While it may not be obvious, the act of buying is often influenced by social psychology. We may think we tend to buy what we need, but research suggests we may buy more expensive items to elevate ourselves above others or access an experience we think is more incredible. For example, some people may scoff at the thought of paying $100 for a bottle of wine, yet happily fork over $10,000 for a significantly more expensive bottle. But is a $10,000 bottle of wine a hundred times as flavorful as wine that costs $100? Hardly.
Costly items and experiences are often marketed as high quality, exclusive, custom-made or offering greater amenities or services. But more expensive things are not always better. So what is it that makes people spend the money that they work so hard to earn? The answer may lie in our perception.
Studies of our perception of the value of goods show that we tend to associate the price and value of products. This means we usually evaluate expensive things as better or more effective, even if they are no different from cheaper alternatives.
A study conducted by scientists at the California Institute of Technology and Stanford University showed that people not only believe that the taste of a wine is better if they are told it is expensive, but an MRI of their brain revealed that they really do enjoy it more when they think the drink is more expensive. Similar results were seen in another study that investigated the use of a placebo as an analgesic. Participants who took a pill that was supposedly worth $ 2.50 said they felt more pain relief than when they took a pill worth 10 cents. Both pills were identical placebos.
But how do price and perception influence our decisions when buying outside the laboratory, say when we buy an Omega watch? If an item is twice as expensive, do buyers assume it is twice as good? Michael Norton, a psychologist and professor of business administration at the Harvard Business School, says yes. Norton’s research suggests we are motivated to splurge because our happiness can be boosted by having exciting new experiences. More people may choose a 1-star or a 5-star restaurant for a new experience, rather than the “safe and predictable” 3-star option.
Norton says the same logic can be used when analyzing why people buy products or very expensive experiences. “There is an extra boost when you increase the quality of the experiences, so it’s possible that a $ 10,000 whiskey bottle is more than twice as pleasant as a $ 5,000 whiskey bottle because it’s an exceptional experience.” Some of us look for unique leisure experiences, even when they may be less pleasurable than other options, in order to build our “experiences curriculum.” By collecting awesome memories, consumers experience a sense of achievement and progress, and improve their self-esteem. So the key is to make them feel as if they have achieved something remarkable.
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