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October 27, 2011 / Simon Thorne

You get what you pay for.

We are often under the illusion that the more we pay for something, the better it will be. This isn’t always the case, albeit I’ll take Tesco’s Finest over Tesco’s Value any day. I’ve also been scorn by the big price tag too; I’ve had more than 1 pair of £50 jeans that have fallen apart while my bargain bucket pair is still going strong. But what other affect does price have? Is expensive medication more effective than the cheaper alternative? Is the more expensive wine better than the rest?

How good would these wines be?

Lets start with a favourite topic, Wine. When you are shopping for wine, what’s your tactic? You’re faced with a wall of options, 100’s of choices (More on Choices to come), which one will you go for? Is it the one you’ve had before and like? Is it the one half price? Or is it the one that is slightly more expensive (and maybe half-price!)? If you are anything like me, you’ll be the more expensive but half-price one. A cunning marketing tactic, two things people love, a discount, and a high price! That’s right, according to research carried out at Stanford Graduate School and Caltech a higher price can make all the difference when buying that perfect wine.
In the study, participants were given 5 wines to taste while in an fMRI scanner. Each wine was priced differently, but the trick was, only 3 wines were used. Two of the wines were repeated under fake prices. One wine cost $90 and was also presented under a $10 price tag; another cost $5 and was presented again with a $45 price tag. The third wine was given with its actual $35 price tag. The participants each thought they had tasted 5 different wines.

Participant’s medial orbiofrontal cortices (mOFC) lit up like a Christmas tree when tasting the more expensive wines. The mOFC is linked with pleasant sensations; in this case, there was more activity due to participants perceived taste expectations. Other studies have shown more expensive wines to be perceived as being better, but this study proved they were actually better than their cheaper counterparts!

Price plays on expectations. The more expensive something is, the better we actually think it is. Therefore when it comes to medication does the same happen? Can branded pharmaceuticals (the brand is what your paying for) be as good as the cheaper supermarkets own variety?

Waber, et al, conducted a study investigating the effect price and expectations played on a new pain relief drug, Veladone-RX. As participants came into the waiting room they were given a leaflet about the drug, 90+% says it reduced pain after just 10 minuets. It also included the price, a whopping $2.50 per pill. The willing participants were then subjected to numerous electric shocks, enough to cause discomfort but nothing too serious! They were asked to record their levels of discomfort after each shock. After a round of shock participants were given the new Veladone-RX drug, and after 15 minuets were back for another round of shocks, fortunately for them Veladone-RX worked wonders and almost all participants said they experienced less pain after being given Veladone-RX.

In the second part of this study, the price of Veladone-RX was reduced to just 10 cents. This time only half of the participants experienced less pain while under the influence of Veladone. The price drop had managed to reduce the expectations of the drug so that now it only worked half the time. Albeit half is still good when you consider Veladone-RX was just a tablet of vitamin C. A worthy placebo if you ever fine yourself about to receive an electrical shock!

The placebo effect works for two main reasons. The first being belief that its going to work, if you watched Derren Brown’s latest show he talks about how hypnosis is all about creating beliefs with confidence. This is a good way to think of placebo’s, a kind of self-hypnosis tell yourself it will work, and it may do just that. The second mechanism behind placebos working is pavlovian conditioning. If we have experience greater pleasure in a more expensive wine before, which is likely from the above study, or experienced pain relief from a branded paracetamol we are training ourselves to react the same in the future.

So if you want the best wine tonight, and want to cure your hangover tomorrow… Go for the more expensive one. Because you know its better.

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5 Comments

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  1. Lynn / Oct 28 2011 7:01 am

    Now you know why I always said branded products were a waste of money. It’s only taken 22years!

    • Simon Thorne / Oct 28 2011 6:05 pm

      There not a waste of money. There much more effective than the cheaper alternative! It may all be in your head though…

  2. wouldyoulikelieswiththat / Oct 28 2011 3:59 pm

    Oooo I like this topic! As a sufferer of migraines from a very young age, I grew up understanding that if I had a migraine, I took a pink pill and life was wonderful again. Having grown out of them somewhat I can now rely on medication that is not as strong. I used to carry nurofen with me for when I’d start to get the familiar feeling again, until my sister questioned my choice of “brand”. She very rightly pointed out to me that the generic version of medicine contains the same ingredients as my beloved silver box. I scoffed. Until I read the ibuprofen box comparatively and realised that as a woman with a PhD in the science area, I was a fool to ever doubt. Since then I only use generic versions of brand name medicines, and I am saving a fortune in the process. I guess the same mechanisms that lead us to assume that Dolce and Gabbana or Gucci are much better quality and will last forever can be applied to anything else. As you rightly point out, in the pharmacological world, I don’t think the placebo effect is to be scoffed at; http://www.boston.com/lifestyle/health/articles/2011/03/07/can_chronic_medical_conditions_including_depression_be_treated_with_placebos/

    This just lends further support to the fact that the mentality associated with branding is more powerful than the brand itself. Brand names as opposed to their generic comparatives are also closely related to image, identity and self esteem I believe. As suggested here “…nobody gets excited buying tesco value beans.”http://www.marketing-made-simple.com/articles/psychology-of-marketing.htm#axzz1c5ncjpYg

    And I firmly believe this is down to status in a group – the in group who wouldn’t be caught dead buying them ,and the outgroup (students perhaps!) who happily lap up the generic versions. Tajfel’s group identity structure is most fitting here and suggests the group prejudice that a 7p loaf of bread can achieve!Ultimately, it’s all in the head – just take the pepsi paradox and placebo effect as examples, and the insight into the mechanisms underlying choice is more than apparent.

  3. The Wandering Consumer / Nov 3 2011 12:34 pm

    I think you are right about the placebo effect influencing our product choices, if we think it costs more it will be a higher quality product, all the way through to pharmacological drugs. There are many experiments that cover psychotic drugs for example for depression that show that sometimes the real thing is just as effective as a placebo, but the idea of price having influencing the potency of a drug is interesting. I often have joint pain, and used to take the branded stuff but I realised what I was paying for was a sugar coating and a nice box that I was going to throw away all I want is the pain to go away. From my own experience I think for short term ‘every now and then’ use of a product the placebo effect of an expensive pain killer works but if it runs into the long term do these effects last? Once a person has had a chance to run a cost-benefit analysis of a product in their mind and tried out other products do they think it is still worth the money? Perhaps.
    I think the opposite will be said for wine, it is an acquired taste and is a little more subjective. The pain is gone you think the pain killer worked, you taste wine you taste wine unless you drink a wide variety and are a wine expert who knows if you like it? Maybe we use the price as an anchor for how nice we should think it is. Do we have price links to our pleasure system? we know it is a high status product if it is expensive so we know we should like it more.

  4. Junna H. / Nov 4 2011 1:43 am

    I think this post is really nice one. I used to read some article about how the price play its role with alcohol product, but i never know how the expensive price works with drugs. It is fresh to me, and give me a lot of idea.

    I agree with what your point out about “The more expensive something is, the better we actually think it is” and i also believe that “price” is such a tricky thing for consumers, because sometime it should be low for attracting consumer’s intension, however sometime it should keep an expensive label for giving a high quality cue to consumers. I think for implementing the price strategy, people should be careful with different domain of products. Anyway there is no doubt that the high price influence consumer think positively with wine and placebo. Moreover, i also found some resources for giving idea about how the low price role during the purchase process. Thanks for you nice post!!!:-D

    http://qje.oxfordjournals.org/content/58/4/602.short
    http://www.sciencedirect.com/science/article/pii/S0022435906000340

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