Jericko Malaya Prof Gamboa Prcis # 6 Placebo Effects of Marketing Actions: Consumers May Get What They Pay

y For Being avid fan of reading success and failure stories, I encounter a story which is a strong example for this article, Chivas Regal Effect. Chivas Regal was once an obscure brand of Scotch whiskey. By raising its prices, it not only increased sales but also taught marketers that people associate price with quality. The Chivas Regal effect is based on the commonly accepted perception that you get what you pay for. In the 1950s, Coca Cola was twice as expensive as Pepsi. Yet, Pepsi sales increased after they raised the price of the soda. In 2010, consumers pay more for brand-name bottled water, believing it is of better quality even though water is colorless, tasteless and odorless. The Chivas Regal Effect usually refers to the cost of tuition at private colleges and universities. Many parents assume that a higher-priced education is a better education. "The theory of it was, basically, we will raise the tuition as much as the market will bear," said William Massy, a former Stanford University finance officer. Scientists actually tested this: At the California Institute of Technology, they did an experiment where they stuck people inside an MRI and gave them a couple glasses of wine. Although the glasses were both from the same bottle, the people were told that one glass contained regular table wine, and the other contained an incredibly expensive vintage. As the subjects drank from each glass, the part of the brain that controls taste behaved the same, but the brain's pleasure center went off like crazy on the "more expensive" glass. Another example is McDonalds. Back in 1960s there was a social stigma in being seen ordering extra portions of anything. People who loved fries didn't just ask for a double order, because they thought other people would judge them for their gluttony. Wallensteins solution was simplicity itself: Normalize the idea of ordering bigger food. Put it right on the menu, promote it and just charge more up front. Tell the cashiers to offer the larger sizes to customers, sending the subconscious messages. As Marketing Managers, we should always be on our toes to look for solutions when the sales is starting to plateau or worst, go down. Brilliant marketers will not stick by the book and cut prices when there are low sales. They will think out of the box, they will use psychological patterns of their target market and they will maximize it to the fullest extent.