines marketing…

SMITH: Yeah?

KAHN: …Is the principle of customer value. And very simply, it says, give the customer something of value. And that’s the way the study of marketing starts.

SMITH: Can you sell something to someone if they don’t want it? Can the powers of marketing and sales – I know you have them. Can you convince someone to buy something they don’t need or want?

KAHN: Yes, you can. And there’s a lot of persuasive techniques where you kind of trick the customer into buying things.

SMITH: Go on.

KAHN: But I wouldn’t argue that that’s good marketing. I think instead that if I have something I want to put into the exchange, I’m going to try to think of a way that it creates value for you so that you will want that product.

SMITH: But how do you create value? The product is the product.

KAHN: Well, the actual physical product could be almost a commodity. And a lot of the value could be in the packaging, in the delivery. It could be in the customer experience that’s wrapped around the product.

SMITH: Let’s keep that customer experience in mind, and we’ll be back with Barbara for more lessons in a few minutes. But first, we have to get to our classic case studies.

(SOUNDBITE OF GEOFF SMITH’S “CUT GLASS STARS”)

SMITH: In today’s show, we are going to take you from the smallest possible sales transaction to the marketing dream, the creation of an entire luxury brand. By the end of the show, you might find yourself strangely wanting to shell out money for a new showerhead and a $60,000 handbag. After the break.

(SOUNDBITE OF GEOFF SMITH’S “CUT GLASS STARS”)

SMITH: Let’s start with the atomic unit of sales and marketing – the purchase.

(SOUNDBITE OF GARETH JOHNSON ET AL.’S “DOING THE HUSTLE”)

SMITH: The customer has money, and they see something – maybe it’s an ad on social media or a billboard or a product demonstration – and they want that thing. They buy that thing. Now, as a businessperson, how do you make that wanting and buying happen? Our first case study is actually the fulfillment of a long dream for me. When I was a child, I used to go to the state fair. And rather than go on rides or eat deep-fried treats, I would stand and watch the product demonstrators – you know, the people showing off the miracle mops and the chamois wipes and my favorite, the Ginsu knives. I’d think, how do they get crowds to watch them? How do they get people to buy? In 2017, Kenny Malone and I traveled to the Ohio State Fair to learn that secret.

(SOUNDBITE OF ARCHIVED NPR BROADCAST)

UNIDENTIFIED PERSON #1: We welcome you to the state fair.

SMITH: Listen for how the sellers find a quick, memorable way to show how their product has value even if you didn’t know you wanted it.

(SOUNDBITE OF ARCHIVED NPR BROADCAST)

KENNY MALONE: So Robert and I are standing outside of a building.

SMITH: It’s not even a building. It’s more like a warehouse.

MALONE: It is three acres large, we are told.

SMITH: It is row after row, booth after booth.

MALONE: Dozens upon dozens of vendors.

Ready? Go.

SMITH: Got your gadgets.

MALONE: Triad air fan.

SMITH: Got your geegaws.

Ultimate Hose Nozzle.

Got your toys.

Splat balls.

There are hundreds of products here, maybe thousands of products.

Worley’s Wonder, which I think is jewelry cleaner.

MALONE: Solar Tees, T-shirts that light up with the sun?

SMITH: Weirdly, there is a hot tub vendor here.

Oh, so good.

MALONE: That was three acres of stuff.

SMITH: At the end of a row, I see a lighted-up booth with a cutting board and this mountain of shredded pineapples and cucumbers and zucchinis.

(SOUNDBITE OF VEGETABLES BEING PEELED)

MALONE: If you are thinking at home, O-M-G, that’s a potato peeler…

SMITH: Yeah, you’re right. It’s called the OMG Peeler.

TOMMY HARRIS: How are you doing guys? You want to see how it works? Y’all ever heard of a spiralizer or Veggetti?

SMITH: Veggetti?

MALONE: I do not know what a Veggetti is.

SMITH: It makes spaghetti out of vegetables. It’s a Veggetti.

HARRIS: So now you don’t have to get that big machine out, and you can already be done with your stir-fried dinner right there.

SMITH: What’s your name?

HARRIS: My name’s Tommy.

SMITH: Tommy?

HARRIS: Uh-huh.

MALONE: Tommy Harris.

SMITH: Tommy is huge – 6-foot-5 – has bright red hair pulled back in a ponytail.

MALONE: If you know professional wrestling, he’s a dead ringer for The Undertaker.

SMITH: Tommy could probably bench press the both of us. But instead, he is delicately peeling the skin off of a tomato.

HARRIS: Once you get home and you get used to it, you can go right-handed, left-handed. You can even do it underhanded like most politicians nowadays.

(LAUGHTER)

SMITH: Do you remember your first time…

HARRIS: Yeah.

SMITH: …You stood up?

HARRIS: Yeah.

SMITH: What was the product?

HARRIS: It was a hose nozzle. Yeah.

SMITH: The Ultimate Hose Nozzle?

HARRIS: The Ultimate Hose Nozzle, the same one, yeah.

SMITH: The Ultimate Hose Nozzle.

HARRIS: Absolutely.

SMITH: What did it feel like?

HARRIS: Nervous. Nervous. The first time, I was really nervous.

SMITH: But it went well. You know, he stole a few jokes from some of the other pitchmen, and he was off. He started to draw crowds. People started to laugh and buy.

MALONE: And now Tommy has become part of this small band of pitchmen and pitchwomen who are like product mercenaries. One day you’re selling a hose nozzle in Nashville, and then, they send you to Memphis for the steam mop.

HARRIS: Come on, ladies. You want to watch while you’re eating your sandwich? Might as well. Ooh, that looks good, right?

UNIDENTIFIED PERSON #2: Yes (inaudible).

HARRIS: Y’all ever heard of a spiralizer or Veggetti?

SMITH: Tommy did not invent the peeler. Tommy doesn’t own this giant stack of peelers. He sells them for $20 and makes about five bucks commission on each one.

MALONE: But he is paying for his own travel and his own lodging. And by our calculations, he would need to sell about a hundred peelers to break even on this fair.

HARRIS: Simple, easy. If you have kids…

SMITH: I could watch him all day long.

MALONE: Nope. Nope. We will not watch him all day long. But Tommy says if you want to go see someone who has a little bit of a different style, maybe a little bit more outgoing, check out the woman who’s pitching in the row over.

SMITH: Who also happens to be his fiancee.

Oh, so she’s here?

HARRIS: Yeah, she’s right around the corner.

SMITH: She’s pitching…

MALONE: Wait, can we hear her? Can we hear her from here?

HARRIS: Only if she starts laughing.

SMITH: Really?

HARRIS: Yeah.

SMITH: She got a big laugh?

HARRIS: You’ll see.

MALONE: I’ve got to hear this.

HEATHER KETO: (Laughter).

MALONE: This is Heather Keto.

KETO: (Laughter).

SMITH: Now, the thing Heather’s great at is called the hook.

MALONE: The hook is when you grab someone’s attention somehow and then you get them interested enough to watch your pitch.

SMITH: And we see this in action. We are walking toward Heather’s booth, and she’s leaning over with this huge grin, locking eye contact, and reaching out her arm like she wants to shake my hand.

KETO: Hey, guys, come on over here. Y’all want to try it out? Makes your life a lot easier.

SMITH: But all of a sudden, she has placed into my hand, like, these garden clippers.

MALONE: It is, in fact, the Tiger Jaw.

SMITH: The Tiger Jaw.

MALONE: But they are basically just pruning shears.

SMITH: And before I could set it down, Heather pulls out a branch, like, a real piece of wood, and she offers it up right in front of me to cut.

KETO: Go for it. You know you want to. Three clicks.

SMITH: Oh, oh.

MALONE: Don’t cut me. Don’t cut me. Robert.

SMITH: (Laughter) I’m in the zone. I’m cutting.

MALONE: And what’s amazing about the way Heather has hooked Robert into her presentation is that she’s put him in a position where in order to walk away, he has to put down the fun, new toy. And it’s a loss – like, no more chopping sticks, no more wow factor.

SMITH: And this is the thing that amazon.com, frankly, cannot do for all of their selling prowess. They cannot physically put a product in my hand while I’m considering it.

MALONE: While we’re hanging with Heather, there’s this guy that walks by, and he gets pulled in by her hook.

SMITH: And he’s pretty into it. You know, he has the tool. He’s cut the branches.

KETO: There’s no effort at all to this. You’re done. (Inaudible).

UNIDENTIFIED PERSON #3: That’s real easy.

SMITH: And then, he starts to say, well, you know, this might be good for my mom.

UNIDENTIFIED PERSON #3: We’ll bring my mom by and let her check this out and see if she can get one of them big ones.

MALONE: And then, he walks away. And Robert chases him down.

SMITH: I have a quick question for you. I’m going to whisper it a little bit.

UNIDENTIFIED PERSON #3: OK.

SMITH: So the, like, I’ll-be-back-later-I’ll-have-my-mom-check-it-out thing…

UNIDENTIFIED PERSON #3: Yeah, no.

SMITH: …Is that just so you can walk away?

UNIDENTIFIED PERSON #3: Yeah, get you out of there.

SMITH: Really?

UNIDENTIFIED PERSON #3: I don’t want to make her mad and upset the lady, you know?

SMITH: Yeah. Heather has a name for these people. They are called leaners. They’re easy to hook, but then during the presentation, they start leaning away, looking for any excuse to leave.

MALONE: In fact, we learned that there is all kinds of great lingo in the world of the pitch.

SMITH: Heather works at what we in the business like to call – I know – a red joint.

MALONE: It means it’s hot. The product is selling.

SMITH: A red joint.

MALONE: OK.

SMITH: But sometimes you get stuck with a Larry.

MALONE: That’s a product that nobody wants. Yes, we asked. Nobody knows who Larry is.

SMITH: But, man, he must have been a total JCL.

MALONE: JCL stands for Johnny Come Lately. But around here, they just say JCL, and that’s a pitchman without a lot of experience.

SMITH: You know, someone who asks too many questions, who’s desperate for the approval of the pitching greats.

MALONE: Robert kept going around and asking…

SMITH: (Laughter) Sorry.

MALONE: …Who is the best pitchman here?

SMITH: Yeah.

MALONE: And people did eventually point us towards the booth where they sell the most amazing showerhead you’ve ever seen.

SMITH: As pitched by P.J. McGee.

PJ MCGEE: Let me give you an example. What’s a good – OK. Remember when we were growing up, and you sometimes played with the garden hose? And you really wanted to shoot that kid across the street with the hose? What did you do?

MALONE: You held your thumb over the nozzle.

MCGEE: Put your thumb on the hose. That’s your first restrictor valve. All we did with this was designed it with a hundred thumbs on a hundred hoses pointing down.

SMITH: Now, P.J.’s been doing this longer than anyone else we met at the fair. He’s sold everything to everyone.

MCGEE: The most insulting thing we hear is when someone says you’re a natural-born salesman. Well, screw you. I spent a lot of time and effort and a lot of energy to learn how to do this properly.

SMITH: And so we saved for P.J. the hardest question – the hardest question a pitchman faces.

MALONE: You’ve hooked in your crowd, but some of them are starting to look like they’re leaners. How do you close the deal?

SMITH: What’s your best close move?

MCGEE: The best close? The best close is asking for the money. I’ll ask you three questions. Is this product better than the one you have now? Usually, they say yeah. And then I always ask them this defensively and always back up and put my palms up – if you bought this today, would you use it? I mean, not everybody needs a new showerhead.

SMITH: OK. You cannot see this. But at this point, P.J. McGee has stepped back from the customer. His hands are up like he’s being robbed.

MALONE: And he – like, as if he’s saying, oh, no, did I cross a line or something?

My instinct is like, no, no, no. You’re fine.

SMITH: You’re fine. You’re fine. Keep going.

MALONE: I like you. Keep going.

SMITH: Keep going.

MCGEE: Please take my money. Please.

MALONE: Oh, that’s so good.

And then P.J. McGee has you.

MCGEE: You want to use debit, credit or cash? Biggest problem with salespeople – 95% of new salespeople are afraid to ask for the money. They think it’s rude. Get into another business.

SMITH: Nobody goes to the fair to buy a showerhead. But P.J. McGee has already sold 10 of them just today.

MALONE: They cost $100.

SMITH: I know. And if I wasn’t traveling with a backpack, I might have bought two.

MALONE: You used to be a rational economics reporter when we flew to the fair.

SMITH: I know, I know. And I do have a theory about this. Everything here is a sensory overload. Every decision made at the fair is a decision made on pure emotion. And my theory is that this sensory experience at the fair creates an urgent need in you. It creates a need that you want something now. And then all of these people here – they sell you the thing that fulfills the need. They bring you from desire to satisfaction in under a minute.

HARRIS: So if you can’t peel a potato, you probably shouldn’t drive a car. Stay away from cliffs. Watch out for lightning outside.

UNIDENTIFIED PERSON #4: (Laughter).

HARRIS: Yeah. Go backwards, then forward.

SMITH: Before we left the fair, we went back to Tommy’s booth. We had learned how to hook in customers, solve their problems, close the deal. How hard could it be? Tommy let me pick up a peeler.

Do you like food? Do you eat food? Do you prepare food? I can do food for you. Look at this thing.

It is super hard to peel and talk at the same time.

We’re all eating healthy these days, right? I mean, believe me, I love pasta more than anybody. But…

I have no hook. I have no clothes. I don’t – I can’t even remember what kind of peeler Tommy called it.

So that’s why we have this wonderful spiral-cutting…

HARRIS: Spiralizer.

SMITH: …Spiralizer.

MALONE: Robert’s enthusiasm does pull people over to the booth.

SMITH: It was exciting. It was totally exciting.

MALONE: But once real customers showed up, Tommy smoothly takes the peeler out of Robert’s hand and takes over.

HARRIS: You got the Spiralizer noodles, so your Veggetti – now you can go ahead…

SMITH: OK, OK, I did not make a single sale, but I did get to feel what it is like, what it is like to be the JCL, the johnny-come-lately.

MALONE: And now you know what it feels like to turn a red joint into a Larry.

SMITH: Not good.

(SOUNDBITE OF MUSIC)

SMITH: Six years later, I am still not over the embarrassment. I clearly need our professor Barbara Kahn to teach me more sales and marketing. After the break, she’ll show us how the state fair lessons can be applied to any product.

(SOUNDBITE OF MUSIC)

SMITH: We are back with our professor for this episode, Barbara Kahn from the Wharton School. As you listened to that episode about the state fair, I know you’re probably writing down some of those terms…

KAHN: (Laughter).

SMITH: …’Cause you want to use them all the time, right? The hook, the Larry, the red joint – do you use any of those in your class?

KAHN: No, none of those. But the concepts are not alien. And what’s interesting about it is, it’s an old example of really basic marketing, but you’re seeing this now more and more and more. It’s creating a customer experience, creating entertainment around the selling of a product.

SMITH: So let’s talk about that customer experience strategy. I know they say it. They even say, like, CX. That sounds so cool.

KAHN: Right.

SMITH: I’m a CX specialist, which means customer experience. But what does that mean? What factors into customer experience?

KAHN: So what I think it is, is that when people go to the stores or they go anywhere or they spend money, they think about not just the product, but also they think about entertainment. They think about enjoyment. Why do people go to the mall? – partly to buy products and partly to hang out and have fun. So if you create an experience around that product, then people are much more willing to engage and pay for the product. So you take what’s basically a commodity and turn it into a show.

SMITH: And the show doesn’t necessarily have to be someone slicing and dicing with a peeler. I mean, the show can be a beautiful package that’s a delight to open or, you know, advertising for your product.

KAHN: Well, that’s what we call the four P’s.

SMITH: The four P’s? Now you got to say them.

KAHN: Yeah, the four P’s are product, place, promotion and price. And so the first principle of marketing is to create customer value. And the second principle is to do it better than the competition. But then once you have an offering, you’re going to have to implement that offering, and that’s where the four P’s come in. I think of them as tactics. You might do things that package the product or think about different ways to promote the product, which is to advertise or communicate benefits of the product. You also do have to price the product, so that’s the third P. And then you have to go to market, deliver the product. That’s the place variable.

SMITH: OK, so let’s just do this for the OMG vegetable peeler. The product, that’s the peeler. It’s easy. It’s right there. You can hold in your hand, try it. The place is the fun, fair atmosphere. The promotion is Tommy essentially joking with the crowds and the price, such a bargain – 20 bucks. So for a second case study, let’s shake up all of these P’s. Let’s imagine a product that most people will never see or touch. The promotion is actually to refuse to sell it to almost anyone. And the price? The price can be as high as $60,000. OMG indeed. It is a purse.

(SOUNDBITE OF MUSIC)

SMITH: Well, more properly, it’s called the Birkin bag by the French luxury brand Hermes. Apparently for 30 years the Birkin has been the it bag for the rich and powerful. This is the bag that proves that you’ve made it. And apparently, they are really, really hard to find and buy. In 2015, our very own Stacey Vanek Smith and Sindhu Gnanasambandan went on a hunt for one. Listen for how luxury brands have to create a different sort of emotional need in their customers.

(SOUNDBITE OF ARCHIVED NPR BROADCAST)

STACEY VANEK SMITH: Wednesday Martin – Wednesday’s her first name – can remember the exact moment she started wanting a Birkin bag. It was right after she moved to the Upper East Side. It’s one of the wealthiest neighborhoods in New York. And she was walking down the sidewalk, and she saw this very well-dressed woman walking towards her.

WEDNESDAY MARTIN: And we were the only people on the sidewalk. And as she walked toward me, rather than keeping to the right, she was slowly but surely walking sort of at me so that I had to move further and further to the right. And I was ceding more and more sidewalk territory to her until finally I found myself stopping right up against this garbage can that she had sort of walked me into. Then she brushed right by me with her handbag. That was a dominance display, and that woman used her handbag to do it.

SINDHU GNANASAMBANDAN: She’s pretty sure it was a Birkin bag. They’re a very simple boxy handbag, kind of on the larger side. And they have a padlock on the clasp.

VANEK SMITH: And when this happened, Wednesday did not think, oh, my gosh, women in this neighborhood are crazy. I need to move. She thought, I need one of those bags.

MARTIN: That was the moment when I realized that handbags are really important in New York. And if I want to play ball on the Upper East Side, I better stop walking around with this white plastic bag with a couple of bananas in it. I better saddle up.

VANEK SMITH: Wanting to buy a Birkin bag, that’s the easy part. Even having the money isn’t the really hard part. Finding one to buy – that is tricky, even for professionals. Michael Tonello ran into this. He had a business buying and selling luxury goods, and one day one of his customers came in and said, hey, can you get me one of those Birkin bags?

MICHAEL TONELLO: I started asking for Birkin bags, but they quickly told me that they didn’t have them. And I couldn’t figure out why it was that Hermes didn’t have any Birkin bags if it was, you know, a bag that Hermes made and sold.

VANEK SMITH: Michael started talking to other people who were trying to buy Birkins, and they were all being told the same thing – we are sold out, but we can put you on a waiting list.

TONELLO: Anywhere from two years to four years waiting list – at one point, they were saying that there was a waiting list to get on the waiting list. And it just all seemed kind of crazy to me.

GNANASAMBANDAN: If you got a bag that people are willing to pay tens of thousands of dollars for, why won’t you sell it to them?

VANEK SMITH: Hermes has an explanation. It says these bags take a really long time to make. They just can’t keep up with demand. First of all, some of them are made out of these very exotic leathers like crocodile and ostrich. And Birkin bags are hand-sewn by select artisans in the south of France. Hermes says that is why they are always sold out. I ran this by Josh Weltman. He’s worked in advertising for years. He was one of the producers of the show “Mad Men.”

They’re like, listen, these are totally handmade. It takes 12 hours to make one. People have to apprentice for years in order to get to the level where they can make a Birkin bag. Like, this product is special.

JOSH WELTMAN: No.

VANEK SMITH: (Laughter).

WELTMAN: I’m sorry, it’s not.

GNANASAMBANDAN: Josh says that if Hermes wanted to make more bags, they totally could. They’ve had 30 years to train those select artisans. He says the reason for the extreme scarcity of the Birkin bag has nothing to do with how it’s made. It’s part of the marketing.

VANEK SMITH: Josh says the whole idea of a luxury good is something that not everyone has. And there are a couple of ways you can make sure that not everyone has your product. You can jack up the price. A lot of companies do this – fancy watch companies, luxury car companies, of course, the Birkin bag. But Hermes has gone a step further. They don’t just charge a lot for the Birkin bag. They make sure that not everybody can get one. They have made Birkin bags really hard to buy, and you have to go through all these weird rituals to get your hands on one.

GNANASAMBANDAN: But Wednesday Martin, our Upper East Sider, was determined to join the Birkin club. So she consulted an expert.

VANEK SMITH: It was her friend’s mom who owned a Birkin. Actually, she owned several Birkins. And her friend’s mom called a salesperson she knew at Hermes and, quote, “affected an introduction.” She told Wednesday to send her husband to the Hermes store to introduce himself to the salesperson. Apparently, Wednesday would have a better shot at a Birkin if her husband said he wanted to buy it for her as a gift.

MARTIN: He had to show up in person and meet this lovely saleswoman who said, I hope you’ll understand. We’ll have to wait.

GNANASAMBANDAN: Even Wednesday – from the right neighborhood with the right connections, doing everything right – even she couldn’t get a bag.

VANEK SMITH: And this goes beyond scarcity. Where most stores try to make you feel welcome, try to make you feel special, Hermes’ strategy seems to be to reject and humiliate. Josh Weltman the advertiser says that is intentional.

WELTMAN: They play hard to get. That’s how they seduce you.

VANEK SMITH: It almost sounds like they’re kind of like humiliating you.

WELTMAN: They haze you. It’s a hazing process.

VANEK SMITH: Hazing doesn’t, like, create resentment?

WELTMAN: No, it creates a bond once you’re in. It makes you feel that you’re worthy. It gives you identity.

VANEK SMITH: I mean, think about this – Hermes has created a $60,000 purse. And instead of convincing you why on earth you should pay that crazy amount for a Birkin bag, Hermes has people trying to convince them to let them buy one. Like, please let me spend $60,000 at your store.

GNANASAMBANDAN: And this may just sound like this insane marketing tactic used on insane people who have way too much money. But Josh says that you can actually find this tactic everywhere.

VANEK SMITH: The basic example is nightclubs, like when they have that big line out front. And Josh says elite colleges do the same thing.

GNANASAMBANDAN: Everyone wants to be part of a club that’s just out of reach.

WELTMAN: That’s the soft part that we’re poking at in advertising, you know?

VANEK SMITH: It feels a little sinister that they’re, like, marketing right to our soft spot. It’s like we’re helpless.

WELTMAN: Well, they didn’t put the soft spot there, you know? You’re the one that has the itch, you know?

VANEK SMITH: But…

WELTMAN: They’re just letting you scratch it, right? I mean, that’s a service.

VANEK SMITH: Wow. You’re good at your job.

(LAUGHTER)

VANEK SMITH: There is, of course, a very obvious cost to the strategy of turning people away, to poking at that soft spot. For Hermes, it means that every time someone walks into a store and asks to buy a Birkin bag, and they say, no, that is a $60,000 sale they are not making.

WELTMAN: They don’t get greedy. I guess that’s what I’m – it’s sort of a weird thing to say about a company that’s charging $70,000 for a bag.

VANEK SMITH: And not getting greedy pays off. Josh is the reason that the Birkin has been on the top of the handbag food chain for 30 years is exactly because it’s so hard to get. It keeps people wanting one. Of course, to make money, Hermes does eventually have to sell a bag to someone.

GNANASAMBANDAN: Wednesday Martin did actually finally get one in this totally random way. Her husband was on this business trip in Japan, and he saw an Hermes store. So he went in and asked, do you have a Birkin bag? They said, no, sorry, we’re out. He said, I need one. They said, no, we’re out. And he said, no, I need one.

MARTIN: After they told him a few times that they couldn’t do that, and he insisted a few times that in fact they could and he wanted them to, they must have just thought, this man is so rude, and this is so awkward. The best way to get him out of here might be to just let him buy one of these. So they produced a bag.

VANEK SMITH: Do you mind – can we see your bag? So I’ve actually never seen one. I mean, I’m sure I’ve seen them around, but…

This felt kind of momentous. That is the genius of Hermes. Even just seeing a Birkin bag feels like a big deal.

It’s very, like, clean lines, very simple, very, very, very plain, really.

MARTIN: It’s very plain and simple and understated.

VANEK SMITH: I mean, if I just saw this on the street and I didn’t know what a special bag it was, I wouldn’t, like, look at it twice.

OK, so here’s the truth – that bag is so underwhelming. It is, like, aggressively underwhelming. It’s ugly and boxy, and the leather doesn’t even seem that nice. But as I was looking at it, I caught myself trying to see how special it was. I kept thinking, people pay $60,000 for this bag. This is a special bag. If I can’t see that, I have the problem.

Can I touch it?

MARTIN: Yeah, touch it.

VANEK SMITH: I feel like it’s almost like a religious – I feel like – I don’t – there really is some weird aura about it.

This is really embarrassing to listen to right now – religious relic, aura – that’s – what happened to me? I was reporting a story about bags. But it’s hard not to get sucked in even when you know all the mechanisms behind what’s going on. And Wednesday Martin said she knew how I felt.

Did you ever feel, like, a little suckered by Hermes going through all of this?

MARTIN: Are you kidding? Of course – only every single second that I was doing it, I thought, I have lost it. I felt ridiculous about it all the time. And I still do.

VANEK SMITH: Still, Wednesday says having a Birkin bag really did help her feel more at home on the Upper East Side. She never got pushed off a sidewalk again. People who didn’t have Birkins approached her to ask her how she’d gotten it, to ask if they could hold it. People who did have Birkins wanted to exchange war stories. She said the bag helped her feel like she had a place in this new neighborhood.

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SMITH: That was Stacey Vanek Smith and Sindhu Gnanasambandan from 2015. Can there be only one Birkin bag? Or can we learn to steal some of their secrets? After the break, our exclusive and rare Ivy League professor finishes up the lesson if we even let you keep listening.

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SMITH: We’re back with our marketing professor, Barbara Kahn. I sort of understand the tricks to sell a normal product – you know, focus on solving a problem for the customer, show how your product is better than the competitors, decent price. But is luxury this whole different world?

KAHN: Yes, the world of luxury is about – in some sense, I think of it as magical. And the reason it’s different is because luxury products don’t invite comparisons. A premium product typically costs more because it’s offering more benefits than a product that’s a low-cost alternative.

SMITH: So a Starbucks cup of coffee is a premium product because you compare it to – here, we have the coffee kiosks out on the street, and you say, oh, this is worth the money because it is better in all these ways.

KAHN: Right. So the coffee is richer. It has a better taste. It’s worth more money than a product that comes out of a vending machine that may not even be hot.

SMITH: OK. But a luxury product?

KAHN: But a luxury product, that’s got to be something that – part of a heritage, a legacy. It’s craftsmanship. You can’t make a comparison. It’s like you can’t put a price tag on a Picasso. It’s just something that’s in a world of its own.

SMITH: You know, when you started to talk about that, your voice changed. It became almost ethereal.

KAHN: Yes, it’s aspirational.

SMITH: OK. There’s no way that I’m ever going to be involved in the luxury industry. If I ever start a business, it will be decidedly more downscale. So what little tricks could I learn from the Birkin and luxury industry that I could use for my own very pedestrian products?

KAHN: I think the idea of creating a brand narrative, a brand story, and getting people to buy into that legacy, that brand narrative, is something that at every price point is very valuable. And it creates this loyalty and creates this lifetime value of the customer over time because they become part of that branded experience. So even at much lower price points, there are ways to use the value of branding that the luxury companies do, create luxury experiences, create luxury brands. You can do that at lower price points and create customer loyalty, which in the end is something you should really go for in a good marketing strategy.

SMITH: Barbara Kahn teaches marketing at the Wharton School at the University of Pennsylvania. Thanks so much for being our professor today.

KAHN: Yeah, it was really fun. Thank you for having me.

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SMITH: It is not Summer School without a little homework. But don’t worry, you can do this with your eyes closed, hopefully on a beach. We asked you in the very first episode to think of a business idea that would make someone’s life easier. And thanks to those of you who have sent in your amazing plans. We got pitched a product that might just make going to the bathroom a little less embarrassing and something special for your pet. On our final graduation episode at the end of August, we will hear the best of your pitches and let our professors give you a little feedback. It’s like “Shark Tank,” but filled with love and support – “Guppy Tank.” Email [email protected] and put – Summer School pitch – in the subject line.

Don’t forget to think about the four P’s of marketing – let me back off the mic a little bit, so don’t pop my P’s – product, place, promotion and price. What are you selling? Where are you selling it? How will people know about it and how much will it cost? And think of a young Robert captivated at the state fair when you think about CX, which is a cool vocabulary word for customer experience, CX. A product isn’t a thing. It’s a problem-solver. It’s a fun adventure. It’s a luxury marker of who we are.

Next week, we boldly go where no business has gone before – the cutting edge of technology. Our Summer School series is produced by Max Freedman. Our project manager is Julia Carney. This episode was edited by Sally Helm and engineered by Josephine Nyounai. The show was fact-checked by Sierra Juarez. PLANET MONEY’s executive producer is Alex Goldmark. I’m Robert Smith. This is NPR. Thanks for listening.

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NPR transcripts are created on a rush deadline by an NPR contractor. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.

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