ALEXANDRIA, Va.—The pumpkin spice latte can teach us a lot about consumer behavior and economics, according to CNBC.
The pumpkin spice craze began its rise to fame when Starbucks debuted its Pumpkin Spice Latte in 2003. Since then, pumpkin spice has bubbled over into other food categories, including beer, ice cream and baked goods, among many others, and even into non-food products such as cleaning products. And convenience retailers, QSRs and other coffee establishments would be amiss if they didn’t offer some sort of pumpkin-spice flavored coffee or specialty beverage. The industry was worth $511 million in 2019, up 4.7% from the prior year, according to Nielsen data.
There are many factors that go into the consumer craze over pumpkin spice. A driving reason is the seasonality of the flavor. Even though companies seem to release pumpkin-spice flavored products earlier and earlier (Krispy Kreme began offering pumpkin-spice donuts and drinks on August 8 this year), the products are only available for a limited time.
“It’s very simple economics,” Jadrian Wooten, an economics professor at Virginia Tech, told CNBC. “We wouldn’t want it if it was available all year long. Companies take those things away from us and give them back to us.”
Because pumpkin-spice everything is only available for a handful of months, consumers want more of it when it returns the following year, according to Wooten.
There are also economic principles at play during PSL season: “marginal analysis” and “diminishing returns.”
Marginal analysis is when a customer decides if another “unit” (pumpkin-spice something) is worth the benefits (satisfaction, happiness) and cost. If the consumer’s marginal benefit exceeds their marginal cost, they will purchase the good. However, once the consumption of a good goes up (PSLs on repeat), the benefit from the good goes down, which is diminishing return.
These economic principles apply to pumpkin-spice products in the way that the first PSL of the season tastes the best, and the consumer’s marginal analysis is off the charts. However, each subsequent PSL isn’t quite as good as the last, and consumers begin receiving a diminishing return on their pumpkin-spice investment.
Another factor fueling the consumer craze for everything pumpkin spice is the emotion it evokes when it’s consumed, smelled or even seen, such as when a customer peeks a sign about how pumpkin-spice season is back at their favorite c-store, for example.
“Beyond flavor, however, seasonal products tie into the feelings of that season, and emotions are a powerful motivator for purchase,” Bruce Clark, an associate professor of marketing at Northeastern University, who wrote about the PSL phenomenon in 2018, told CNBC. “To the extent you’re looking forward to the fall season, here is one reminder of that season. Buying the product reinforces those good feelings.”
Companies take into account these factors when choosing to offer pumpkin-spice for only a quarter of the year at most. There is a financial benefit to offering pumpkin spice products for a short amount of time, according to CNBC. However, companies have a fine line to walk. If they offer a PSL too early in the season, they could be accused of “seasonal creep.”
“To some people the PSL promotion can feel like an exemplar of all the things big brands do to us to distort the ‘natural’ cycle of our lives,” Clark told CNBC.
But companies happily walk that line—not only for the beloved PSL but for other seasonal offerings. Before long, the PSL will end its reign, and peppermint and gingerbread flavors will enter the scene, reminding us that winter is coming.
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