TEXT OF INTERVIEW
Tess Vigeland: I'm a firm believer in small luxuries -- good olive oil, pedicures, indulgences that look ridiculous on the bottom line. But there is a lot to be said for the occasional splurge. Still, all of us draw that line somewhere. And when we heard that colleagues here at Marketplace were spending $20, even $30 on shampoo, we just had to ask... What were you thinking?: Our look at why we do what we do with our money.
Our index case for this phenomenon is 29-year-old web producer Dalasie Michaelis.
Dalasie Michaelis: All right, the water's in my hair.
Who proudly spends 28 bucks a pop for 16 ounces of a shampoo called Wen. How do I know this? I visited him at home in the shower this week.
Michaelis: I think they wanted to shill more product. They tell you to put, like, six pumps per section of your head, so your product runs out faster and you have to buy more sooner.
Vigeland: So how much money do you think is on your head right now?
Michaelis: Probably $1.50, maybe $2. Oh God, why'd you put it that way?
Um, cause you volunteered. He claims he used cheap stuff until his girlfriend introduced him to this brand.
Michaelis: And once I tried it, I was like, God, where has this been all my life? I don't know how long I can keep afford buying this stuff, but we'll see.
And why did girlfriend, 40-year-old Mika Larson buy this shampoo in the first place?
Mika Larson: Ooh, that's really embarrassing.
Not any more than holding a microphone up to a shower curtain.
Larson: Late-night advertisement that was just so compelling I just had to try it.
Vigeland: Was there any element of if it's that expensive, it must be good?
Larson: Well, there's a little part of you that thinks that.
Vigeland: Probably more than a little. And so we bid farewell to the shower and hello to Erica Okada, marketing professor at the University of Hawaii. Welcome.
Erica Okada: Thank you very much.
Vigeland: So how crazy is it to buy a $50 bottle of shampoo versus a $5 shampoo. I mean, is there any logic going on here whatsoever?
Okada: There are probably two explanations for why people would go for the $50 shampoo when there is a $5 shampoo right next to it. One is it's probably for the same reason that suppose you got sick while you were traveling. And you see an advertisement in the Yellow Pages and it says, "I'm the cheapest doctor." Would you go to that doctor?
Vigeland: Uh, nope.
Okada: People infer quality from price when they don't know anything else. I'm not saying that shampoo is the equivalent of medical services. But there are many things about shampoo that have that same kind of quality. Is your hair frizzy in spite of the shampoo that you're using or is your hair nice and silky because of the shampoo that you're using?
Vigeland: Why do we associate a higher price with a higher quality?
Okada: It's because consumers assume that the marketplace is, over a long enough period of time, fair. Prices are high for a reason, and so a high price, they infer to be a signal for high quality. Another reason, I think, is also based on trying to prevent regret later on.
Vigeland: Let me guess now, this is the, "OK. I'm having a bad hair day, because I bought that cheap shampoo."
Okada: Yes. And so knowing that you bought the $50 shampoo and your hair is frizzy anyway, at least you'll know that you've done everything that you could to prevent the frizziness. So many purchases are made based on the motivation to minimize any future regret.
Vigeland: Are these choices that we're making informed? Do we generally go ahead and buy the expensive shampoo because we have tried a less expensive one and it didn't work, or are we simply doing that on faith?
Okada: That people make a purchased decision based on experience, I don't think is that interesting from a researcher's perspective because that's just common sense.
Vigeland: But surely there must be times when we are informed and we know that there's really no difference, and yet we're still buying the more expensive one for some reason.
Okada: Yes, and studies have shown that even when consumers know that a particular product attribute -- and one of the specific examples that they used in the study was silkiness as a product attribute for a shampoo. Consumers know that just because there's silk extract in the shampoo doesn't necessarily make your hair more silky. But in spite of that, they're willing to pay a premium for it. So the previous study has actually only documented that phenomenon and I'm actually doing some follow-up study on that to see why they do that. And my hypothesis is that they want to minimize regrets.
Vigeland: May I ask how much you spend on shampoo?
Okada: I go to Costco and I buy the Pantene shampoo there. So I guess it's like a medium-price product. Certainly not $50.
Vigeland: Erica Okada teaches marketing at the University of Hawaii. Thanks so much for joining us, it's been fun.
Okada: Thank you.