Price Determines Perception

Here’s a shorter version of the story that Robert Cialdini tells us about in his book, Influence.

A business owner who owns a consignment of slow moving turquoise jewelry, leaves a hand-written note for one of her sales staff to mark down the stock at “x ½” price before leaving for an out-of-town trip. On her return, she wasn’t surprised to learn that the stock had sold out, But she was surprised that due to her bad penmanship, the saleswoman mistakenly reading the “x ½” on her note as “x 2”, and everything had sold for twice the original price.

The story illustrates nicely how, in the absence of other information, the price of an item can often serve as an effective decision trigger—in this case if something is expensive then it must be good. Let’s think about some other real world examples of this: Have you ever found yourself in an antique store, picking up an item and checking the price tag before you decide whether you like it?

Even if you’re not interested in buying, the price can give you a sense of whether the item is valuable or not. The same principle applies when you’re looking at a product in a store: if it’s priced high, you might assume it’s high quality and worth your money. But what happens if that same information is presented after, rather than immediately before, sampling?

In wine, studies have shown that people’s evaluations are significantly higher if they’re told it’s expensive before tasting. Similarly, learning the quality brand of a food before sampling leads to improved perceptions of taste and satisfaction.

Imagine you’re at a wine tasting and you’re trying to decide which wine to buy. The first wine you try is $10 a bottle and you think it’s just OK. The second wine you try is $50 a bottle and you think it’s really good. You’re more likely to buy the second wine even though it’s five times the price of the first wine.

If you were to buy a house, you would be more likely to buy a more expensive house if it was in a good neighborhood. If you were buying a car, you would be more likely to buy a more expensive car if it was a luxury brand. If you were hiring a lawyer, you would be more likely to hire a more expensive lawyer if they had won more cases. The list goes on.

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