🔒 Members Only: The Business of Exclusivity

Welcome to The Level Ups. Modern business news for the future business leader (explained in plain-Jane English).

Today:

• Why (and how) this works

• My favourite example

• Companies crushing this game

• How can any business do the same?

Let’s get into it.

Estimated reading time: 3 minutes & 56 seconds.

The Red Velvet Rope Still Works (In Different Ways):

Waitlists, VIP access, expensive (prohibitive) pricing, and “limited time drops” are all marketing tactics that trigger humans’ desire to belong.

But only when we believe the objects we’re chasing are “worth it” (perception).

But why does it work?

Many studies look at human needs and desires. They’re complicated and would make this email several thousand words long. I’m skipping them. You can look up Maslow’s hierarchy of needs or the list of seven fundamental human needs.

Let’s call it what it is.

We pursue what we think will make us feel amazing while avoiding what we fear. An example is Fear of Missing Out (aka FOMO).

Rather than list the things that motivate people, like status, money, and the rest, let’s go straight into how businesses make this work for them and why.

When It Works So Well, People Feel Stupid

You may have seen this before.

Payless Shoes is a bargain store. Everything is reasonably priced, hence the name. It wasn’t something celebrities wore, nor influencers talked about.

Until Payless created Palessi.

The company leased a high-end store at Santa Monica Place, an upscale shopping mall that houses stores such as Louis Vuitton, Barneys, Michael Kors and Tiffany & Co.

It didn’t stop there.

• Fake Italian designer, “Bruno Palessi”

• Luxury interiors

• Launch party

• Velvet ropes

• Camera crews

• Fawning influencers

• It’s own Instagram account

• A new website with nothing but a picture of two shoes + holders (the “shop” button now leads to Payless).

My favourite part was the new price tag (a sticker) placed right on top of Payless price tags.

Shoes sold for thousands, and people bought them big time. Literally the same shoes you can buy at Payless. Identical.

The buyers were eventually told it was all one big prank (and given their purchase as a gift). Pretty savage move giving someone a $50 pair of shoes after humiliating them in front of camera crews.

Check it out:

You already know why it worked.

Shoppers couldn’t tell the difference between bargain or designer shoes. The presentation made them believe in a completely different reality.

Aesthetics, the crowd, how they’re dressed, the location, and more. It all came together.

Palessi Is Just One Example - Here Are Many More:

Supreme

• Sells out hundreds of $1,600 items in 20 seconds in their limited drops.

The League

• Dating app that curates successful, sexy swipers and charges users up to $999 per month.

“My first thought was that it was an elitist Tinder designed specifically for the pretty, rich and privileged to have yet another exclusive space to be snobby. Naturally, I was intrigued.”

Clubhouse

• Audio chat app reached $4B (in valuation) by requiring a unique code to use (existing members were the only ones with the code).

Hermes

• A classic. If you want to buy a Birkin, you must have already purchased ~$100k in Hermes goods (the number is elusive) and demonstrate “love for the brand.” The waitlist was (at one time) six years.

Here is the wildest example I could find.

Roblox is a popular game that lets you convert real money into “Robucks.” Gucci partnered with this company to create an in-game, virtual Gucci bag. Identical to one of their existing bags.

The virtual Roblox bag sold for more than the one in real life. $4115 USD.

People want to be “cool.”

What cool means is changing, and so is how we represent it. But the feeling’s not going away anytime soon.

Now the question is, what can a “normal” business do about it?

Is Members Only The Way?

Let’s review the elements that make these examples work:

• The perception of “quality.” Whether aesthetics, craftsmanship or both.

• High price-point that prohibits others from participating.

• Unique way to “get in” like an invite code.

• Curating people with aspirational qualities (depending on your target market).

• Limited supply “drops."

Here’s what any business could do:

• The Palessi stunt but for their products (but for real, not a stunt).

• Data “drops.” Business collect hordes of data. Give it away for a price, but limit the number of purchases. Lower supply, increase the price. Not limited to just data.

• Invite-only events or groups.

• Waitlists for high-value releases. Don’t make people wait for something bad.

• Boost credibility with collabs. Paying a high-end designer (for example) with a big name and who can give exposure can work in most industries.

Here’s something most people don’t want to tell you; it’s hard to hear.

It starts with the people at that company. Businesses (and owners or staff) that neglect to focus on how they “come off” struggle to create this effect.

If you’re the most expensive product in your space, you must embody the results of what you’re selling (x10).

Another way to look at it: instead of thinking about “how to be,” focus on “how not to be.”

Here’s what I mean.

• Marketing agencies who have bad marketing.

• Dentists with bad teeth.

• Makeup artists with bad makeup.

• Fashion brands with employees who don’t care about fashion.

• People who never party trying to host a party.

• Writing business news, but never reading about business.

Could you start a successful business without embodying what you’re selling? Of course.

Can you create a sense of exclusivity around what you’re doing if you don’t represent the “in crowd?” It would be very, very difficult.

So ask yourself. Can you limit the supply of something you “sell” to allow you to charge more for it? Can you embody the ideals that small few aspire to?

Thanks for reading!

See you tomorrow,

Darwin