It's Proven: The Science Behind Why People Value Authentic Products
He was talking about ketchup. Specifically, Dhar was describing how consumers associate the thickness of Heinz (and the slowness with which it leaves the bottle) with quality, even though Heinz does not reliably win in blind taste tests against thinner ketchups.
In other words, the ketchup's thickness doesn't necessarily make it any better (or worse). In terms of quality, it's a meaningless attribute. But it's an attribute that nonetheless creates a meaningful differentation for the product, because consumers have (speciously) connected it with quality.
As it happens, so-called "meaningless" attributes are not the only way to provide meaningful differentation for your product. You can also differentiate your product by persuading consumers about its perceived attributes. Consider, for a minute, how differently a consumer perceives a $100 bottle of wine versus a $10 bottle of wine. Even if the same wine is inside--even if the labels and brands are exactly the same--there is an immediate perception difference that a consumer feels, based on the tone you set through your pricing.
Through pricing, you can create a perception that your product has more of a vintage--more of an artisan's authenticity--than it actually does. Wine sellers have known this for years.
But why do consumers react so strongly, when they believe that one product has more vintage or artisan aspects than another? Below is a primer on what somemarketing professors have discovered about the topic.
The Concept of Contagion
In a recent Journal of Marketing Research paper coauthored by Dhar and his Yale SOM colleague George Newman, the professors demonstrate that consumers prefer products made in a company's original manufacturing location:
It is well established that differences in manufacturing location can impact consumer preferences through lay inferences about production quality. In this paper we take a different approach to this topic by demonstrating how beliefs in contagion (the notion that objects may acquire a special aura or 'essence' from their past) influence perceptions of authenticity for everyday consumer products and brands. Specifically, we find that due to a belief in contagion, products from a company's original manufacturing location are seen as containing the essence of the brand. In turn, this belief in transferred essence leads consumers to view products from the original factory as more authentic and valuable than identical products made elsewhere.
The main takeaway here is that consumers place a higher value on products they believe contain the aura of authenticity. This idea corresponds with another of Newman's studies, which he presented a few weeks ago at Yale SOM's Art, Mind + Markets conference. In the study, Newman showed consumers a new chair with a stated value of $1000. He then asked: If this chair was destroyed, how much would you pay for a replacement?
One group of consumers was told that the $1000 chair was a piece of furniture. A separate group was told that the chair was a work of art.
How 2 Identical Chairs Have Different Values
Guess what? Of the consumers who believed that the chair was furniture, 44 percent said that they would still pay $1000 for a replacement chair. The average price they said they'd pay for a replacement was just under $400. Of the consumers who believed that the chair was a work of art, only 21 percent said they'd pay $1000 for a replacement. The average price they said they'd pay for a replacement was just over $200.
When asked why, the furniture consumers explained that the replacement chair was identical--made from the same materials, in the same manner. By contrast, the art consumers explained that only an original work would have the same worth. They also expressed concern that the replacement would not be made by the original artist.
And that's how two identical chairs can come to possess different values, in the eyes of consumers. By telling one set of consumers that one of the chairs is "art," you add value to the chair (as seen in how those consumers measurably devalue the art-chair's replacement).
Now think, again, of Dhar's observation about the "meaningless" attributes of ketchup. Though thickness was a meaningless attribute in terms of quality, it nonetheless led to a meaningful differentiation. Based on Newman's study with the chairs, you could change Dhar's quote from "meaningless attributes often lead to meaningful differentiation" to "perceived attributes often lead to meaningful differentiation." For there is no differentiation, in physical attributes, between the furniture chair and the art chair; the only differentiation is whether the consumer perceives the chair as a piece of art, or a piece of furniture.
The Key Takeaway, for Business Leaders
Actual artists have toyed with the ramifications of labeling something as "art" for centuries. Perhaps the most famous example is Marcel Duchamp's In Advance of a Broken Arm, a famous work of art that is, essentially, a snow shovel with a title. The point? Even a snow shovel can be viewed and valued as art, if the right artist (i.e. a legendary creator like Duchamp) spin-doctors it as such.
More recently, the rap group Wu-Tang Clan announced it was attempting a strategy like this with a forthcoming album. Most albums are sold and distributed in mass quantities, for sub-$20 prices. By contrast, Wu-Tang clan announed it would release only one copy of its upcoming opus, selling it for a multi-million dollar price to a high bidder--but only after a promotional museum-gallery tour.
Essentially, the Wu-Tang Clan is doing with an album what Newman's experiment did with the chair (and what Duchamp's experiment did with the snow shovel): Increasing its value, by communicating to people that it's "art," rather than the ordinary consumer product it seems to be.
The key takeaway, then, is to think about pricing as a form of differentiation.
In business settings, the master of this was Charles Revson, the marketing legend who built the Revlon cosmetics empire. (A shout-out here to pricing guru Ron Baker, for sharing this observation.) When other nail polish products sold for 10 cents during the Great Depression, Revson's products were 50 cents. His lipstick sold for one dollar, compared with the 49 cent price of competitors'.
The reason? Revson aimed to differentiate himself from his competitors, all of whom treated makeup like an ordinary consumer product. In Revson's hands, makeup was a vehicle for romantic hope. In positioning his product this way--as something that was more than a strictly functional (and therefore, highly fungible) consumer product--Revson was acting like an artist.
His lipstick was more than mere lipstick. In the same way an artist's chair isn't just a highly replaceable piece of furniture. And in the same way Duchamp's Broken Arm isn't just a shovel.