There is something special about a fine bottle of wine—for many, a fine wine is worth the hefty price premium. Yet, that price premium is how many wine lovers actually determine a fine wine’s merit— the higher the price the better the wine.
Scientists at California Institute of Technology studied premium pricing and its impact on drinkers of Cabernet Sauvignon. They asked 20 ordinary people to sample wine while undergoing functional MRIs of their brain activity. The subjects were told they were tasting five different Cabernet Sauvignons sold at different prices.
However, there were actually only three wines sampled, two being offered twice, marked with different prices. A $90 wine was provided marked with its real price and again marked $10, while another was presented at its real price of $5 and also marked $45.
The results were astonishing. The brains of the test group showed more pleasure at the higher price than the lower one, even for the same wine. In other words, changes in the price of the wine changed the actual pleasure experienced by the drinkers. On the other hand, when tasters didn’t know any price comparisons, they rated the $5 wine as better than any of the others sampled.
What this means to you and me is that premium products “need” premium pricing. If you are marketing a high-end or luxury product, discounting or lowering the price is not consistent with the potential buyer’s perception of value. The Cal Tech study tells us that part of the thrill of buying and enjoying a luxury item is its exclusivity, as determined by the price.
If quality is your competitive advantage, a higher price is the best match. A cheap Rolex is merely an insult to luxury watch buyers since they want only the best.
As for me, I think I will stick with Bud Light.
John Bradley Jackson
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