Does Price Mean Quality To You?

Let's say you're in a really nice restaurant with a group of business colleagues and you're looking over the wine menu, trying to choose a bottle of red wine. Let's pretend--importantly--that you're spending your own money and not putting it on your company's expense account.

One bottle costs $199. (Ridiculous! I'd never pay that.)
Another is $99. (Still ridiculous.)
The next one is $69. (Hmmm, still kind of pricey.)
There are a few other bottles priced in the $50 range. (Ehhhhh.)
There's a bottle priced at $48. (Mmmmph.)
The least expensive bottle is $39. (Hmm. Can't really buy that one, can I?)

Which would you pick?

Interestingly, many diners select the second-least expensive bottle. Why? Because choosing the cheapest bottle on the menu is, well, cheap. Hey, you've got people to impress.

Then again, if you're the type of person who really values impressing people, you'll order the most expensive bottle. And make absolutely sure nobody forgets it.

But let's pretend you're on a bit of a budget, you're spending your own money, and you want to choose the best value without looking like a cheapskate.

Voila, you choose the $48 bottle.

But what if the restaurant already knows what you're likely to do? What if the restaurant actually does intelligent market research on its customers, and it already knows their two biggest selling wines will be the most expensive and second-least expensive items on their wine list?

What would you do if you were armed with that knowledge? Well, duh. You'd adjust your pricing accordingly, and make sure your profit margins were highest on those two wines. You would chose those wines--and set all your prices--with that in mind.

If you don't care about wine, don't worry, I just used it as an example. Be assured, this phenomenon happens across nearly every segment of the consumer products industry: food, cars, hotels, vacations, clothing, and so on.

Hardly anyone can make fine distinctions among products, despite the fact that we love to convince ourselves otherwise.* The truth is, we usually end up using price as a default guideline to help us make our decisions, no matter how judicious, savvy or discerning we think we are.

But those prices have been chosen for us. And they've been chosen for us by someone who already knows our selection tendencies. Which means we are playing right into their hands and letting them decide the terms and conditions of our consumption decisions.

Readers, what do you think? Do high prices signal quality to you?

* A side note: Here's something that will save you boatloads of money at very little loss of personal happiness: Simply accept the fundamental truth that, for many types of products you simply cannot tell much of a difference across wildly different price points. You can easily prove/disprove this to yourself by performing honest blind tastings of products across a wide range of prices.

How can I support Casual Kitchen?
If you enjoy reading Casual Kitchen, tell a friend and spread the word! You can also support me by purchasing items from via links on this site, or by linking to me or subscribing to my RSS feed. Finally, you can consider submitting this article, or any other article you particularly enjoyed here, to bookmarking sites like, digg or stumbleupon. Thank you for your support!


Anonymous said...

With the caveat that if you were talking about something other than wine that my answer would be different... Since oyu were talking about wine, I'm only going to shell out my money on a Reisling or Gwertzaminer. With most wine lists missing the Gwerz completely & only sporting a single Reisling, my choice is made for me.

Interesting theory though & I'll pay closer attention next time I am choosing from a more thorough list...

chacha1 said...

We don't eat out all that often anymore (since I learned to cook!), so when we do, it tends to be a special occasion.

We generally choose menu items that we can't/don't make at home. So cost isn't really an issue. (I am not a frugal cook, anyway.) To go along with those, we usually order wine that we've never tried before.

My favorite Italian restaurant has a rich and varied wine list, going from the $34 Merlot (which we never order because we know perfectly well we can get the same bottle at Bevmo for $9.99) to the $870 Brunello (which we also never order). We had our first Dolcetto there, and at $42-$46 a bottle, thought it was a great recommendation ... and as we found later, priced "only" at 2x retail. We've found generally that the best values are in the lesser-known varietals from Italy and Spain.

The only downside to learning to cook has been a consequent disinclination to "indulge" in certain things. I'm still much more likely to get a salad at a restaurant than make it at home, but much *less* likely to order, say, a steak. It has to be a preparation that I'm not able/willing to do. Once that criterion is satisfied, though, price isn't really a consideration for us.

looloolooweez said...

It really does depend on the product. I'm going to pay more for organic/local produce or for a hand-knit sweater than I am for the conventionally mass produced stuff, but I know I can expect a higher level of quality.

But with the wine example -- there are plenty of decent wines for under $15, and usually the cheaper "house" wine is OK too (I always ask the server rather than sommelier if I'm not planning on buying a bottle, as I've found they're often more honest about what they like as a non-expert because they aren't as invested in selling that $50 bottle).

Daniel said...

These are good comments right out of the gate. Thank you.

I guess what I'm trying to say here (and it's entirely possible that this post missed the mark!) is that pricing decisions are often recursive, for both consumers and companies. The people selling to us want to know what assumptions we make based on the prices we see... and they then can use that intelligence to optimize their prices further.

We consumers, if we learn that we're being gamed, can then decide differently too. And the game goes on. The wine list example is just a painfully obvious version of this.

I want to help readers realize that this goes on all the time, in a wide range of the products and brands we buy.

Once you know this, you start "looking through the price." You stop using price as your only cue and only signal of value. That's a major step to being an empowered consumer, and it will help prevent you from needlessly being separated from your money.


Joanne said...

For me it really depends on the product. I tend to look at ingredient labels before anything else and choose based on which are the cleanest, regardless of price. The only time I look at price is in terms of olive oil. Just to get an idea of what the cheap stuff is and what is actually worth spending the money on!