Persuasive Advertising - J. Scott Armstrong [39]
Price advertising leads customers to become more sensitive to price. This might have unfortunate consequences if firms begin to compete on price. If prices do become an issue, the advertiser of a high-quality product should explain why the price is low. For example, “Thanks to a new manufacturing process, we have been able to improve quality, and at the same time to reduce costs, so we are passing savings along to you.” Or, “Because of a temporary price reduction in our primary ingredient, sugar, we are able to pass along savings to our customers.”
Evidence on the effects of advertising prices
A meta-analysis of 25 experimental studies found that price advertising leads customers as well as competitors to focus on prices. In contrast, non-price advertising leads customers to show less concern about prices—and presumably more about quality (Kaul and Wittink 1995).
1.4.11. Use high prices to connote high quality
The Foote, Cone & Belding advertising agency developed a campaign for Johnson’s car polish. The polish was inexpensive, and the agency’s staff thought that customers would not believe that such an inexpensive product could produce the claimed benefits. Test runs at various prices showed that customers were more likely to purchase the polish at a higher price. As a result, the company decided to double the price that had initially been proposed.3
People tend to believe that “you get what you pay for.” This principle is relevant when quality is important yet hard to judge even after product use. It is less relevant if the customers are knowledgeable about the costs of producing the product.
Universities meet the conditions for this principle, and they use high prices to connote high quality. They compete for applicants by charging high tuition fees, then use large discounts (packaged as “need-based scholarships”) to many students.
Robert Cialdini related a personal account of a jewelry store owner at a shop called The Beaderie in Tempe, Arizona. A particular item had not been selling well, so the owner, before leaving for a vacation, left a note to her assistant to cut the price in half. Because of her poor handwriting, the assistant interpreted it as to double the price. The item sold out rapidly.
Neil French had an advertising problem with his client Chivas Regal Scotch. At the time, Johnny Walker was the leading brand of Scotch whisky, and Chivas was priced lower. French’s solution? “Put the price of Chivas up, and tell everyone they can’t afford it.” He hammered away at this theme with full-page ads which included such copy as, “This is an ad for Chivas Regal. If you need to see the bottle, you obviously don’t move in the right social circle,” “If you need to know what it costs, turn the page, young man,” and, “It has been said of Chivas Regal advertising that it smacks of elitism … how true.” The campaign was judged to have been successful. It seems to work also for beer: Stella Artois advertises, “Reassuringly expensive.”
High prices serve as an indicator of quality when purchasing an item for someone else, such as a gift for a friend. It implies that the purchaser made an effort to get the best quality. Buying agents for organizations face this issue. For example, they may prefer to pay a high price when hiring a consultant. The message is, “We got the best consultant: Look how much he charges.”
Evidence on the effects of using high prices to connote quality
Does a high price affect people’s experience with a product? Subjects were given SoBe Adrenaline Rush, an energy drink that claims to increase mental acuity. Over 90 percent of the subjects had heard of this drink and about half had drunk it previously. A randomly assigned group of subjects were told that they would be charged $1.89, the regular retail price, while others were told that they would be charged $0.89 because the drink was purchased at an institutional rate. After ten minutes had been allowed for the drink to kick in, the subjects were asked to solve 15 word puzzles within a 30-minute limit. The effects were astonishing. In