Why a Ferrari May Make Imported Wine Seem Expensive

A professor of marketing says consumers equate "foreign" with "expensive."

July 01, 2011

| by Marguerite Rigoglioso

Imagine browsing Ferrari’s web page before going to dinner at a restaurant. Could viewing the expensive cars make you perceive prices at the restaurant as more costly than you otherwise would have? An extensive body of research says that it should.

A new study from Stanford Graduate School of Business, however, shows that this interaction is more complicated and multifaceted than past research suggests. For example, a Ferrari car may not just activate the concept of “expensive,” but also make the consumer think about “foreign.” This additional association determines whether the concept of “expensive” will have any effect on subsequent judgments about goods and services.

Across four experiments, the Stanford study, published in the Journal of Consumer Psychology, shows that activating one concept, such as “expensive,” will bias perceptions about other products only in some cases. Thinking about a Ferrari and its price tag will make a consumer see foreign food as more expensive but won’t change perceptions of an American deluxe hamburger. “In the real world, it’s generally not just one thing that causes such effects, but a combination of factors,” says Christian Wheeler, associate professor of marketing at the business school and one of the coauthors.

In the first experiment, participants who first estimated the price of expensive Ferraris subsequently estimated the price of beverages in a foreign restaurant to be expensive. Subjects asked to estimate prices of inexpensive Kia automobiles didn’t think the same beverages were as expensive. The estimated cost of drinks in a domestic restaurant was not affected, regardless of which cars the subjects priced.

“It’s not just that the mere concepts of ‘luxury’ versus ‘economy’ activated the concepts of ‘expensive’ versus ‘inexpensive’ in participants’ minds,” explains Wheeler. “If they had, participants’ subsequent estimates of both the foreign and domestic restaurant prices should have been affected equally. Rather, what you see is an interaction in which ‘foreign’ came to be equated with ‘expensive.’ So those who priced the Ferraris thought beverages would be more expensive, but only in a foreign restaurant.”

In a second experiment, participants first estimated the prices of identical objects that were said to be from either an (expensive) antique store or (inexpensive) thrift store. They then estimated the hourly wage of an elderly or young lawyer. Participants who had previously looked at furniture in the more expensive antique context subsequently estimated the hourly wage of the elderly lawyer to be higher than did those who had previously looked at furniture in the thrift store context. Estimates of the wage of the young lawyer, however, were unaffected. “This experiment activated the association between the concepts of ‘expensive’ and ‘old,’ and so only judgments of “old” targets were affected,” says Wheeler, who authored the study with David Sleeth-Keppler, a social psychologist.

Experiment three asked participants simply to memorize items for sale at an antique shop versus thrift store, not price them. They then were asked to estimate the cost of a house. Once again, participants had higher estimates of the value of the house when it was said to be “old” if they had first looked at items in the more expensive antique store than in the thrift shop. There were no effects for estimates of the value of a newer house. “This experiment showed that the effects emerge even when participants do not actively think about the price of the objects in the initial context,” Wheeler observes.

A final experiment had participants pricing Ferarris and Kias, and then guessing beverage prices at a domestic restaurant only. But in this case, investigators varied how prominently they portrayed the restaurant as being domestic. When the “Americanness” of the restaurant was made prominent, participants in both the Ferrari and Kia groups priced the beverages as more or less the same. However, when the domestic nature of the restaurant was made less prominent, participants in the Ferarri group once again provided higher beverage price estimates than those in the Kia group. “The contextual information has to be attention grabbing for the associated concept to have an effect,” says Wheeler.

The study shows that brief exposure to different consumer contexts can activate not just single concepts, but rather associations across multiple dimensions. “Being aware of these other associations and how they may or may not transfer to subsequent contexts will increase prediction of when real-world consumer contexts will - and won’t - affect consumers’ subsequent judgments of and behaviors toward products,” Wheeler says.

The study could have implications for how marketers want to sequence information to customers. On the internet, for example, sellers may want to customize home pages to emphasize specific salient characteristics prior to customers viewing target products. While the paper is only a beginning investigation in this direction, it should provoke some insights for marketers.

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