How Pricing Affects Perception of Quality

Merchants have manipulated product prices since before the invention of the price tag. It’s the easiest way to maximize your profits as a retailer: all you have to do is mark up a product by twice its original cost and sell it at a discount some time later. The wholesale price of a wine bottle may be $6.00, but you can sell a lot more by marking that bottle up to $20.00 and later selling it at $10.00 at a 50% percent discount.

What happens, however, when the consumer tastes that marked up wine? Do they recognize the $20.00 bottle for the fraud that it is, or does the price itself change our perception of the wine’s quality?

In a recent study, Antonio Rangel of the California Institute of Technology had 20 subjects taste various wines at different prices. The only information given to the subjects were the prices of each wine. A $90.00 bottle was priced at $10.00, a $5.00 bottle was priced at $45.00, and as a control, the researchers provided the group with one $35.00 bottle at its actual price.

As expected, the tasters consistenly rated the $5.00 wine over the $90.00 wine just because of the price tag.  Rangel’s team went a little further than this, however. They performed brain scans on each of the tasters in an MRI machine as they tasted the wines. It appeared that when tasters tried the $5.00 wine, their brain scans registered a lot of extra activity in the media orbital frontal cortex (mOFC), a region of the brain known to be associated with experienced pleasantness. Because higher priced wines are generally considered to be better tasting wines, the knowledge (true or false) of a high price had a profound effect on mOFC activity.

It would be interesting to see what the effects of prolonged consumption of a mis-priced wine would be.  Would the brain continue a knee jerk conditioned response and activate the pleasure centers? Or would there come a moment where tasters realized that the overpriced cheap wine actually tasted bad and the pleasure centers weren’t activated?  How many tastings would that take?  Would it be different depending on the taster?

In the study, Rangel notes that there have been other notable experiments that show how marketing actions affect levels of experienced pleasantness.  In another similar study, subjects who drank Coke as opposed to a Coke masquerading as a generic cola not only registered activity in the mOFC, but in several other regions of the brain as well, which could be linked to the retrieval of brand information.  This latest study by Rangel shows that reduced the complexity level by reducing the variables to a wine’s price only, and as a result only the mOFC was stimulated and not the other regions of the brain that were stimulated in the coke study.

The implications of this study and others like it shows how marketing may soon become more of a science than an art. If marketers realize the simple changes they can make to product packaging and presentation to enhance the consumer experience, there will probably be a lot more money poured into research such as this.

This is a guest post by Kenji Crosland a writer for TeachStreet.  TeachStreet is a website dedicated to providing local and online classes, from psychology classes to fitness classes.

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