Purchasing decisions used to come down to three things: quality, price, and service. These factors made up what we used to call value. So if you needed a new washing machine, you’d consider the quality, price, and service of multiple offerings and then choose a winner. This system worked great. Granted, not all products have a service component. For example, when buying a new car, you think heavily about how you’ll get it fixed but something like toothpaste doesn’t require repair (unless you consider the store’s return policy).
Right after WWI, our criterion changed. We split quality into two when business discovered that people not only look at what a product does, they consider how it makes them feel. This new factor was dubbed emotional quality. So now we have four:
- Tangible quality
- Emotional quality
- Price
- Service
Bernays
Emotions are powerful drivers linked to our subconscious. And it’s because of our subconscious mind that we don’t always act rationally, especially when buying. Freud was the first to suggest such a thing and his nephew, Edmund Bernays, took it to market.
Bernays worked with the US government during WWI developing propaganda to support the war effort. Afterwards, he created the idea of using psychoanalysis in advertising. Previously, products were advertised based solely on what they did. Bernays taught business to talk about how they make you feel.
Costing emotional quality
Our spin today is to mix tangible quality with emotional quality in order to justify a higher price. For example, if you need a new t-shirt, you can buy one from Walmart for $5 or go into Hugo Boss and pay 82. In either case, you’ll be getting something to cover your body but with Boss, it’ll be a higher quality garment since it’s constructed of better material and takes more time to make.
So how much are you paying for tangible quality vs. emotional? To figure this out we need to consider cost. In the Walmart example, the cost must be below $5 so let’s pick 4. And the cost of the Hugo Boss must be higher, so let’s triple it to $12. Then we’ll add a hefty markup of 300% to arrive at a more than reasonable price of $36 for the higher “tangible” quality product. The rest of Hugo’s price is just emotional ($46).
Walmart
- Mfg cost = $4, retail price = $5, markup = 25%
Hugo Boss
- Mfg cost = $12, tangible price = $36, markup = 300%, emotional premium = $46 ($82 – $36).
In the end, you can buy something cheap or get a high-quality item that comes with an emotional premium. (In actuality, Walmart’s product probably costs around $2 and Hugo’s less than 5. We exaggerated the numbers to prove a point. And yes, Hugo pays a fortune to create their fancy image but image isn’t tangible, it’s emotional.)
Summary
I once met a guy at a car wash. He was the worker who gave out change and kept the place running. He was also an immigrant. We got to talking about prices and he said he got his rubber boots from a second hand store for 50 cents. He then added that he liked Second Hand Store A better than Second Hand Store B because of selection. I said, “that’s a pretty good price for boots.”
A common question is whether life is fair? And in some cases, it is. If you can live without labels, you don’t have to pay a fortune for most goods. Especially with fashion but the same applies to the Honda Civic, regular shampoo, phones without call waiting, and groceries items like eggs, rice, and beans. Business always provides an inexpensive way out, if you’ll choose to be practical. Think about this the next time you shop.
Note: For more information on Edmund Bernays and the beginning of marketing based on subconscious emotions, check out the BBC documentary, The Century of the Self, available on YouTube.