You get what you pay for, don’t you?

We’ve heard it enough times…but how often is it true? Wouldn’t every salesperson be saying it if it wasn’t true anyway?
Well, let’s look at some of the practices happening out there and the reasons for their existence.

Online retailers like Amazon have been openly pushing for the ability to display higher prices or a selection of more upmarket offerings if they somehow detect that you don’t mind paying for that sort of stuff (maybe using your purchase history, postal address, education levels/workplace, age, etc.)

Manufacturers and brick-and-mortar retailers (who can’t pull off the same trick easily) have a few tricks up their sleeves as well. They can give us a choice of products where one is made subjectively more desirable than the other. Say, the same flour in a no-brand packaging (with a purposely very ugly design) and in packaging with a design of an advertised brand on it for 50% extra. Milk with calcium added or fat removed costs twice the price of the “common” variety. A V6 Toyota Camry for $28,000 and Lexus equivalent (same platform, engine, different skin and furniture) for $50,000 – brighter (“Xenon”) lightbulbs are an extra $2000, thanks. $2000 is near enough to a cost of building a whole engine!

If differentiating products isn’t economical (usually more of a problem in manufacturing – say, a car maker isn’t big enough establish a “halo model” with it’s dedicated dealer network), then the provider will simply give you a list of overpriced extras to blow your money on if you have the desire to stand out (and will push you in that direction at every opportunity-for instance, you’ll find it is very hard to get a base spec BMW!).

Service providers have their tricks. Days when movies are shown in cinemas at half price will make sure some money is collected from those that wouldn’t spend money on visiting cinemas. Airlines tell us that traveling in a business class seat on the airplane is worth double. Some in the higher socio-economic strata don’t want to mix with riff-raff and do pay extra just for that. Others’ self worth is intricately tied with spending, the more wasteful, the better. Both groups are very thankful of these differing levels of service – so why wouldn’t providers oblige?

Sometimes motives get mixed together and it becomes really hard to untangle why a marketing campaign works. “Fair Trade” coffee is usually sold in rich countries where a lot of us feel guilty about the inequalities in the world. It is one made of coffee for which the coffee growers are paid more (an amount considered fair buy the buyer, although still no-one of us would lift a shovel for the amount they get paid for an hour’s work). This extra cost might work out say, 5 cents extra per cup at the coffee shop. However the “Fair Trade” coffee sells for 50 cents extra. We feel better about ourselves, we look better in front of others, we might hope for better quality…who knows why this trade is taking off?

Sure, customers tend to get (a bit) more when they spend (much) more. Like, they get a lot more hassles. Genuinely well off customers are often frustrated by problems that often plague cutting edge technologies and small runs of productions. The social climbers (people who make a stretch in order to belong to a higher class) get caught out with higher servicing costs (if one can afford a luxury good, one can pay later as well) and lower residual value.

There you go, it’s all been said, the “You get what you pay for” myth is officially declared dead! We are simply being charged as much as we are prepared to pay for things, which is a different amount for different people. The trick is how to dress this discrepancy up.
Sometimes you might get a bit more value for the higher priced product, but whether you do or not is very unpredictable. In any case it is safe to say the extra value bears no relationship to the extra cost. These tactics are necessary to the providers purely for the reason that they want to cater for as wide a range of clients as posible. But don’t try to explain this to the salesperson in the appliance store where you will hear it next. They have internalised this lie so deeply (or otherwise they couldn’t live with themselves) that you stand no chance convincing them.

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