You might have heard of the placebo effect. If you haven’t that’s fine, I didn’t learn about it until I was in the 10th grade (thanks Mr. Walker). The idea is this: If you give a pill with no medical properties to someone, but lie to the person to give the impression that it will help him/her, it may actually him/her. One could call it the power of positive thinking.
One concept that I’ve run into lately is the Price Placebo effect. Truth be told, I didn’t know the name of this phenomenon until recently. I had to ask in the comments of my MonaVie article. (MonaVie is a $45 bottle of juice that has zealous believers that it’s a good value.) Why did this come up? I could start the story at a number of places, but I should probably go with one that is geographically close to my home, Stanford University.
In January of 2008, Stanford posted an interesting study on wine. Essentially the result was that if you told someone they were drinking an expensive, they’d like it more than if you told them it was a cheap wine – even if it is the exact same wine! The Stanford researcher called this phenomenon the Price-Placebo Effect. I don’t know why this is surprising as we see people pay for brand name medicine and batteries, when most everyone agrees that it is the same product as the generics – just different labeling.
The Price-Placebo Effect isn’t just about enjoying of a product more because you paid more. People told they were spending more money for a energy drink actually performed better on mental tasks – even when those studied were explicitly told that the drinks were identical. (Those interested in another Price-Placebo Effect example involving Eliot Spitzer and Ashley Alexandra Dupre are encouraged to click that Washington Post link, but I won’t touch that subject here).
The Price-Placebo Effect explains a lot about the psychology of our purchasing patterns. I know I’m a victim of it especially when it comes to wine as in the Stanford study. Bringing it back to MonaVie, the Price-Placebo Effect explains why people think it’s somehow better than other juices even when scientific studies show that it’s not. After all, if it costs 20 times as much per ounce, it really must be better, right? Wrong.
Kosmo @ The Casual Observer says
Agreed, price does not equal value. I enjoy quite a few cheaper products more than their more expensive counterparts. My favorite frozen pizza is Totinos, and I love my Wrangler jeans (in spite of the fact that Favre is in their ads)
Lazy Man says
Go Totinos!!! That’s definitely a cheap product that tastes good. It’s too bad it isn’t healthier for you. I’d be eating them all the time.
Scott Lovingood says
People who study the human mind and how it operates can accomplish a great many things. It takes significant effort to break the price/value connection. There have been a couple of books written that cover some of the basics. Predictably Irrational and The Science of Influence.
They cover different areas but both discuss how the mind’s inherent nature can make us do things that don’t make rational sense.
I guess I should raise the price of my coaching to make it appear more valuable. I know McKinsey charges a boatload for consulting and they keep getting the high profile jobs.
Kosmo @ The Casual Observer says
Totinos seems to “crisp” better than other pizzas. I like a nice, crispy, thin crust – right on the edge of burnt. Not charcoal, but a few spots of black here and there :) Honestly, I prefer it over most restaurant pizzas as well …
It’s also one of the few brands that doesn’t make my acid reflux go all refluxy, which I guess qualifies it as “healthy” for me.
her every cent counts says
Yes! I value the things I buy that are more expensive more than the things I buy that are cheaper. If I see the same item I want on sale, I want it less usually. Even though it’s all a trick of psychology to get me to spend a lot, I really do feel happy when I save up and buy something expensive and then own it. For instance, I recently spent $600 on a leather jacket. I tried on other jackets that were $200 and $400 and less, but I did not like them as much as the $600 one.
Clever dude had an interesting video on his site a couple months ago about the price of happiness. Some guy with apparent connections got to sample some of the most expensive things in the world..kobe beef, some special wine, designer jeans. His thoughts were really interesting.
Personally, I sample everything and compare on my own.I am not going to take the word of some company that their product is or tastes better, because tastes vary! Once I have compared price, value and my own opinion of the quality, I choose whats best for me and stick with it.
Lazy Man says
I read about this guy doing all these things. I found it interesting, but I never got around to posting it.
I would never be able to pay for anything like that, I would feel to guilty I think even if I had the money but I wouldn’t mind trying some if it didn’t cost me ;)
Still, I agree that there is more to life than the price tag