High Prices Affect Perception of Quality, But Not Sales

Last Updated Sep 10, 2009 9:06 PM EDT

You go to a restaurant and decide to have a glass of pinot with your meal. You look at the wine list and haven't heard of any of the choices, so you assume the one with the highest price is the best glass. But the question remains: will you buy it?

According to new Cornell research, "A positive perception of a product based on its higher price doesn't automatically translate into a decision to buy it."

The research was conducted by Ori Heffetz, an assistant professor of economics at Cornell's Johnson Graduate School of Management, and Moses Shayo of the Hebrew University of Jerusalem.

In order to determine the extent to which price influences consumers' attitudes toward a product, the researchers conducted experiments with differently priced foods. A few of the findings:
  • Contrary to conventional wisdom, participants did not clearly favor the higher-priced items.
  • A higher price tag can create a favorable first impression of an unfamiliar item, but this may not be enough for a consumer to buy it.
  • The researchers believe that price still has some effect on demand, but that the effects are too small to be significant.
"When you make something more expensive, the psychological effect may make it more attractive, but that's forgetting good old economics -- when something is more expensive, you can afford less of it," says Heffetz.

This study seems fairly indicative of current trends. After all, well-known designers collaborate with budget-conscious stores like Target and H&M, and people seeking gourmet snacks are just as likely to head to Trader Joe's than to a high-end wine and cheese shop. It seems that consumers no longer automatically think quality needs to come with a high price tag; either that or in these recession-minded times, quality simply isn't the highest priority.

Wine bottles image courtesy of Flickr user Ed Yourdon, CC 2.0
  • Stacy Blackman

    Stacy Sukov Blackman is president of Stacy Blackman Consulting, where she consults on MBA admissions. She earned her MBA from the Kellogg Graduate School of Management at Northwestern University and her Bachelor of Science from the Wharton School at the University of Pennsylvania. Stacy serves on the Board of Directors of AIGAC, the Association of International Graduate Admissions Consultants, and has published a guide to MBA Admissions, The MBA Application Roadmap.

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