Does a higher price mean better quality?

This week’s kerfuffle over the J.Crew’s inflated Canadian prices — which, let’s face it, are pretty steep on both sides of the border — has got me thinking. The U.S. apparel chain has a cult-like following, despite the fact that many social networkers have said they found the merchandise merely “meh”. Could it be that the high prices are precisely what attracts the chain’s key clientele?

The same theory makes sense when applied to other high-priced, yet hugely popular consumer goods. Coach handbags. Tiffany & Co. silver jewellery. Apple’s iPad. I’m not saying these are bad products — not at all. But the breathtaking universality of their appeal is a bit puzzling to me. Indeed, a clerk in a store recently commented that his girlfriend has tons of Coach bags, but no one ever notices them; when she receives a compliment, it’s always for her cheap, no-one-knows-that-brand bags.

This week, The Globe and Mail’s economy blog described a study on the very topic of what marketing pros call the “labelling effect.” Researchers bought a bunch of cheap wine — the kind that comes in a box — and told some of the people who’d agreed to participate in a wine-tasting that they were drinking wine that costs three euros a bottle; others were told the wine cost 20 euros a bottle. Everyone was asked to rate the wine from 1 to 100, with 100 being best.

People defined as ” not materialistic” rated the wine at 60, whether they thought they were drinking a cheap or expensive bottle. People who were materialistic rated the wine way lower when they thought it cost only three euros, but higher when they thought the wine cost 20 euros.

In other words, when they thought the wine was more expensive, they perceived it as “better” — even though it was plonk.

What’s your take? Do you think higher prices equal better quality? Or do you shop around and judge for yourself?

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