Friday, February 09, 2007
Chocolate: a signal that you’d go to the extreme cost to maintain the relationship
Noka chocolates run $39 a box. A box contains 0.9 ounces of chocolate.
By DAMON DARLIN February 10, 2007 NY Times
If you are still seeking the perfect gift for Valentine’s Day, have you considered a box of Noka chocolates?Both you and the recipient may be in for a surprise. A 12-piece box costs $39 before tax and shipping. And for that you will get 0.9 ounces of chocolate. Not 0.9 ounces per piece, but 0.9 ounces in the entire black and silver box. Do the math and that comes to $693 a pound. Buy just four pieces in its Signature stainless steel box and you are paying more than $2,000 a pound, making the Noka chocolate more expensive than delicacies like caviar, saffron or black truffles.How can anyone justify paying that much for a gift? Economists have struggled over that question for years, suggesting that anything other than a cash gift is inefficient. But the high-end sector in retail is red-hot, whether it’s super premium vodka, tequila, blue jeans, or chocolate. Spending on luxury goods, which exists by convincing people they are getting higher quality or higher status by paying a premium, was stronger in the last holiday shopping season than spending on more prosaic products.And while cash cards have proved popular during Christmas, a gift card, even one festooned with red hearts, does not quite seem appropriate for this romantic occasion. The question of how much of a premium is reasonable in gift-giving recently nagged at a blogger who writes about local food at the DallasFood.org site. In a 10-part series that can only be called investigative blogging, he tried to justify Noka’s price. He analyzed the marketing of the chocolate with lawyerlike logic and came to the conclusion there was little special about it. He noted that the company, just as other chocolatiers do, buys bulk chocolate, called couverture, from chocolate makers, who process the cacao. But while truffle makers like Michael Recchiuti or Michel Cluizel charge a mere $80 or $85 a pound for their treats, the mark-up for Noka could be as much as 50 times the wholesale cost of the couverture, the blogger estimated. Through taste-testing and some deduction, he guessed that the source of the Noka chocolate is Bonnat, a French chocolate maker. A consumer can also find a Bonnat chocolate bar in stores for about $7.50, or $34 a pound. (Noka is hardly the most expensive chocolate. A Forbes.com survey gave that honor to a shop in Norwalk, Conn., Chocopologie by Knipschildt Chocolatier, for its slightly more pricey $2,600-a-pound bonbons that have unusual ingredients like pink peppercorns or crystallized violets.) Heavily trafficked sites like BoingBoing.net, Chowhound.com and Slashdot.org publicized the exposé on the little-known DallasFood blog. The report has had 750,000 page views since the story went up in December and has been passed from chocophile to chocophile. A clerk at Fog City News, a San Francisco magazine and chocolate store, laughed when asked if she carried Noka chocolates. “Haven’t you read the posting about that on DallasFood.org?” she asked. Katrina Merrem and her husband Noah Houghton, who started Noka three years ago in their Dallas-area apartment, took umbrage at the attack. They will not reveal the source of their chocolate, though most chocolatiers brag about that. Mr. Houghton said, “The couverture is made specially for us.”The couple, both former accountants, do not add flavorings to their chocolates, which are identified by the country of origin and which, they say, each come from a single estate. “Our focus is on the pure natural flavor of the cacao,” Mr. Houghton said. In other words, it is pretty much the chocolate they get from the wholesaler, just molded into little pieces.He said the product’s value was also in the “total gifting experience” with brushed stainless steel boxes available at Neiman Marcus stores and a distinctive logo that belies the company’s origins in a one-bedroom apartment in Plano, Tex. Like the premium ice cream Häagen-Dazs created in the Bronx, which sounded foreign and expensive, the Noka logo has exotic typography: capital N, small o (with a macron over it), capital K, capital A in a meshing of the owners’ first names. “On the gift end, no one was really doing justice to the gifting experience,” Mr. Houghton said. To succeed in the luxury good market, he said, “the value people are getting must be there.” DallasFood.org saw it differently. “If you or your gift recipient are rich, stupid and vain, Noka is probably the way to go,” it said.But not so fast. There might be some rationale here for springing for at least something more than the Whitman sampler at Walgreens. Most economists would say that giving gifts, other than cash, makes no economic sense. The recipient would be better off spending the money on something he or she values. Joel Waldfogel, a professor at the Wharton School of Business, gained considerable attention from his 1993 paper in the American Economic Review titled “The Deadweight Loss of Christmas.” He argued that people valued a gift as much as a third less than if they had been given the same amount of cash to spend on themselves.He shed some light on why people give extravagant gifts. “It’s like food stamps,” Mr. Waldfogel said, because the government antipoverty program is intended to get people to buy food, which they might choose not to do if given cash. A luxury gift is similar, he said. “Suppose it is something they wouldn’t buy for themselves,” Mr. Waldfogel said. “You are forcing them to consume something luxurious. You are saying: ‘I don’t care what you want. This is what I want you to have.’ ”There could, however, be some value in giving an expensive gift. Bradley J. Ruffle, an economics professor at Ben Gurion University in Israel, said gifts were a way to establish a relationship. The economic term is “signaling,” jargon for showing a person that you care at a very high cost to yourself. “Giving a diamond ring when you are getting engaged is a similarly extravagant and wasteful gift,” he said. But it signals serious intent. In some American Indian tribes, a ceremony to initiate relations with another tribe was marked by burning the tribe’s most valuable possession, Mr. Ruffle said. “Why? It’s a signal that you’d go to the extreme cost to maintain the relationship.” In short, what an expensive gift really shows is that the giver and recipient do not know each other all that well. The gift is an attempt to convey the information : “Hey, I’m O.K.” It is a time-saving way to establish a relationship without going through the drawn-out process on a series of thoughtful gestures. There may be other benefits, said Mr. Ruffle, who studies economic puzzlers like gift giving and religious belief. A gift carries with it emotional costs and benefits. The recipient has an expectation of what the giver will deliver. If the gift fails to exceed expectations, then the recipient is at an emotional loss, as the giver could be. And there could be other consequences like a certain chill in the air. But if the gift is well received, the giver can take pride in that and win an emotional benefit. Gifts can also save the recipient time, another benefit. If the recipient cannot get to a place selling a desired product or has not done the necessary research to know what product to buy, a gift saves that person time. Mr. Ruffle, for instance, buys unique dolls for his niece back in Canada during travels around the world and would consider buying a high-tech device for his technophobe mother that would make her life easier.“It is still wasteful,” Mr. Ruffle said. But it might make you feel less guilty about splurging for the roses, a bottle of Port, or a dinner out. [port??]