Tuesday, August 14, 2007

The Psychology of High Prices

There's a phenomenon at my school that's familiar to anyone who's attended an all-female college. After spending days (or weeks) in the company of women and the occasional male professor, one has put on "Smith Goggles" (or Wellesley Goggles, etc) and can no longer rationally judge men. The average guy is suddenly incredibly attractive, while the loser who you'd normally never give a second glance is dateable, or at least in the darkness of a party, good enough to dance with. You find yourself telling your friends that he has a "scruffy, Colin Firth-thing" going, when really he just hasn't shaved or showered in weeks. You begin to believe your own justifications.

The Wall Street Journal
identified a similar trend among shoppers, where being surrounded by extremely expensive items leads one to view expensive items as affordable. Retailers like Coach set the bar very high by promoting a $10,000 bag, with the hope that when you browse through the racks and come across a lovely $400 bag, it'll seem like a bargain. Ideally, you'll even be congratulating yourself for having the willpower and reason to not succumb to the priciest bag. If that's not brainwashing, I don't know what is.


An article in last week's New York Times came to a different conclusion about shoppers and sticker shock. Just as we often assume that a $4 ice cream cone is better than a $.90 one, shoppers often believe that a $1000 dress is superior to a $300 one. According to a retail consultant interviewed in the article, "For certain people, the higher the price, the more attractive the item becomes." The article continues by arguing that when you expect an item to be a certain price and it's less than that number, it invariably seems like a bargain, even if both prices are out of your budget.

Both articles are referring to clothes and accessories that are so far out of my price range as to be laughable, but I tried to think about whether I experienced the same phenomenon on a (much) smaller scale. I find that I rarely compare an item's price to other things in the store, but I do compare the sale price to the original price and feel like I'm getting a bargain even if I'm spending more than I normally would. I may view it as overpriced, but I still give the original number some legitimacy and am able to justify the sale price.

I also tend to assume that if something's cheap (I'm talking H&M, Forever 21, DSW-level prices) it's not high quality and it won't last very long, even though I've had been burned when many of my expensive clothes have ripped or lost their shape or lustre after washing. I do buy clothes from discount stores assuming they'll fall apart within a year, while I justify pricier items as "investment pieces," hoping I can wear and enjoy them for years (this is rarely the case).

But I'm curious what you guys think. How swayed are you by high prices, and do you find yourself shopping with "price goggles," caving on items outside your budget because they're cheap for that store?

14 comments:

jpott022 said...

I definitely agree. I am finding that shopping my myself is helping with that though.
I am not as pressured into buying out of my price range as much, because I don't have the pressure of friends cooing at sales along with me.
My boyfriend is the opposite though. He needs someone else there to convince him that it is really isn't that great of a deal.
To each their own.

Fabulously Broke in the City said...

It's like people starting to view SUVs as luxury vehicles because of the amount of gas it takes to fill up one of those suckers.

If I shop by myself (now), I tend to be very critical and ask: Do I REALLY want it? Really really really? And after I pass that criteria, and I'd ask "Is it worth that much $ to me?" and "How much use am I really going to get out of it?"

I usually set a 'budget' or amount constraint in my mind and I rarely exceed it, unless it's for something spectacular...

Fabulously Broke in the City said...

...last comment: keeping up with the Joneses is expensive, and trying to set yourself apart from the "plebs" is financially draining and exhausting.

Cristina said...

Considering I buy almost everything from resale stores, I don't really have this problem. If I need something in particular, I go to a brand store I trust and buy it, no matter what the price.

dakiwiboid said...

I buy almost all of my clothes from upscale resale shops. Admittedly, I do tend to find that my name brand clothes from these shops (Laurens, Ann Taylors, various Italian and Spanish brands I don't usually see in department stores) last longer than inexpensive clothes I've bought from Target, et al. Some of that's because of the materials. I tend to buy good wools, linens, and finer cottons when I can actually afford them.

kelly said...

i was just thinking about this topic earlier. two years ago, i wouldn't fathom spending gobs of money on shoes or bags, but since i've been reading up on and exposing myself to more high end goods, i find myself far more likely to justify it. it somehow doesn't seem as expensive as it used to.

also, i can definitely relate to justifying sale purchases by calculating the markdown from original prices. i mean, i HAD to buy that stuff. It would be foolish not to! :P

Meg said...

I shop around a lot so I often see the same item for sale at more than one store. It does make a difference. Even on sale, I've seen items in stores like Macy's and JCPenney that cost more than what I got them for at TJMaxxx, Kmart, or Ross. But I'm sure that there are plenty of mall shoppers who snub their noses at the discount stores.

And the odd thing is, I usually see the items FIRST at the discount store (which id definitely good for me). One time, I bought a dress at Ross, kept it a few weeks, decided to return it because it didn't quite fit, and then saw it a couple months later at Macy's at nearly four times the price (not the same exact dress I assume, but definitely the make).

A lot of items are branded differently, which I think is even more hilarious. One pair of shoes I bought at Kmart was "on sale" for about twice as much at Steinmart - which is itself supposed to be a discount store. They were the same shoes, but with a different name on the label. Why am I so sure? I happened to have on my Kmart shoes and took them off to compare.

judyo423 said...

OH...the idea of luxury goods and designer wear is getting soooooo boring. Maybe I sound grumpy but consumerism seems to be the only thing that is holding this country together. After 9/11 all we were told to do was go shopping...and we have certainly done a good job of that!

I find shopping very difficult these days because there is soooo much overchoice that it is dizzying.

Back to the topic of the psychology of high prices...oh yeah...I am always asking myself if the newabsurdly expensive wrinkle cream could be better than my Olay stuff! Ridiculous but true.

Tellicherry said...

Hi, retail buyer here, and I can tell you the strategy does work.

Generally, I look at creating a collection or story for my store that is often centered around a showpiece item. I find that the very expensive showpiece helps sell the lower priced items where I actually make money. The high price point creates "perceived value", though it's also easy to go too far and encounter "price resistance".

Elizabeth said...

I like to think that because I've got some sewing experience under my belt that I'm clever about what's well-made and what's not. And really, anybody can tell that there's a whole spectrum of quality even just at one store.

The thing that gets me crazy is make-up pricing, because it makes a lot of sense to me that $20 eye shadow should be better than my $2 wet 'n wild. But how do you quantify that advantage/disadvantage?
Of course, the craziest of the crazy make-up stuff is so out of my price range (Ruby oil? Seriously?) that I don't really have to be worried by it.

FemmeNoire said...

Great article! I've gotten better about resisting the allure of overpriced designer items but every now and again the skin care counter will get me.

Anonymous said...

i spent my early life growing up in a lower middle-class household. my father taught at a state university without tenure. moreover, my mother comes from an impoverished background and at that time had severe money and food insecurity that pressured us into a lifestyle far below our means; I had friends who lived far better on foodstamps than I did. so for the first decade of my life, i bought everything (even underwear) on my annual trip to salvation army, got socks for christmas, only wore skirts because then i could wear them for three years instead of one without it being obvious that they were too short...

then my father got tenure, a job at ivy, several chairs. my mother got over her insecurity and started to relax a little. we splurged on a few vacations, a car, and eventually a very expensive boarding school education for me.

i noticed my shopping goggles immediately after returning from my freshman year at boarding school, where i was surrounded daily by displays of excess wealth. my mother was shocked - despite being over her insecurities, she was still used to considering 20 bucks a splurge for a pair of shoes, much less a pair of pants (i had three pairs of pants all of middle school, and every one of them cost less than ten bucks), while i was starting to think 100 dollars a bargain for anything short of tshirts. now, i'm back to some sort of a balance between both worlds - i can't see myself throwing down $180 bucks for a pair of tory burch flats (i don't even LIKE tory burch flats!), but unlike my mother, if i spend $70 on a dress I love, i'm not going to get a heart attack or anything...

Teek said...

To some extent the perceived value of clothing is kind of implanted in the shopper's head. I have an escada suit that is not really any nicer or more durable than my Ann Taylor seperates. But I've bought a few pairs of pants at Target's clearance rack and they are literally wearing through in the thighs within a few wears. They look like pilly sweaters, even though they're cotton. It's ridiculous; a waste of $10 that could have gone toward clearance price pants from Ralph Lauren or even Gap that would last for years.

Anonymous said...

Ha! As a fellow all-female college attendee (Mt Holyoke!), I can definitely relate to the boy-goggles.

As for the price-goggles, I really can't afford anything too pricey, but even I, after online window-shopping at bluefly or somewhere ridiculous like that, think oh, wow, a t-shirt for only 60 bucks?! What a bargain! Luckily I don't have the funds to succumb, though. :)