Marketing Affects Efficacy

Study finds marketing affects product performance

Thursday, January 26, 2006
last updated January 26, 2006 1:11 AM

The results of an experiment conducted by a Stanford professor and published in the Journal of Marketing Research could have a significant impact on current perceptions of how marketing and pricing affect the efficacy of products.

In a study entitled “Placebo Effects of Marketing Actions: Consumers May Get What They Pay For,” Graduate School of Business Marketing Prof. Baba Shiv concluded that that “consumers who pay a discounted price for a product... may derive less actual benefit from consuming this product...than consumers who pay its regular price.” Shiv conducted the study during 2004 and 2005 in cooperation with Ziv Carmon, associate professor of business at the European Institute of Business Administration (INSEAD), a prestigious business school with campuses in Singapore and Fontainebleau in France, and Dan Ariely, a professor of management science at Massachusetts Institute of Technology.

Previous experiments had already demonstrated that marketing and product presentation have a significant effect on consumer perceptions of such subjective qualities as taste. For example, previous studies found that meat packaged as “75 percent fat free” tasted better than the same meat labeled “25 percent fat,” and beer that had a favorite-brand label was found to taste better than the same beer in a generic bottle. The new study, published in November of last year, sought to provide an answer to the question of whether “the beliefs and expectations that marketing actions evoke... can also influence the actual efficacy of the marketed product?”

In three experiments, Shiv, Carmon and Ariely tested over 400 students and found that those who had paid full price for Sobe Adrenaline Rush were able to solve more word-jumble puzzles than students who paid a reduced price. The potential ramifications of these findings may be widespread, the researchers found.

For example, the study suggested that if the effectiveness of over-the-counter medicines could similarly be linked to price, both health policy and the marketing of these drugs could be affected. Shiv, Carmon and Ariely reported that a small-scale study of 29 students over the course of a semester found that those who purchased national-brand cold medicine at full price rated it more effective than those who purchased the same type of medicine at a discount.

Shiv had this potential link in mind as he planned the experiment. “[My pursuit of this experiment] began with my purchasing a medication on sale for my son, my son not feeling better, and my wife complaining that I should not have purchased the medication on sale,” he wrote in an e-mail to The Daily.

Some found the study’s findings — that unconscious beliefs about price could alter the efficacy of products — alarming. “That’s surprising,” said sophomore Eric Frenkiel, who expressed willingness to pay more for medicines if he knew they would perform better than a similar national brand on sale. “But then again, I’d probably go with the more expensive one... people are willing to spend a lot for the perceived effect.”

Other students said they were not so willing to abandon sale products. “I don’t intend to stop buying products on sale,” said freshman Danny Berring. “First, price is not always the best indicator of effectiveness. Second, because oftentimes I don’t need the best performer. Like a T-shirt. I don’t buy Gucci T-shirts, because my $8 cotton T-shirt will do just as good a job.”

According to Shiv, the effect of unconscious perceptions on pricing can be neutralized, “by drawing people’s attention to their broad price-quality beliefs to make them realize that these beliefs may not apply all the time.” However, the advertising blitz that defines American society can make this possible change a difficult one to make.