By Christine Hollinden
While listening to a podcast from the well-known book Freakonomics entitled, "The Days of Wine and Mouses," Steve Levit and Steve Dubner discuss how price effects perceived value. Higher price equals higher quality in many cases, but Dubner and Levit were out to determine how often people are influenced by price when experiencing a mediocre product.
Levit describes a meeting of self-proclaimed wine connoisseurs at an Ivy League school. Attendees were presented with the evening’s wine options and, unbeknownst to them, the contents of the two most expensive bottles had been exchanged with a very cheap wine. The group tasted the wines and ‘oohed and aahed’ over the “expensive” wines.
At the end of the event, they were told about the experiment and gasped to learn that the expensive-looking bottles were not reflective of the product inside. It led to the question, ‘how much does price really affect the perception of value?’ In this case, it was a direct correlation. The attendees were "tasting the dollars" not the wine.
Though a lesson in economics, I couldn't help but compare it to principles of marketing. Clients often come to us requesting web sites, advertisements, brochures, or other marketing tools thinking they will solve their issue of decreasing revenues or market share. The fact is, a marketing tool is not the solution – at least, not without the appropriate strategy. Tactics are external shells, much like the expensive wine label and bottle. Tactics cannot solve business issues without initially evaluating the company’s goals, needs, desires, challenges, and competition and, then setting an appropriate course of action.
What is your company’s perceived value and is it truly reflective of the service delivered?
Posted on Fri, July 27, 2012
by Jessica Stenklyft filed under