A product’s price tag defines its value, at least that’s what recent studies have found.
According to a wine test conducted by researchers at the Stanford School of Business and California Institute of Technology, a wine’s taste is perceived to improves as its price increases. A similar test using prescription pain relievers found the same result (perhaps not so surprisingly) of higher prices creating the impression of an increase in pain relief.
Eleven male Caltech graduate students who said they liked and occasionally drank red wine were recruited for the bottled wine study. They were informed they’d be sampling five different wines to study the effect of sampling time on flavor. Only three wines were actually used, two were given twice with different price tags. The wines were given in random order, and the students were asked to focus on flavor and how much they enjoyed each sample. The participants said they could taste five distinct flavored wines (even though there were only three) and added that the wines identified as more expensive tasted better, as reported by ScienceDaily.
In the case of judging prescription pain relievers, investigators had 82 men and women rate the pain caused by electric shocks applied to their wrists, before and after taking a pill. Half the participants were instructed that the medicine described as a newly approved prescription pain reliever, was priced at $2.50 per dose. The other half of the group were instead told that the pill had been discounted to 10 cents. Both were placebo pills. More than eight in 10 of those using the expensive pills reported significant pain relief, compared with 61 percent on the cheaper pills.
There is a medical explanation for ‘perceived’ value provided by one of the doctors and the lead researcher in the prescription pain relievers’ study. “When you’re expecting pain relief, you’re secreting your own opioids. When you get it on discount, you doubt it, and your body doesn’t react as well.”
Similarly, in the bottled wine study, the part of the brain that experiences pleasure will become more active when the drinker thinks he or she is enjoying the more expensive vintage.
Other studies have also shown that pill size and color changes people’s perceptions of effectiveness. In one, people rated black and red capsules as ‘strongest’ and white ones as ‘weakest’ while rating larger pills as ‘strongest’ and smaller ones as ‘weakest’.
Think about ‘perceived’ value in terms of the electronics industry. Today, size is known to create the opposite effect. The smaller and slimmer the product the more ‘perceived value’ in terms of performance and advanced technology. Over the years we’ve seen computers, phones and iPods designed to become smaller and smaller. Even the movie ‘Zoolander’ starring Ben Stiller and Owen Wilson pokes fun at tiny electronics as portrayed by the miniature phone as Ben Stiller’s necessary accomplice in order to ‘be cool.’
So, are the participants in the above studies really experiencing pleasure, or, do they just think they are because they are anticipating it? Due to perceptions about quality positively correlating with price, scholars argue that people might expect an expensive wine to taste better and a prescription pain reliever to work better than a cheaper version because of their need for anticipation.
Even if heavy price tags increase the ‘perceived value’ of a product, this factor isn’t inspiring most of today’s level headed consumers to dutifully swipe their credit cards. And here’s why.
It’s not all just about the price tag and ‘perceived’ value. A product must appeal to consumers’ emotions. In order to sell the product, the price must justify the cost, and that’s where marketing comes in. People do not buy a prescription pain reliever because it is merely the most expensive on the shelf. Consumers purchase prescription pain relievers in order to create a better life, pain free. In this example, price and pain reduction play supporting roles. Having a fuller, better life remains the primary motivating factor for their purchase because the brand connects with the consumer, emotionally.
It’s the same thought-process behind most of today’s luxury brands. Price justification via brand name and reputation will allow consumers to connect, subsequently encouraging them to buy. According to Pamela Danzinger’s (Unity Marketing) white paper titled The Six Myths of Luxury Branding, ‘luxury consumers buy luxuries because they want to and this desire is emotionally driven and right-brain controlled. Justifiers are left-brain reasons that give consumers permission to buy luxuries. And the brand justifies the purchase because it confirms the product is of outstanding quality will last a long time, will be in style for years to come, is worth the price tag, will be admired and noticed by people in one’s social circle that matter.
‘Real’ value is the ‘real’ motivating factor
Although a higher price can help increase a product’s desirability, utilizing marketing to increase brand name, brand reputation and a healthy price/value relationship, will not only increase a product’s ‘perceived’ value, but also its ‘real’ value. This translates ultimately into sales.
K&A represents many “aspirational” brands where price is but one of many factors positioned to help influence and create desirability. Check out next week’s blog for more information about marketing to the luxury consumer. For more information about how to market your luxury brand, email me at firstname.lastname@example.org.