Extrinsic Goals, Perpetual Dissatisfaction, and Sustainability

There is a clear difference in consumer expectations, or rather more of a division between intrinsic and extrinsic goals.  Some customers are focused on the intrinsic value of a product (the functional benefit derived from its use), whereas others are more concerned with the extrinsic value (the esteem that a person derives from being associated with a product).

It is a common mistake to suggest this is an evolution – as it is not. Preference for the intrinsic is prevalent amount the Silent Generation, Generation X, and the iGen whereas extrinsic is prevalent among Boomers and Millennial Generations – but even within the generations there are customers of both kinds, not to mention that each individual has a mix of extrinsic and intrinsic goals when approaching any purchasing decision.

It is plainly evident in advertising messages that some firms seek to associate their brands with the intrinsic value of their product, whereas others seek to associate with the extrinsic value.   I believe the latter to be a tactical benefit and a strategic mistake because extrinsic motivation does not support a sustainable competitive advantage and, in fact, creates a business model that is inherently unsustainable.

This is mainly because the extrinsic qualities of a brand are entirely beyond the maker’s control.   They may believe that they have command of the market, that their advertising dominates customer perception, but it does not: the market may hear the voice of the brand, but it often comes to its own conclusion.

Moreover, the intrinsic value of a brand is immutable, whereas the extrinsic is extremely mutable, and mutates in a manner that is entirely whimsical.   If a brand is popular because it is fashionable, it may find that it becomes unfashionable in an unpredictable and inexplicable manner – or at the very least new customers reject the brand because of its acceptance among old customers from whom they wish to dissociate themselves.

As a concrete example, considering the advertising campaign that proclaimed “This is not your father’s Oldsmobile.”   The market heard and rejected it, voting with their dollars that, in fact, yes it is my father’s Oldsmobile, and because I want to be perceived as being different from the older generation, it is not the vehicle for me.   And on that hill, the brand lost the battle.  It failed entirely to shift the extrinsic value of the brand to meet the expectations of the younger generations, and it died when its previous customer base left the market.

Not only is it impossible to predict the whims of the extrinsic market, but satisfying such demands can lead only to short-term success.    It is typically the younger generation, which is perceived as being capricious and fastidious, never satisfied and constantly complaining – but it is also true of older extrinsic customers, and it is because of a simple maxim, that “money cannot buy you happiness.”  The extrinsic goal may be achieved, but it is a limited and short-term success.

The extrinsic customer is seeking to become something he is not by associating himself to a specific brand.  But instead of the customer being perceived differently because of the brand, the brand is then perceived differently because of the customer.   That is, if working-class people buy a brand because it is associated with the wealthy, then they are not perceived as being wealthy – at least not in a sustainable manner.  Instead, the brand loses its glamor and is perceived as a working-class brand.

To go again to the automotive market, consider the mistake made by Mercedes-Benz in putting out an economy version of its marque.  The affordable C-class (and the extremely cheap A-class) did, for a time, make their blue-collar drivers feel like they had advanced their social status, but the wealthy then saw the brand as being more of a working-class vehicle, low-quality and cheap, and the Mercedes brand has correspondingly fallen from grace, and the maker had to launch a new brand to recapture the luxury market.  Though they may find commercial success in serving the mass markets, they may never again be regarded as a luxury brand.

Back to the point, the extrinsic customer who seeks to change his status by associating himself to the brand will be dissatisfied because the status of the brand will be diminished by his patronage.  In much the same way, a person who purchases a brand with the assumption that ownership will make him seem smart, clever, and sophisticated will still be the same stupid, dull, and vulgar person he was the day before he purchased it.  The ability of a brand to adjust perception is thus only temporary.

This considered, any appeal to the extrinsically motivated customer must be regarded as a happy accident, rather than a sustainable brand strategy.  And brands may ignore this to their own peril, as they will invariably  discover that the sustainability of their firm derives from the sustainability of their brand – it is unwise for long-term objectives to be pursued by means that are inherently temporary and capricious as fashion and those who follow it.

How Temporary Customers Kill Brands

A conversation about cuisine has got me thinking about brands that experience a brief surge in popularity that drives short-term revenue but do damage to the core customers and ultimately to the sustainability of the brand.  

The conversation was at a local culinary institute among a group of gourmands, who have a genuine interest in cuisine, as opposed to the “foodie” crowd who are disdained for having no palate and mindlessly following culinary fashion.   It’s the foodies who have made sriracha sauce so commonplace these days – it’s being slathered on hot dogs and cheesecake and many other things on which it does not belong, simply because it’s being mentioned in various media by celebrity “chefs” who have no real culinary credentials.

The most popular brand of sriracha is produced by Huy Fong Foods in California, which has been around for about forty years, and which originally produced small quantities of high-quality product for ethnic groceries and restaurants.   Because the foodies have taken to it, their product is in mass-market groceries, and the gourmands generally agreed that it has suffered significant loss of quality, and they are seeking other brands – small shops that produce the original high-quality product similar to what they used to get from Huy Fong.

From there, the conversation turned to sourcing of ingredients, but the question stuck in my mind: what are the long-term prospects for Huy Fong?   The present popularity of their product will not last, as the foodies will eventually turn their interest to some other ingredient, leaving the brand high and dry.   And because it diluted its quality to produce in such high quantities, its original customers will have left it for other suppliers.  In plainer terms, the brand has a sacrificed its long-term sustainability by abandoning its core market to pursue short-term profitability in the mass market.

There are tactics such a firm can use for recovery: to pursue other product lines that are more sustainable, to be prepared to scale back operations as demand wanes, and to attempt to predict the next foodie fad.   None of these seem promising or sustainable – it is merely prolonging the decline of the firm as it spends out its present surplus attempting to remain solvent once the mania has passed.

More troubling is the question of how a brand can sustain its core customers, those who have been loyal from the start and would remain loyal after the fashionistas have lost interest.  Fashion is, after all, an environmental factor over which a firm has no control and can only react: but can it react in the right way to sustain itself?

I suppose that time will tell, though my expectation is that within ten years, the Huy Fong company will collapse from having ramped up its operations to serve a temporary surge in popularity.   Even if it is able to scale back production facilities in a timely manner once the fad passes, it has already lost its core customers and will need to explore a different market – perhaps those who cling to a fashion once its heyday has passed, but even they have a limited lifespan.

And perhaps it is just the nature of things: there are very few quality brands that have sustained themselves for a century or longer.  It can be argued that the true luxury brands have shunned the mass market and abstained from the temptation to vulgarize themselves for easy money when threatened with popularity from the wrong kind of customer, but these tend to be very few.

Evolution of Fashion and Consumer Preferences

Following up on my previous post about fashion and consumer preferences, I've put a bit more thought into the manner in which they evolve.   I'll do a quick recap (and will try to keep it minimal) before moving on to the topic of evolution.

Recap

The previous post considered that fashion, like practical behavior, is based on the desire to achieve a result that exceeds the effort put into achieving it.  Because the goal of fashion is esteem (to be admired, or to avoid ridicule) there is not an objective measurement of its effectiveness - each person decides from himself what is fashionable.  However, because the goal is to make an impression on others, our prediction of the opinions of others figures highly into the choices we make in regard to fashion.   This makes fashion both imprecise and unpredictable.

Evolution as Rebellion

When considering practical tasks, the goal of evolution is to improve the quality of results, reduce the amount of effort, or some combination of the two.   The amount of effort is largely moot to fashion (bargain shoppers place fashion firmly in the back seat), but the quality of results is key: the fashionable shopper wants to achieve a favorable impression on others.

The safest way to achieve a favorable impression is merely to imitate what others are doing, and this is the behavior of most consumers who are not attempting to stand out, but merely to fit in.   These individuals do not cause fashion to evolve, and in many ways their behavior results in preventing evolution - anyone who does anything different to the rest of the herd is to be ridiculed, and their rebellion against tradition is to be put down simply because it is different.

The fashion-forward individual who means to create a positive impression by standing out from the crowd, thereby getting attention and earning esteem, is in a very basic sense a rebel against tradition and standards.   They are not merely a nonconformist, who is indifferent to the opinion of others, but a rebel who means to change the opinion of others by their behavior.   The rebel becomes a revolutionary when his campaign succeeds and his change is accepted ... and then becomes a champion of conformity if he chooses to defend the change once it has been implemented.

The Risk of Rebellion

An individual who consciously defies tradition, whether as a nonconformist or a rebel, takes on a risk: he may be attacked or at least ridiculed by conformists for undermining their standard.   This threat is balanced against the reward of succeeding in his rebellion and unseating the conformists, becoming the new champion of fashion, and gaining the esteem of that position.

In general, to take the lead one must move fashion forward - to depart from what is the present normal and enter new territory, which is generally truly novel in that it is a break from the immediate present and the recent past.  (Granted, there is a "retro" tendency in fashion to reach back to a previous time and recycle trends and tastes - but the reach must be significant.  A person who imitates fashions of last year or the year before isn't "retro" but merely "outdated.")

Again, the difference between the nonconformist and the rebel is that the nonconformist is indifferent to the opinions of others, whereas the rebel means to change them: the rebel wants followers.  The first step in gaining followers is in choosing a change that other people will follow rather than ridicule - and this may be the reason fashions evolve slowly, as a radical departure from the norm is dramatic and threatening, and easier to ridicule than consider for adoption.   Very few rebels have the influence and charisma to sell a radical change.

The Evolution of Fashion

In practical concerns, the acceptance of change is based on visible results: others workers recognize that a rebel who has changed his behavior is achieving better results, incurring less cost, or both.   The problem with predicting fashion is that there is much subjectivity as to whether a change is "better" and its outcome is not known until it meets with approval.

This makes evolution difficult: the rebel must risk his esteem in practice in order to determine whether he has sufficient esteem to get others to adopt the changes he proposes.   It is in that sense a gamble, and one that will result in a loss if it is not successful, as there is little forgiveness for an earnest effort that leads in failure - any failure diminishes esteem.

And so the rebel takes the risk of making a change with little certainty that the change will be respected and adopted by others.   If the risk meets with the acceptance of some - the few informal leaders with influence - then it will likely be accepted by others.

Predicting Evolution

It follows that the first step in predicting the evolution of fashion is to keep an eye on the nonconformists - to determine if they are rebels or mere nonconformists.

The second step in predicting evolution is to assess whether the nature of change that a rebel is proposing will be amenable to others, specifically those who hold unusual influence.

The third step is to witness whether others actually adopt the change proposed by the rebel.   This is "arguable" is because at this point, it is no longer an act of prediction, but one of observation, and it may already be too late to intervene or capitalize on the knowledge of where fashion is headed.

The fourth step, also arguable, is to determine whether a fashion is spreading from the small number of individuals to the mass market.   One who uses this method is very likely to be well behind the curve and unable to react swiftly enough to capitalize.

The fifth step is a repetition of the first, which is to recognize that the change has become a new norm, and that it is time to look to signals of nonconformity to recognize the "next thing" given that the present one has run its course.

Fashion and Practicality

At the onset of this meditation, I sought to differentiate fashion from practical concerns - but it seems to be that having considered the evolution, it would be worthwhile to move back from fashion to practicality.

Practical changes, intended to achieve functional and measurable results, likely follow the exact same pattern - but are based on standards that are more rational and easier to observe.  Given that, an individual or firm who wishes to keep pace, or even to take the lead, would do well to consider the evolution of fashion.

Fashion and Consumer Preferences

Fashion is a difficult issue for marketers, because it seems entirely arbitrary and random, hence difficult to predict.   It's best know in the garment industry, in which manufacturers needed to predict the styles of clothing people would wish to purchase in the winter, which means it would be sold in the summer, which means it would need to be produced in the spring, which means it would need to be designed/selected the winter before - and predicting a year in advance where consumer tastes will be is no easy matter.

I got to thinking about fashion while reading on sociology and operations management - and while I haven't developed a prediction model that will solve the problem, I do think I've gained some insight into the issue - because fashion is a social behavior, which considers the way in which individuals have the option to follow the behavioral choices of others or to ignore the choices of others and make their own choice.   This is what evolves the way in which tasks are done, but in a way that can be adapted to fashion as well.


Evolution of Tasks

To begin, I'd like to set aside the psychological factors that motivate a person to adopt a behavior and focus exclusively on the praxeology of behavior.  Fundamentally, people consider a pattern of behavior because they expect that it will achieve a desired outcome, and they choose to adopt that pattern of behavior when they expect that the outcome is worth the cost and effort of performing that behavior, in comparison to other options they would forego or delay for the purpose of performing it.

In functional matters, such as the performance of a task to achieve a result, a behavior may be adopted because it improves the quality of the result or decreases the effort of achieving it - and when both quality and effort are impacted, they balance one against the other, albeit in an imperfect and arbitrary way (regardless of how much effort is put into the decision, there is always some degree of imperfection and arbitrariness).

In a leaderless environment, such as a workshop, a rational worker notices that another worker has a superior output or is expending less effort to accomplish a task, and imitates his behavior in hopes of achieving the same in his own work.   This makes perfect sense, but for three things:

1. Leadership. There are few leaderless environments, and in organizing labor it is often a non-laboring observer (manager) who dictates the way work ought to be done, and the workers are not free to choose the most efficient and effective behaviors to accomplish a task.
2. Rationale: Not all workers are rational, and many are quite irrational - they may cling to the security of an established behavior in spite of their observation that doing things differently would be better.   
3. Subjectivity: Even when workers are rational, the notion of "quality" is nebulous at best, and the ways in which a different behavior improves the outcome may be in dispute.

These obstacles to functional quality and efficiency are even more pronounced in matters such as fashion - particularly because fashion is not about functionality at all.   Particularly in haut couture, the highest expression of fashion, whether an item is considered fashionable has nothing at all to do with whether it is suitable to any purpose - and in fact, couture may prefer a completely unusable or unsuitable item to be preferable simply because the person who adopts it is doing so for "higher" purposes than the functional need of the object.


The "Quality" of Fashion

Fashion is about esteem and the desire to be admired by others, or at the very least not to be ridiculed - there is no functional element to fashion, or at least functionality is optional, such that the most fashionable item may not be functional at all.  For example, a pair of shoes that makes a positive impression is not necessarily comfortable - and in fact many of the most fashionable shoes are uncomfortable, and they may be considered "fashionable" simply because they are not functional.

So where practical matters evolve in pursuit of functional qualities, fashion evolves in pursuit of non-functional qualities.   It is far easier to observe that one method or another of accomplishing a task is more efficient than it is to observe that one article of clothing is more impressive than another, and it is even difficult to understand the parameters by which "impressiveness" would be assessed.   One person decides that another person they see looks impressive and imitates their style, even though they may be unable to identify or articulate the reason they think it is worth imitating.

I'd like to return briefly to the three obstacles to functional quality that were mentioned previously:

1. Leadership:  Fashion is not strictly leaderless, as some individuals lead fashion by virtue of their esteem - but even then, the most esteemed person may adopt a ridiculous fashion that others choose not to follow.   In that sense, some people have a sort of temporary influence, but not formal leadership.
2. Rationale:  In the same way that workers cling stubbornly to familiar routines in spite of the manner in which new behaviors would be more efficient or effective, people cling to familiar fashions of a sense of comfort and safety with the known.
3. Subjectivity:  Fashion is far more subjective than productive activity, because people have a wide array of opinions about what "looks good" or causes others to be impressed, and cannot observe the reaction of others until a new behavior has been adopted.

All three of these factors - a lack of control, the absence or reason, and the subjectivity of evaluation - make fashion a more wily pursuit than effectiveness.

I'd like to progress this meditation into considering the manner in which fashion and behavior evolve, but my sense is I've rattled on for quite a while and am not yet at the point where I have an acceptably plausible theory as to the manner in which evolution occurs.   I'll meditate on that further and post a follow-up.