The Psychology Behind a $25,000 Hoodie

Basic economic theory shows us that that consumers benefit when brands compete for our purchasing power. The more brands vie for our affections, the higher the quality of goods and services and the better the pricing.

Then why do some marketers do the opposite by making customers compete for the privilege of buying the brand?

“Drop culture” marketing is a strategy that involves brands releasing limited quantities of highly anticipated products at unpredictable times. These new product “drops" find frenzied buyers going to extraordinary lengths to attain the coveted wares. This leads to higher prices because limited inventory creates higher demand. Marketers using product drops like Nike, Adidas, Gucci, Louis Vuitton, and Supreme often see items sell out within minutes of being released. In addition, resellers flip merchandise adding hefty markups and brand cache that further drive the urgency toward impulse purchases.

Supreme, widely credited with perfecting drop culture, started out as a local New York City skate shop and is now an iconic global leader in streetwear fashion. The brand built a fanatical community of followers engaging with the brand through social media, forums, and in-person events centered around hyping upcoming drops. This has driven desire and pricing for Supreme merchandise to astronomical heights. For instance, a Supreme Louis Vuitton Box Logo Hoodie Sweatshirt from the highly coveted 2017 collaboration has been offered for as much as $25,000 on the resale market according to the fashion magazine Hypebeast. In 2020, the 12-store company was sold for $2.1 billion, according to the Wall Street Journal.

Let’s explore why humans, i.e., consumers, will work so hard to pay more by uncovering the instinctual counterintuitive psychological mechanisms driving these nontraditional approaches to product launches.

1. Novelty: Our brains are wired to adapt to changing environments and learn new patterns of behaviors that ensure our survival. Novelty activates the dopamine system, so when we learn new important patterns, we are rewarded with the payout of pleasurable feelings. Dopamine also creates the “gimme more” tugs of wanting behavior and shopping "addiction." Having a constant stream of unpredictable product drops keeps consumers on their toes actively seeking out new product release information that may lead to new news on how to acquire the hyped goods. In addition, the unusual collaboration and unexpected pairing of a countercultural streetwear brand like Supreme and a high-end luxury brand like Louis Vuitton further activates the dopamine system, driving up consumer valuation and pricing appraisal even higher.
2. Intermittent Reinforcement: Common sense suggests that consistently rewarding customers would be more likely to increase loyalty. But Harvard professor B.F. Skinner's work on behaviorism demonstrated that intermittent reinforcement can be an even more powerful motivator. When rewards are offered on an unpredictable schedule, we become more engaged in attaining the reward. Brands that use product drops have learned to capitalize on this phenomenon by defying traditional marketing norms to keep customers guessing about when and where new product drops will occur. This strategy drives engagement by creating urgency and anticipation.
3. Anticipation: Optimizing consumer product releases boils down to optimizing dopamine release in the minds of buyers. Conventional wisdom suggests that the excitement for new products is greatest when experiencing the product, but dopamine is also released in anticipation of desired events. Learning about product release information online can be as or even more exciting than experiencing the product firsthand. Hype in marketing often happens best in the form of “teasers,” days, weeks, and months in advance, through provocative hints that have consumers begging for more. The allure of the chase can be more seductive than the prize itself.
4. Scarcity: Since the dawn of humanity, we have lived in dominance hierarchies competing for access to valuable resources that helped us survive. This social structure helps explain the instinctual pull of purchasing a diminishing supply of valued goods and services in consumer settings. It should come as no surprise that the fear of missing out (FOMO), which drives much of social media, also creates the urge to act quickly when drops occur. Brands make their resources desirable not by creating access but by limiting availability, positioning products as rarefied symbols of success and status.
5. Status: Brands are not just products on the shelves of retailers; they are status displays within the social spheres of consumers. Owning a hoodie that can cost upward of $25,000 signifies membership in a cooler club and an exclusive community. This status-seeking behavior is deeply rooted in our hierarchical social structure. Brands win big not only when they cultivate a devoted group of followers but also when they encourage customers to compete and proudly display their status on social media. This human drive to be part of an elite group is at the deepest roots of consumer connection to the brand.

Human Strategies as Marketing Strategies

Brands that employ drop culture are leveraging sometimes hidden and often counterintuitive psychological mechanisms that make us buy by creating powerful brands through almost addictive connections. The next time you find yourself compelled to work for the privilege of purchasing something hard to get and expensive to buy, ask yourself if you really need that item or if you are just responding to the subtle machinations of our most primal instincts.