The marketing Why and the pineapple effect

Many of you who read this blog know that I believe that marketing is a science and an art, but if I had to choose which one will be more important in the future, I would pick science every time. Here is why... 

Before I begin explaining my point I would just like to note that I understand that marketing will never be a science in a way chemistry and physics are. The biggest difference is that in marketing people are the essential part of the experiment and when it comes to people it is sometimes hard to know why people act the way they do.

Science is by its definition knowledge about or study of the natural world based on facts learned through experiments and observation. Experiments in economics are hard to do of course. Controlled experiments do not represent the natural human behavior as people often act differently when they know they are being monitored. It can be a hard task to find a perfect fit all model that can show an easily understandable cause and effect relationship. On the other hand, we can not underestimate the advantage of doing economic/marketing field experiments as shown in a great book by Uri Gneezy and John List called The Why axis. I will explain this on how price effects perception of the quality of wine.

DEFINING THE RIGHT PRICE FOR WINES

How do wineries come with a right price for their wines? It can be intuition, last year prices or cost + added margin to it and that is mostly it. For most wine drinkers it is hard to objectively measure the quality of wine as they are not professional connoisseurs and often the price tag is the factor that influences the perception of the quality the most.

Uri and John were asked to help one winery come to a perfect price for a 2005 cabernet sauvignon that was at that moment priced 10 dollars. The experiment was built so the price was varied from 10, 20 and 40 dollars for a single bottle during a couple of weeks of tasting. The tasting process was similar to every other winery. The person who organized the tasting gave the tasters one paper that contained the name and the prices of the vine. There were nine wines on the paper and six could be chosen. In every tasting everything was similar so for example cabernet sauvignon was always seventh on the list. The duration of the tasting was 15 to 30 minutes and after that, the tasters could choose one or more wine to buy. 

Results were somewhat interesting. People were 50% more likely to buy 2005 - cabernet sauvignon that was priced 20 dollars vs. 10 dollars one. The mechanics of this phenomena is experienced in the brains emotional part. As people drink the expensive wine this part of the brain will light more in the functional magnetic resonance imaging (fMRI) tests. We tend to love more things that are expensive and I like to call this the pineapple effect.

PINEAPPLE EFFECT AND CONNECTING PERCEIVED VALUE WITH PRICE

Some of the most exciting YouTube channels out there is The School Of Life. They can really find an interesting point of view for every topic possible.

In the bellow video, they explain why people hate cheap things. The main hero of this story is the pineapple. This tasty fruit was first introduced to the Europeans by Columbo after his American adventure. At that time pineapple was hard to cultivate and really expensive to transport so only the royalty could afford it. This divine fruit was served at fancy dinner parties and the price was equivalent of today's 6.000 dollars. With development of technology and easier ways of transportation, the pineapple become affordable to the general public and today you can buy this fruit for 2 dollars and it will never be served or even considered as a magical fruit as it once did.

Poor pineapple story is not the only one as most things share the same faith. In the whole preindustrial human existence we connected quality things with a high price. There was no way to get a quality product at a low price as everything was done by hand and the costs of transporting the materials were expensive. With the end of the 19th century industrial revolution and job specialization happened and people could finally produce quality things at a low price. Still the way of thinking stayed the same, people connected high price with quality things.

Lesson to be learned here that there is no perfect price. Every brand will have to experiment to find one or more that is best for them in regards to their current market position. When asking the why question you start seeing the true cause of why people do the things they do. Without this you are just left with mambo jambo, so experiment!