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Placebo effects of marketing actions. How prior experience modulates the effect of price on expectations about product efficacy

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Price changes perceived product value

If you buy a low-priced product, does the low price affect your perception of the quality of the product? And another interesting question, does it make a difference if you taste a product before buying it?

Industrial Technologies

The PLACEBO research project demonstrated that price reductions trigger immediate and post-experience negative effects on perception of product quality. Also, product sampling offers only cause post-experience negative effects with no immediate negative effects. Constituting important information for EU marketers, project results suggest that price promotions continue to have a negative effect on perception of product quality, even after direct product experience. PLACEBO's main conclusion is, using wine as an example, that the perceived quality of a bottle of wine changes when the price changes, even when a consumer has experienced the wine before. This research shows that price is a more important driver of perceived product quality than experienced quality. The implications of this research can be extended to the pharmaceutical sector. An investigation this sector ensued when the EU received complaints that non-branded, generic drugs were slow in coming to the market. Besides the fact that branded medicines were actively trying to delay the entry of generic medicines on to the market, there was another mechanism contributing to the lag in generic drug usage. Now we know why. This study finds evidence for people tending to assume that low price means low quality. Consumers may resist purchasing cheap generic drugs because they believe they are less effective than branded alternatives. This project's findings suggest that not only inexperienced consumers but also experts with extensive product experience and knowledge may fall victim to incorrect beliefs about products, services and technologies. PLACEBO answers why these beliefs are so hard to change. Consumers hold their beliefs based on product experience, the most seductive evidence, but fail to realise that their experiences are influenced by past and present marketing actions.

Keywords

Price change, product value, low-priced product, perception, price reduction, product quality, product sampling, price promotion, product experience, marketing

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