Why Did People Pay $600 For a Pair of $20 Payless Shoes?

“If you serve fast food on white tablecloths in a tony-looking restaurant, people sometimes think it’s haute cuisine.” – T. L. Stanley

Although it’s just a few weeks old, the story about Payless Shoes’ multi-million dollar pranking of Instagram influencers is already reaching legendary status among marketers and advertising experts. Payless ShoeSource is a US-based discount footwear retailer with close to 3,600 stores. It is known for selling trendy shoes at low prices in strip-mall stores. Most of its shoes are priced in the $10–$40 range.

The Palessi Luxury Brand Launch Party

Here’s what happened. The company took over a former Armani store in Santa Monica California for a weekend in late November 2018. It created a luxury ambiance and stocked the store with the same Payless shoes that sell for $20–$40. It invented an upscale fashion designer called Bruno Palessi, branding the store as a “Palessi” store. (It even created an Instagram account and website for the fake brand). For the Palessi store’s grand opening party, influencers and fashion industry insiders were invited under the guise of inviting them to the new designer brand. When attendees were asked how much they would pay for the displayed shoes, the answer was several hundred dollars. Many attendees even shelled out this much money and purchased the shoes. (See the video below).

For Payless, this campaign was a huge marketing success. The videos and the articles about the prank went viral, garnering millions of views and likes. More importantly, the company made a convincing case that its shoes are of high quality and value. After all, if industry experts and influencers are willing to pay $600 for a pair, shouldn’t us normal consumers be happy to get the same shoes at a small fraction of that price? Luxury branding and retailing experts weighed in, praising the campaign’s social media-worthiness and publicity value, but questioning its long-term benefits for Payless.

In this blog post, I want to consider two questions, not about what the Palessi campaign means for marketers, but what it means for consumers: What does the fact that influencers are willing to pay $600 for fake-luxury-branded shoes that are readily available for $20 mean for us normal consumers? And what can we learn from Payless’ Palessi marketing campaign to become smarter shoppers? The answers lead to three vital lessons for shopping smartly.

1) We should be skeptical of recommendations given by influencers and so-called experts.

In a short time spanning a few years, influencer marketing has become big business, with $1.8 billion forecast to be spent on Instagram influencers alone in 2018. Influencers are essentially prominent consumers who have built a large base of followers or fans, presumably because of their expertise in a particular category (fashion, makeup, food, etc.). Their followers look to them for recommendations which makes influencers attractive to marketers. Marketers pay them (in cash or through free products and services) for mentioning their brand or giving a testimonial.

However, the questions of whether these people have real expertise, and whether they are motivated to help their followers make prudent purchase decisions remain open. The Palessi campaign suggests that the answers to both these questions are, at least in some cases, no. While influencers may provide entertainment value, relying on them for purchase advice that will benefit us may be a bridge too far.

2) We should treat brands like wrapping paper on a Christmas present, not the present itself.

The second big lesson from the Palessi campaign is the insidious power of brands to thwart smart shopping decisions. With imagery and emotions, brands distort the weights consumers place on product features. The transformation of the everyday, budget-priced Payless brand into the luxury Palessi brand required a lot of work but took very little time. Out went the strip center store with low-end fittings and industrial carpeting. In came a swanky store, fitted with “avant-garde sculptures and displays” and manned by a team of sales associates dressed in suits and cocktail dresses. Out went the Payless name, in came Bruno Palessi, a (fictitious) Italian designer. Out went the $14.99 and $20.00 price tags, in came $400 and $500 prices.

Only one thing remained unchanged, the shoes themselves, but their importance in the purchase decision diminished because of the surrounding razzle-dazzle.

The influencers were so taken with the luxury accouterments of the Palessi launch party experience, they transferred these emotional reactions to the shoes. I am not so sure they would have made the same shopping decisions on some other day when cameras were not flashing away and champagne was not flowing. The moral is that to make smart shopping decisions (and not overpay hundreds of dollars for shoes), we need to treat brands like wrapping paper on a Christmas present, glossy and attractive. What’s really important is inside the package, in the actual features of the product or service that we're paying for.

3) When making a purchase decision, we should pay attention to the product features that really matter.

The Palessi prank shows that people are not good at quantifying the value of products in dollars and cents. The problem of value quantification often arises because we don’t identify the important features that matter and assess their quality. And this happens because we don’t pay enough attention in inspecting these features.

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Source: Shoes by Dong Tran/ Unsplash

In the Palessi case, assuming the influencers were footwear experts, if they had inspected actual shoes on display more carefully and tried to recall other exemplars they’d purchased before, both other upscale brands and down-market brands, they would likely have become more skeptical of the shoes’ quality vis-à-vis their prices. But because they got caught up in the luxurious ambiance and the launch party spectacle, they took their eyes off what really mattered, the quality of the shoes. Our lesson is that to avoid such a mistake, we should try to find and use objective measures of quality in buying decisions and pay attention to the features that really matter for the product.