One of the most common misconceptions people have about themselves and others is the thought that humans act rationally. We like to believe that we are the pinnacle of evolution and our superior logic is what separates us from the rest of nature. Well, we are wrong and marketers, behavioral economists, and social psychologists know this. If you haven’t looked at Dan Ariely’s book “Predictably Irrational” I highly recommend you do. It’s an intriguing look into the way humans behave irrationally and the driving forces behind it. One of the most powerful forces Ariely talks about are expectations.
Do you prefer Coke or Pepsi? This has been a long-running debate that’s torn families apart for decades (just kidding...or at least I hope that’s not true). While Pepsi has been pretty successful, it’s never been able to usurp the juggernaut that is Coca-Cola. But is it really the taste that we love, or is it the brand?
Studies have shown that when people taste these colas without knowing which brand is which they prefer Pepsi over Coke, but once you assign the signature Coke logo people prefer that over Pepsi. This is because people have already built up an affinity for Coke through their experiences and the company’s advertisements. That means once they see that red can their expectations decide that they’re going to like it before they even get a chance to taste it. That’s how powerful Coke’s branding has been.
Exactly how powerful is this brand they’ve created? Well let’s take a look at Christmas. Santa used to be depicted in many different forms and many different colored robes until Coke hired an artist in the 1930s to popularize the current plump, jolly Santa in the signature Coca-Cola red. That version of Santa has been widely accepted as the traditional Santa. That means whenever you see Santa, you’re seeing an advertisement for Coke.
This example has no real effect on your wallet, since Pepsi and Coke are pretty much the same price wherever you go. So what does this have to do with saving you money? Consider this: in a similar study done with wine, people prefered the wine they were told came from California that cost more over the wine from North Dakota that was much cheaper. The truth is they were the same exact wine (Charles Shaw, aka 2 Buck Chuck), just in different bottles.
You could argue that the difference between Coke and Pepsi or two different brands of wine is negligible, so to drive the point home let’s take a look at one last study. In this study psychologists asked participants to judge the taste of strawberry yogurt. To make sure they only judged on taste they said they had to blindfold them. In reality they were giving the participants chocolate yogurt instead of strawberry. Despite the switcheroo over half of the participants said the yogurt had a great strawberry taste.
Do you really need the pricier version of most products you buy? Studies seem to say no. So when you encounter the conundrum of choosing quality or frugality it’s typically safer to be frugal. As long as you temper your expectations you’ll be saving money in no time.