The price reflects quality or quality has its price? Which expression from the two is really true? What do we think when we go shopping and search for a product we want to buy? We see it and its price – so how do we decide to buy a specific product and say “I take this one”?
We consumers estimate the subjective value of a product compared to other similar products. Those are products we either have bought in the past and so we had certain experiences with them or we simply compare the products which we see in front of us, when we are in the shop. This gives us a reference point, and we are confident that we have taken the right decision. Then we think ” I would spend something between 50-100 Dollars for this product, every product which is either under 50 Dollars or below 100 Dollars is seen as too cheap or too expensive. This is called the assimilation-contrast-effect.
But what do we think, when we see product prices, which do not lie in our price range? If the price is lower than we expect, we are usually suspicious that the product has a low quality and we become susceptible. If the price is higher we automatically expect a higher quality of the product. We say, “this is an excellent product”, so it has to cost more.
We see the price as an indicator of quality (especially, if we have no other decisional criteria like e.g. brand, founded information about the product, time pressure, motivation to inform). If we are a economizing person we do not take the price as an indicator of quality.
Furthermore it has been proved that also the socio-cultural background of the consumers play an important role for the quality perception. In a study by Sonderegger & Sauer (2013) participants form Eastern Germany and from Switzerland had to estimate the quality of a coffee machine depending on its price. The result was that: people from Eastern Germany said, that a low-cost coffee machine was more qualitative, whereas people from Switzerland perceived an expensive coffee-machine as more qualitative. Here we see that a low vs. high price is not always equal to low vs. high quality.
The fact is that price and quality have a low correlation, because price and quality depend on the consumers`perception and expectation. Everyone of us has made the experience and has learned that we have bought an expensive product, which was not at all what we have expected. This was disappointing and we have learned that quality does not have to cost much. To overcome such bad experiences it might be useful to inform yourself by searching for studies about price-quality-relations. Examples are: Consumer Reports, Monthly Consumer, Consumentengrids or Stiftung Warentest. Those will give you a more objective perspective over the product, because other consumers share their experiences with it.
If you are still not convinced about the connection between price and quality or if you want to read some more studies on this topic, I recommend you to have a look at “Wirtschaftspsychologie” by Erich Kirchler.