Did Louis XVI Discover a Loophole in My Theory of Pricing Power?
Tuesday, August 14, 2018
Louis XVI was born in the year 1750, more than a quarter of a millennium before my theory of pricing power was revealed to the world. His reign was brief, lasting only a decade and a half until he was removed from office and beheaded.
While most historians focus upon his governmental and economic reforms, I would argue that his greatest legacy is, without a doubt, the popularization of the potato. It is a vegetable that is so beloved for its use in french fries and potato chips that the entire nation comes together each August 19th to celebrate its magnificence.
After consulting with a French scientist, the King became convinced that the potato represented an important and inexpensive source of calories for his people.
There was just one problem: no one had any desire to consume the vegetable in question. As a close relative of the nightshade, potatoes were seen as potentially toxic, flavorless, and even a symbol of the nation's most untrustworthy rival Prussia, a nation ruled by a man who would one day be known as the potato king.
As a result of this unbridled hatred toward the tuber, Louis XVI's men were forced to develop an extraordinary marketing plan to boost the vegetable's poor reputation.
Soldiers were employed to guard the potatoes as they grew and placed under orders to kill any thieves they encountered. The protection afforded to the tubers was widely publicized, and citizens were left to wonder why the plants had gained in importance. In an iconic example of reverse psychology in action, locals began eying the forbidden potatoes with interest. Unfortunately, for them, they were forced to view the tubers from afar. Although their stomachs bore great desire, the soldiers' muskets proved a strong disincentive to looting the potato beds.
One day, a citizen noticed something quite odd. Every once in a while the fields were left completely unguarded. The soldiers seemed to disappear at irregular intervals, leaving the potatoes completely unprotected.
Eventually, word got out and the spuds were quickly stolen, both to be eaten and to be planted in local gardens. Thrilled with their access to this rare and valuable commodity, the French people were quick to integrate it into their cuisine.
Turning back to my theory of pricing power (The DUMB Model), one can't help but notice that Louis XVI seems to have found a bit of a loophole.
According to DUMB theory, a product's desirability should go down as barriers to its acquisition are increased. Yet, in the case of the potato, the barriers to acquisition boosted its desirability.
Was I somehow wrong in my analysis? Does the model need to be revised?
Of course not!
The truth is that the four components of DUMB (discoverability, urgency, mesmerism, and barriers) do not exist independently of each other. Each can be affected by the others.
In the case of the potato, the introduction of soldiers had the following effects upon the model:
- Discoverability - The addition of highly visible troops increased the public's mindshare of the potato, turning the vegetable into a topic of frequent conversation.
- Urgency - The windows of time when guards were not present increased the urgency of the citizenry to act quickly. The artificial introduction of scarcity into the marketplace was but one of several causes.
- Mesmerism - The fact that the king appeared to believe that the potatoes were worth guarding served as an important signal of value to those who did not understand his ulterior motives.
In addition, it should be noted that King Louis' barriers were imperfectly implemented and irregularly enforced. Had the king truly desired to prevent his people from eating potatoes, his barriers could have been implemented far more effectively through various means, not the least of which being secrecy and public shaming.
While King Louis may have used barriers to increase the potato's desirability, barriers usually result in the opposite effect. Imposing barriers to purchase will almost universally decrease a product's desirability, unless they are implemented in such a way as to increase the other components of the model.
Trying to understand how shoppers build models of value can be challenging, and the process is often full of potato paradoxes. Fortunately, I'm available to help. Feel free to contact me for a consult.