Warning: Reading This Is Hazardous To Your Party-Animal Lifestyle
Understanding the behavioral economic impact of entertainment: 1st in a series
By Al Berrios (contact Al Berrios)

In a recent article in the Wall Street Journal, Carnegie Mellon University researchers discussed their research into the economics of emotions. They plainly said that being sad makes people want to spend more. Being disgusted or neutral makes people want to spend less.

When you're disgusted or neutral, you think clearer about the value of things. When you're sad, you need change (remember that shopping spree when you broke up with your ex?)

You observe these behaviors in everyday life and yet are completely oblivious to their impact. So how do you profit from this insight?

By understanding your products and its customers well enough to never discount. On Friday, March 19, I attended a party by world-renowned trance music DJs. Admission: $35, a 100% mark-up to standard admissions prices in NYC. At an estimated 250-300 party-goers, it was a successful turnout. But bartenders spent most of the night just standing around, serving about 10% of the crowd. No one was paying for $4 dollar water and $12 mixed drinks, as you'd expect at a hip-hop party, for example. Why?

The crowd was as diverse as the DJs with young and old, black and white alike, drawn by over a month and more worth of promoting this event. It was a safe assumption that income levels were also wide-ranging. But if you've ever heard trance, it makes you feel pretty good. The promoters, Phantasm Records, with this insight into their product and customers, gave their event premium pricing because they realized that they would otherwise be leaving money on the table. The crowd wasn't cheap, just thinking more rationally about the value of the event vs. the value of the beverages because of their generally neutral-to-jovial moods.

Understanding nightlife dynamics even more helps us understand the behavior better:

Trance events attract folks interested in the music. They come to dance and get together with like-minded party-goers to appreciate the music. Unlike hip-hop parties, where folks arrive expecting to meet someone to go to bed with that night, but generally leave rejected and unsuccessful, trance party-goers don't have such expectations, and as a result, don't experience rejection. This sense of failure amongst its customers may explain why hip-hop parties are the de facto money-makers in the nightlife industry - customers spend more when they're sad.

And here's the amazing part - as lifestyle segments, trance party-goers have an overlap of about 5-10% with hip-hop party-goers, based on my own informal observation of both audiences. Granted, hip-hop may be a national force, appreciated by all cultures and backgrounds, and used in an increasing number of marketing communications campaigns, however, so is trance (and garage, house, techno, and rave).

Based on these insights, you may argue that courting hip-hopers was a good idea after all, because they spend more. However, since the audiences barely duplicate, you're missing an extremely lucrative and loyal segment that recognizes, and pay for, the value of your quality products and services.

[Editorial note: you can just imagine how difficult this research must have been.]


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