Happy Sunday, Everyone!

We've officially made it to March. If you've been following along with these intros for the past few weeks, you've likely picked up that I've been doing some shopping. I finally decided to get a grown-up wardrobe and — in my typical style — I did it all at once. We all have our things.

After an initial round of shopping for basics, I identified a few gaps that needed to be addressed and thought I should explore a different store to fill them. I visited the nearby mall and went to Macy's for the first time in 20+ years. These last few weeks have been the first time in my adult life I've actually shopped - truly shopped - in a physical store. Prior to this, I had done virtually all my clothes shopping online. Add to cart, pick a size, wait for the box. It's easy and efficient. If I'm not sure of a size, I buy the 2 I think are closest, try them both on, and return the one that doesn't fit. I'm sure that causes consternation among my friends who run eComm businesses, but it works for me.

All of that meant that my recollection of in-store shopping was frozen somewhere in the mid-2000s. In my head, Macy's was still the fancy New York store my parents took pre-teen me to when we were buying something nice. It was where you went for the good stuff.

So, I walked in expecting something elevated. What I got was a wall of noise - racks crammed together, sale signs on top of sale signs and a truly disorienting number of scents and sounds. Just finding the right section of the store was a chore with everything going on. Nobody approached me or asked what I was looking for. I perused the men's section for 10 minutes, picked up a few things, put them back and left.

There was too much of everything to evaluate anything. The gap between what Macy's was in my memory and what Macy's is today was eye-opening.

I left and went straight back to Nordstrom.

The experience was exponentially better because there was so much less. Fewer racks, no random smells, no Times Square vibes. There was space. Bruce - the same guy who helped me with suits a few weeks ago, came right back over, asked what I was shopping for, and -without me asking - started pulling pieces he thought would work. He didn't ask me what brands I liked. He didn't point me to a section and wish me luck. He just picked. Less than an hour later, every single thing on my "wardrobe gaps" list was acquired or in the process of being tailored.

These were two stores located within minutes of one another, with many of the same brands and surprisingly comparable price points. Yet, my experience with each produced radically different outcomes. That result had everything to do with how each store made me decide.

That experience got me thinking about something I've been chewing on for a while: why do luxury brands get away with things that would destroy any other business?

They limit your choices. They restrict access. They refuse to discount. They communicate less. They don't ask for your feedback. They certainly don't care about your Google review. By (almost) every metric marketers today hold sacred - reach, frequency, conversion rate, customer satisfaction scores - luxury brands should be failing, though they do quite well on AOV and LTV, but that only deepens the question.

Despite all of that, these stores/brands are among the most profitable, most resilient commerce operations on the planet.

The reason isn't magic, history or product quality (though most luxury brands do have objectively better materials/offerings than more accessible alternatives). The reason is that luxury brands, whether they know it or not, are the best behavioral economists in the world. They've engineered their entire operation to obsess about what Bill Bernbach (one of the original Ad Men) coined the "Unchanging Man."

A few years ago, I was fortunate to have dinner with Dan Ariely in Bucharest. We spent hours talking about his research into behavioral economics and human decision-making. One of the things he shared that has stuck with me for years is a stat that Danny Kahneman shared with him: the overwhelming majority (19 of every 20) of our decisions never reach the rational brain. That includes (surprisingly) high-leverage choices like investments, vacations, healthcare and luxury purchases. Those "quick" choices are made by System 1: the fast, emotional, intuitive brain. System 2, the slow and analytical one, is lazy. It only shows up when it has to.

That's the world behavioral economics lives in. It focuses on what I find most fascinating: how real people make real decisions in real-world settings, especially when they're stressed, distracted and/or overwhelmed.

What's even more fascinating is how that observation ties into my Nordstrom/Macy's experience. It turns out luxury brands have been exploiting these principles for centuries. They just never called it behavioral economics.

They called it the brand. And the best part? You don't have to be a luxury brand to use them. In the sections that follow, I've outlined 5 real-world examples of these principles in action, along with how any brand can apply them today.

Scarcity + Reactance: The Hermès Effect

Walk into an Hermès boutique and ask for a Birkin bag. You won't get one. If you're lucky, you'll be told there's a waitlist. If you try it in Paris (I did last year!), you'll likely be told there isn't a waitlist at all. If you want one, you must develop a purchase history. Then, when the store thinks the time is right, you'll be "offered" the opportunity to buy one.

This is categorically insane by any conventional marketing or customer experience standard. You have a customer standing in your store, ready to spend $15,000+ for a bag that costs maybe $1,500 to produce (including a hefty premium on labor)....and you're telling them no?

But there's a method to the madness. When that happens, 2 behavioral economics principles are firing simultaneously.

Scarcity: when something is rare or restricted, the brain automatically assigns it a higher value. This is one of the most well-documented findings in behavioral science. Robert Cialdini identified it decades ago, and it hasn't gotten less true since. You've likely experienced this in your own life - the instant something becomes rare (whatever it is), you want it a little bit more - even if you don't have a rational reason to want it at all. This is the thing that explains much of what we see in weird commodities markets (Pokemon or Magic the Gathering cards, Bitcoin, even the ZR1X, where the first VIN went for nearly 10x the MSRP at Barrett-Jackson Scottsdale Auction last month).

Reactance: likewise, when someone tells you that you can't have something, your desire for it increases. This is the psychological equivalent of telling a toddler not to touch the stove or of "playing hard to get" in the dating world. The restriction itself creates the wanting. (In behavioral science, the behavioral outcome of reactance is often called the boomerang effect - the attempt to restrict produces the exact opposite of the intended constraint. Hermès isn't trying to suppress demand. But the mechanism is identical: restrict access, amplify desire.)

Hermès didn't invent scarcity; they perfected it. The best part: the effect compounds. Every person who can't get a Birkin makes the Birkin more desirable for the person who eventually does. The waitlist isn't a logistical problem. The waitlist is the product.

You do not need to be a luxury brand to use this. All you need is to be a brand willing to say "no" to some customers in order to say something meaningful to the right ones. This doesn't have to be mean - use limited-edition product drops, invitation-only access and/or waitlists for new features or services. Even something as simple as capping enrollment for a program or closing a sale early will do the trick.

A SaaS brand I work with limits onboarding to 50 new accounts per month. When they hit that total, they push your onboarding to the following month. That creates real scarcity, which signals quality and drives urgency. Similarly, a high-end home services company we work with books 3-6 weeks out and refuses to expedite for new customers. Before a customer ever meets with a member of their team, they're keenly aware of the market demand.

The key is that the scarcity must be real. Fake scarcity (i.e. the "only 3 left!" countdown timer that resets every time you refresh the page) triggers the opposite response. People aren't stupid. They can spot manufactured urgency a mile away. When they do, you've burned trust you can't get back.

Authority + Prescription: Our Way or No Way

When I sat down for dinner at Hemicycle in Paris last year, I wasn't given options. The only choice was whether I wanted 4, 6, or 8 courses from the chef's menu. That's it. After making that one decision, the rest of the meal was entirely in the hands of the chef - and it was positively divine (aside, if you're in Paris and like good food, visit them).

Again, on the surface, this violates everything modern marketing has preached regarding customer empowerment. I've sat in more conference presentations and webinars than I can count, where everyone in the audience was told to give people options. To customize and personalize and tailor and configure. To allow your audience to build their own bundle, choose their own adventure, cherry-pick their own package from an endless menu of options.

Luxury does the opposite. And the brain loves it.

Once again, 2 things are happening here. First, authority bias: when someone positions themselves as an expert, we defer to their judgment. The chef doesn't ask what you want because the chef knows better. Hermès doesn't poll customers on what to make next because Hermès exists to tell them what they want. The customer feels taken care of rather than in control. Those are very different emotional states. Contrary to popular belief, the first one wins every time.

Second, the paradox of choice. Barry Schwartz's research - backed by Iyengar and Lepper's famous jam experiment (if you're unfamiliar, they conducted an experiment that showed participants offered a choice amongst 30 varieties of jam led to fewer purchases than when participants were offered only 6) - proved what luxury brands intuitively understood long before the data confirmed it: fewer options, more purchases. More options don't liberate the customer. They paralyze the customer. Paralysis doesn't convert.

The non-luxury application: Stop giving people a never-ending list of options or bundles or whatever. Stop offering every possible customization. Curate. Prescribe. This is why quizzes work so well in high information asymmetry spaces (home services, cosmetics, perfume, fashion, cars) - people are so desperate for guidance that they'll willingly defer to the authority of a decision tree.

"Here's what we recommend for you" will almost always outperform "Here's everything we offer - go figure it out." Recart does this brilliantly in the SMS SaaS space: comparable pricing to competitors, but they do it for you, and they tell you why: because they're the experts and you're not. That's a luxury mindset at a non-luxury price point. The expertise is the product.

Exceptional salespeople already know this intuitively. Mediocre ones stumble over it every day. In senior living, the pattern is unmistakable. The move-in coordinators who generate the most conversions are the ones who actively listen to a potential resident's situation, then prescribe the right package. Just like the chef at Hemicycle. Just like a great stylist or architect. They absorb the complexity so the family doesn't have to. The coordinators who underperform? They're the ones who present a seemingly endless number of floor plans, care levels, pricing configurations, and add-on services, then leave it to the family to figure out what makes sense. The families are so overwhelmed with the options, they wind up doing nothing.

Remember: prescription isn't pushiness. It's a service.

Anchoring + Perceived Value: The Math Behind Better Offers

This is the math that changed how I think about offers.

Imagine you're a cosmetics brand. A customer is about to spend $100, but you need to give them a little something extra to get them across the finish line. You have two options:

Option A: Give them $10 off, bringing the total to $90.

Option B: Give them a "free gift" — a $50 bottle of serum that costs you $10 to produce.

The cost is the same to you ($10). But these two options produce radically different outcomes. With Option A, the customer perceives $10 in value. With Option B, the customer perceives $50 in value. That's a 5x difference in perceived value for the same $10 out of your pocket.

This is anchoring at work.

The customer has already seen the $50 price tag on that serum. Their brain has anchored to that number. When they receive it as a gift, the perceived value is $50, even though your actual cost is a miniscule fraction of that. The discount, on the other hand, is just a discount. There's nothing to anchor to. $10 off a $100 doesn't create a story. It doesn't create an emotional response. It just…is.

But what it does do is awaken System 2 (the rational brain) - which (in turn) scrutinizes the entire transaction while simultaneously creating the expectation of another discount next time. You might get more sales in the short-term, but you'll do it at the expense of long-term brand equity.

Luxury brands, on the other hand, never discount. Ever. Some go so far as to destroy surplus products instead of offering them at a lower price.

Believe it or not, destruction of surplus inventory is actually a rational course of action for the luxury brand. The foundation of their success is their adherence to standards. If one standard (price) is compromised, all subsequent standards can be compromised. The moment you train a customer to expect a discount, you've permanently altered their reference price. You haven't gained a customer; you've gained a bargain hunter. Instead, luxury brands add value: exclusive packaging, priority access, a handwritten note, experiences money can't otherwise buy. The perceived value is enormous; the actual cost is a fraction.

Every brand — not just luxury — should be asking: where are we discounting when we should be anchoring?

If you need proof of what happens when you get this wrong, look no further than another late 90s/early 00s darling brand: Coach. Back when I was in high school, Coach was a genuine aspirational brand. I still remember girls in my high school fawning over these things. They were bona-fide status symbols.

Then they opened factory outlets. Then they ran perpetual sales. Then they trained an entire generation of customers to never pay full price. By 2014, comparable-store sales were in freefall. The brand had to gut itself. They renamed the parent company Tapestry, brought in a new creative director, closed stores and spent years trying to claw back the pricing authority they'd voluntarily surrendered. The truly amusing thing is that - at least, according to my friends in fashion, the quality never really changed. The bags they sold in the 2010s and early 2020s were well-made with premium materials. The product was not the issue - it was the positioning. Once customers internalize "this brand discounts," you cannot un-teach that expectation. You can only rebuild from the wreckage.

Loss Aversion: The Pain of Exclusion

Here's one most marketers get backwards. We've all been told to extol the benefit of inclusion: "Join now! Be part of the community! Get access!"

Luxury brands sell the pain of exclusion.

Kahneman and his long-time collaborator, Amos Tversky, showed that people feel the pain of losing something roughly twice as intensely as the pleasure of gaining it. 2x. Luxury brands weaponize that asymmetry. They don't sell you on what you'll gain by buying; instead, they create an ambient awareness of what you're missing by not being part of their world.

When you see a luxury ad, the models aren't approachable. The settings aren't relatable. Nothing about it says "inclusive." It's aspirational to the point of being exclusionary. It's a world most people don't even have the capacity to dream of inhabiting. The "user-generated content" luxury brands create features celebrities, supermodels and cultural icons. People most of us will never be - and that's the entire point.

Sticking with our fashion examples, Rolex understands this at an operational level. Try walking into an authorized dealer and buying a Submariner or a Daytona. You can't. There's no waitlist to sign up for. There's no timeline. You build a relationship with the dealer, you buy other pieces, and eventually, maybe, hopefully you get "the call." The entire system is designed so that at any given moment, the thing you want most is the thing you cannot have. That's loss aversion distilled into a business model.

American Express understood the same thing decades earlier with the Centurion Card. The so-called Black Card is invitation-only. You can't apply. You can't request it. It is so exclusive that even in an era where virtually any bit of information is available to anyone, there is still no public clarity on what is actually required to receive one. Think about that. The qualification criteria themselves are scarce. You don't just lack access to the card - you lack access to the knowledge of how to get the card. Every other credit card company publishes their requirements and competes on transparency. AmEx built the most coveted card in the world by making the path to it invisible.

The non-luxury application: Instead of always leading with what someone gets, lead with what they might miss. Limited-time access. Members-only content. Experiences that won't repeat. The fear of missing out is one of the most powerful forces in decision-making, but only when it's real. Once again, today's customers are master BS detectors (that's one muscle a decade-plus of doomscrolling will strengthen) - so only do this if you're genuinely prepared to exclude people.

One of our B2B SaaS clients runs a gated strategy consultation, meaning prospects must qualify before you get on sales team’s calendar. They require a minimum revenue threshold, a validated count of website visitors AND a completed intake form before anyone on their team will speak with you. Since they’ve implemented it, they’ve lost nearly 30% of their inbound volume - but the leads that do come through close at nearly 3x the previous rate and their ACV has increased nearly 50%. The best part? Their sales team has more time to devote to those customers (since they’re not meeting with every brand that fills out a demo form), which has created a virtuous cycle where they have the time and resources to impress the brands that fit their ICP, which allows them to close at a higher rate with less total work.

Inverse Social Proof: The 1-Star Strategy

Most brands are obsessed with social proof - and for good reason: PowerReviews analyzed 4.5 billion shopping visits and found that products with even a handful of reviews convert at 52% higher rates than products with none. Spiegel Research Center pushed that further: products with 5+ reviews are 270% more likely to be purchased. For higher-priced products, that number climbs to 380%. Put another way: reviews work really damn well.

But luxury brands don't play the same game.

The Hermès store in Paris has hundreds of 1-star Google reviews just like these:

Read those reviews.

People make appointments, then wait 30, 60, 90+ minutes to speak with someone. Some are refused service. Some describe experiences that would send a normal retailer into full crisis mode.

Hermès doesn't care. That's the point.

Hermès isn't selling to the people writing those reviews. The 1-star reviews actually reinforce the brand for its target audience. They signal: this is exclusive. This is not for everyone. If you have to wait, you're probably not the person they built this for. And that friction - the very thing that would destroy a mid-market brand - makes the people who are the target audience for Hermès want it even more.

Instead of traditional social proof, luxury brands use cultural signaling: aspirational identity, celebrity association, the implicit message that ownership places you in a specific tribe. You're not buying a product. You're buying membership in a world.

I'm not suggesting you deliberately tank your Google reviews. But the principle is worth internalizing: not all customers are your customers. Optimizing your experience for people who will never buy from you often comes at the direct expense of the people who will. This is the core lesson of "The Middle Is Death" - the worst place any brand can be is trying to please everyone, because the result is mattering to no one.

Here's what connects everything above. It's not a list of tactics. It's a worldview.

Luxury brands understand something most marketers refuse to accept: the customer does not want to be in charge. They want to feel important. They want to feel chosen. But they do not want the cognitive burden of making every decision, evaluating every option and/or navigating every possible configuration of your product or service.

Think about what each of these principles actually does. Scarcity takes "when should I buy?" off the table. Prescription takes "what should I choose?" off the table. Anchoring means the customer never has to do the mental math on whether they're getting a good deal. Loss aversion creates urgency that doesn't require rationalization. Inverted social proof replaces the noise of mass-market validation with something far more powerful: the feeling of belonging to a tribe.

Every single one reduces the cognitive burden on the customer while making the experience feel more intense, not less. That's the secret. These are not a set of isolated tricks from a behavioral economics book, but rather a system meticulously engineered over centuries to do one thing: work with the brain, not against it.

For the last two decades, the entire trajectory of marketing technology has pointed in one direction: more. More reach. More channels. More personalization. More accessibility. More automation. More content at lower cost. AI has accelerated this to its logical extreme. The cost of producing competent creative is approaching zero, and every brand on earth now has access to the same tools, the same platforms and the same AI-generated output.

The pendulum has swung as far toward ubiquity and abundance as it can go. And here's what happens at the extreme end of that arc: when everything is available, accessible and frictionless, restriction becomes the differentiator. When production costs hit zero, the value of taste and discernment rises exponentially. The scarce resource is no longer the ability to make things. It's the judgment to know what to make, who to make it for, and (critically) who to exclude.

That's the economic logic underneath every principle I just walked through. Scarcity works because restriction creates value in a world overwhelmed with access. Prescription works because curation matters most when options are infinite. Loss aversion works because exclusion carries more weight when inclusion is the default. Inverted social proof works because rejecting the wrong customers naturally appeals to the right customers.

If you follow that logic to its conclusion: most brands would be more profitable if they deliberately made their product harder to buy. Not inaccessible. Not antagonistic. But harder. More friction. More prequalification. More "this might not be for you."

This requires having the willingness to lose volume in the short term. That can be a difficult thing to do, especially if you’re a CEO/CMO who is staring down daunting lead/sales goals. You’re likely doing everything you can to bring in more prospects/customers - so the idea of intentionally rejecting people feels counterproductive. But the math almost always resolves in your favor. The customers you lose to friction were your lowest-margin, highest-churn, most price-sensitive customers anyway. The ones who stay (or who fight through the friction to get to you) buy more, stay longer and never ask for a discount. You’re saying “no” to suboptimal customers so you can say “yes” to more ideal customers

Friction, deployed with psychological precision, is a competitive advantage.

The brands that understood this first - luxury brands, intuitively, for centuries - are capturing disproportionate value, simply because they built everything around how people actually make decisions: the offer structure, the communication, the creative, the entire customer experience.

Here's what I keep coming back to: taste can't be automated. Neither can psychology, or the instinct to know when friction helps and when it hurts. You can't buy that je ne sais quoi with a larger budget, and you certainly can't ask an AI to generate it for you (machines that are designed to recognize patterns are actually quite bad at knowing how to break them).

And luxury brands have been building it for centuries. The rest of us are just now figuring out what they've known all along.

Putting This Into Action

Pick one principle from this issue - scarcity, authority, anchoring, loss aversion, social proof, the paradox of choice. Audit one part of your customer journey through that lens. One touchpoint. One page. One offer.

Then change one thing based on what you found.

One principle. One change. That's all it takes to get started.

Be warned - doing this well almost always results in some metrics taking a short-term hit. That’s expected. In some ways, adopting these principles is a detox from the short-termism that many brands are addicted to. What you should see - over time - is AOV improving, LTV:CAC trending in a positive direction, higher retention/repurchase rates and/or close rate increasing Those are the signals that your ICP - your best customers - are responding favorably to the strategic shifts you’re making. It takes time, but the payoff is often worth it.

Until next week,

Sam

P.S. Whenever you’re ready, here’s how I can help: if your brand needs a strategic partner that blends performance marketing, analytics, and brand into one integrated team — not five siloed agencies — reach out or reply to this email.

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