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Post No.: 0746quality

 

Fluffystealthkitten says:

 

Some common but unreliable heuristics that customers trust in include assuming that ‘a higher price always means a higher quality or better product’, ‘a discount always makes something good value’ or ‘multi-buys always make the unit prices cheaper’. Hence marketers gladly exploit these assumptions by ripping off those who rely on such lazy mental shortcuts! It’s like ‘I don’t have to put in the effort to think about each individual case because I can just apply a broad generalisation’. These heuristics work most but hardly all of the time, which means that we can be too impressionable to believe that we’re getting something of a higher quality when we see it being sold at a higher price.

 

A jacket that’s marked at a moderate price mightn’t seem special. But that exact same jacket marked-up with an expensive ‘original retail price’ but then apparently ‘discounted’ to the same moderate price as above will suddenly seem more desirable! This is because this exploits the crude rule-of-thumb that a higher original price equates to a higher quality, and that if something has apparently been heavily reduced (from an arbitrarily selected original price) then we must be getting a steal.

 

A product will, in part, appear good or bad depending on the price one expected to pay for it. So if a manufacturer sets a high anchor, or ‘recommended retail price’ in this case (which they can just totally make up), but then apparently slashes this price – it can make it appear like they’re offering a deal that one would be a chump to miss. The limited stock and/or time of the offer add a scarcity and/or time pressure too.

 

Is £39.99 good for a particular pair of earphones? Well if it says ‘60% off from £99.99’ then you’ll now have something to compare it to, and that size of apparent discount looks massive. But that means that retailers just make up over-inflated original prices or sell at the higher price for just the minimum regulated duration until they can claim a price reduction from it, and people can get fooled into thinking that they’ve made a massive ‘saving’ from an over-inflated price that virtually no one paid. You could create a product that costs £30 to manufacture and sell it initially at £1,000, then a month later reduce the price to £100 – and shoppers will go ‘I must snap this up now because it’s reduced by 90% or £900!’

 

Special offers mustn’t happen too often though otherwise they’ll become the new reference point i.e. the discounts won’t seem special anymore, as much as the full prices will seem overpriced. (The same with government aid to fulfil temporary needs – they start to become expected as permanent and then difficult to retract.) So the temporary nature of them, and when they’ll end, must be made absolutely clear from the outset, and they cannot happen too often unless you make them permanent.

 

Fashion outlet stores don’t just sell last season’s stock at a discount but specific items made for those outlet stores that have never been sold elsewhere before. They’re again exploiting our assumptions that ‘we’re getting a high quality item at a price that one would be a dunce to miss’. And the fact that when people continue to buy these specific items made for those outlet stores and don’t realise that they’ve never been sold at a higher price before shows us how little consumers actually pay attention to the product itself to assess the quality of it rather than refer to the heuristic of judging it according to its price; or alternatively how those items genuinely aren’t any much different in quality to those that were supposedly initially sold at a much higher price but then discounted!

 

Haggling for a discount is often worth it though – read Post No.: 0615 for some tips.

 

Marketers and salespeople routinely try to exploit our irrationalities, like by offering an endless stream of, usually unprompted, discounts and throwing in supposed ‘freebies’ (the ‘and that’s not all…’ technique), when we should assess any price and product against the wider market and not merely compared to some previous selling or full price. A cake for £1 with a cookie thrown in for ‘free’ is the same as a cake and cookie for £1. ‘Free’ texts and minutes when you’re paying £25/month (or any amount) aren’t free at all! Nothing is free if you must pay to receive any part of it. So completely ignore the words or how much money has supposedly been taken off – just look at the product and the price as it currently stands against the competition/wider market. And no offer is irresistible! Well is it saving or wasting money to buy something that one doesn’t need or didn’t absolutely want when one is being drawn into purchasing something solely because it has, ostensibly, been discounted?

 

It’s therefore only a saving if you were going to buy the item anyway. If you already need or want a new food bowl (or you think it might make a good gift for someone else) and one you like is currently reduced from £7 to £4, then you’ll save £3 if you buy it. But if you aren’t really looking for a new food bowl then you’ll actually be wasting £4 if you buy it.

 

Things like heavier cups and heavier cutlery, because they’re associated with more expensive dining experiences, can shape our perceptions of the quality of the food itself – our minds naturally conflate correlation with causation constantly. A problem is that designers often deliberately add weight to products in strategic places just to exploit this neoclassical economic understanding that value or the prices of things are perceived rather than calculated according their actual production costs. And it’s bad for the environment to use extra raw materials just to make a product heavier. The heavier weight increases transport emissions too. We can understand features that are necessary for the improved function of a product but increasing the consumer perception of the price, and by inference quality, of a product just to maximise profits or economic surplus is environmentally wasteful. But that’s business!

 

So the assumption that ‘a higher price always equals a higher quality of product’ can be easily exploited. It’s analogous to if you believed that the highest quality items are always in purple boxes – retailers will eventually learn to place lower quality items in purple boxes and watch you still automatically reach for the purple boxes!

 

If it’s not because of inflated mark-ups then something can be expensive because of inefficient business or manufacturing methods and these costs are being passed onto the customer (e.g. hand-built cars). Yet because they’re expensive, they’re coveted – thus inefficiency is rewarded(!) Luxury brands may claim that they’ve spent a long time designing something and so the high price is justified – but we might critically wonder if working more slowly, in itself, deserves more pay?!

 

Some supermarkets sell fewer stock-keeping units (SKUs) but they buy these in much larger quantities thus negotiate cheaper per-unit prices from their suppliers, which they then pass onto their customers. So they run more efficient businesses and their value-for-money isn’t due to skimping on the quality of produce.

 

Price won’t necessarily align with quality but will align with exclusivity when a new and patent-protected product comes onto the market because then we’re paying for that exclusivity; which might be fair enough for the company to recoup their R&D costs, however. But once a technology becomes available for competitors to use and flows down the market, these features should become increasingly commoditised, which should drive down the costs and in turn prices. It’s like airbags in cars or touchscreens for devices. So in a mature market, a higher price won’t necessarily mean more (useful) features.

 

There’s also an upper limit to the functional quality of some products, like how much UV a pair of sunglasses can block – so in terms of seeking performance, there will logically be an upper limit to the price one will need to ever pay for the highest functional quality. Regulated products like drugs or condoms all must meet minimum active ingredient and/or safety requirements. Therefore a higher price won’t necessarily mean a higher objective performance product. Why are mined diamonds worth more than lab-grown diamonds of the same quality? The difference is purrely in one’s mind. Meow.

 

Sometimes two companies (e.g. clothing brands) belong to the same parent company and they’ll both sell some of the exact same products from the same production lines except they’ll stick on a different label for each brand – one for the relatively more ‘premium’ end of the market and another for the relatively more ‘value’ end; with corresponding price differences. This is to serve more of the market and to maximise the takings from everybody’s willingness-to-pay amounts. If some customers are willing to pay more for essentially the same product – then take their money! Don’t leave them no choice but the low price. If you only offer your product at a high price then those who aren’t willing to pay that much won’t or can’t buy your product. If you only offer your product at a low price then you’ll be forgoing profits from those who are willing and able to pay more. So you offer two different prices for the same product but make it seem like they relate to different qualities via merely their labelling and packaging, or just different shirt buttons! Brand signalling may be important to (snobby, pretentious) customers but this post is about assessing the objective quality of products.

 

Sometimes even if they’re independent brands, a common third-party factory produces for them all (e.g. the exact same cheese for different supermarket own-brand lines, or even the same biscuits for different well-known brands and supermarket own-brands with only the slightest recipe differences). Some cheaper brands just cheekily copy the benchmark recipes too!

 

This can obviously only work with products where so much of the quality appears subjective and hard to discern without conducting a direct side-by-side review between different versions, like many comestibles and clothes. Businesses are less likely to get away with these kinds of tricks with products that have clearly objective specifications, like computer components. But you may be surprised at how many products these tricks can apply to, including cars from different marques when they use the exact same base chassis; although they might have different engines and other key features.

 

…Quite simply, customers make purchasing decisions based on a multitude of fallible mental shortcuts and assumptions that retailers and marketers then routinely seek to exploit. Too many customers aren’t being sufficiently conscientious critical thinkers because of the mental effort. They’re intuitively guided by their emotions and may be impulsive, superficial and presumptive. They do little research, avoid maths and don’t carefully weigh out their options. Their peers, celebrities and advertising overly sway them, and they care greatly about what their purchases supposedly signal about themselves to others. We don’t have to attempt to be rational to the nth degree – in fact there are some pros to being a ‘satisficer’ over a ‘maximizer’ – but we should try to be more rational.

 

Meow. The phrase ‘you always get what you pay for’ is exclaimed as if we’ve never heard of the concept of getting ripped off! From the perspective of paying a business that’s selling a good or service to us and is trying to maximise its own profits (as opposed to paying nature back for the resources we take from nature) – we don’t always get what we pay for, and we more often get less. Relying on the price, label or brand to judge an item is a heuristic similar to relying on someone’s skin colour, accent, social class or nationality to judge them. It’s a shallow judgement that isn’t based directly on the performance, taste, healthiness, safeness, etc. of a product.

 

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