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Pumpkin Spice and Everything Nice: The Economics Behind the Seasonal Treat Many of Us "Fall" For

Updated: Aug 28, 2023

It is still August, but this past week, Starbucks released its fall menu one week earlier than it did last year. Why? Well, because they’re Starbucks and because Fall is their favorite time of the year since everyone seems to “fall” for everything pumpkin.

Since it’s debut in 2003, the Pumpkin Spice Latte (PSL, as abbreviated by your favorite barista) is Starbucks’ most popular item on its menu, selling 20 million units annually. So, what’s behind the obsession over anything pumpkin this time of the year? Turns out, it’s all about consumer behavior (psychology) and economics.

Psychology says that pumpkins tend to conjure positive images and memories. Because pumpkins are a seasonal fruit (yes, a fruit, not a vegetable), and ripen in the fall, pumpkins, specifically pumpkin pie, become a staple during holiday get-togethers, from Thanksgiving all the way to Christmas. The association of pumpkins to holidays, family gatherings and time off from work and school conjure images of happier times, nostalgia and positive emotions. Couple that with the fact that Starbucks is known to be a high-end type of beverage, and the social status factors come very much into play. Think about the 1.2 million #PSL hashtags and mentions on social media every year!

The concept of scarcity in this case is also where psychology and economics intersect. Since pumpkins and pumpkin spice-flavored products are only available in “limited quantities” in the fall and winter, sales of these items rise sharply during this period because consumers are in that mindset of needing to “buy it now before it’s all gone or you’ll have to wait for next year to get it again.” A certain sense of “herd behavior” and “social proofing” tends to feed the frenzy as well, where consumers need to conform in order to be liked and belong.

The thing is, we cannot have these pumpkin-spiced products forever. Why? The economic concept of diminishing marginal utility starts to set in after having it for a while. Utility is defined in economics as the amount of satisfaction or benefit derived from consuming a good. However, once you consume more and more of the same good, the additional satisfaction (utility) derived from every (marginal) unit consumed falls. Using pizza as an example, the first slice pizza could be described as amazing, even heavenly, the second one-great, but by the time the pie is almost finished, it can start to feel and taste well, disgusting.

So if PSLs are sold year round, the utility (satisfaction) derived from it will be much lower to the point of it “falling” out of popularity, pun intended. So Starbucks does what it does best: It creates demand for the PSL by making it available for only several months each year, making people crave for it even more.

During these inflationary times, I wonder if people will continue to pay almost $6.00 for a cup of PSL. I suppose that, similar to ice cream (see my previous post on the Economics of Ice Cream), PSLs may be inflation proof and possibly something people can consider an "affordable luxury.” After all, fall is the time to cozy up by the fire and indulge ourselves in everything pumpkin. Well, maybe not everything…I think I’ll pass up on these Pumpkin Spice Cup Noodles and

Pumpkin SPAM.


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