Retailers aren’t in sales; they’re “in the perception business”, says Jonah Lehrer while discussing how we perceive goods of varying prices, especially discounted goods.
Consumers typically suffer from a version of the placebo effect. Since we expect cheaper goods to be less effective, they generally are less effective, even if they are identical to more expensive products. This is why brand-name aspirin works better than generic aspirin, or why Coke tastes better than cheaper colas, even if most consumers can’t tell the difference in blind taste tests. “We have these general beliefs about the worldâŽ¯for example, that cheaper products are of lower qualityâŽ¯and they translate into specific expectations about specific products,” said [Baba Shiv, a neuroeconomist at Stanford]. “Then, once these expectations are activated, they start to really impact our behavior.”
I suppose this goes some way to explaining why some magazinesÂ are gaining readers despite increasing their subscription ratesÂ (The Economist, for example).
The latter via Kottke