Christopher Herot's Weblog

Why Expensive Wine Tastes Better

Economists Hilke Plassmann, Baba Shiv, Antonio Rangel, and psychologist John O'Doherty have come up with one explanation for why that bottle of Opus One tastes better than the usual Mondavi Cabernet: knowing the wine is expensive increases the activity in the medial orbitofrontal cortex (mOFC) and the rostral anterior cortex (rACC), the areas of the brain that experience pleasure.  In a recently published paper, Marketing actions can modulate neural representations of experienced pleasantness, they describe an experiment in which they put 11 Caltech graduate students in a functional magnetic resonance imaging (fMRI) machine and gave them five samples of Cabernet Sauvignon to taste.  They were told that the purpose of the study was to measure the effects of degustation time on perceived flavors.  Unknown to the students, there were really only three wines, with two of them being offered twice at different prices ($5 became $45 and $10 became $90).   Not only did the subjects reports that the more "expensive" wine tasted better, but their MOFC and rACC showed increased blood oxygen levels when presented with those wines.  Interestingly, the portions of the brain associated with taste were not affected, suggesting that the mOFC integrates the "bottom up" sensory components with the "top down" expectations, a mechanism similar to the well-known placebo effect.

In the Wall Street Journal Lee Gomes shed some additional light on this topic with some experiments he did at the Home Entertainment Show at CES in Las Vegas.  He set up a room with two sound systems, identical except that one system connected the speakers with $2,000 worth of cable from Monster Cable, while the other used ordinary 14-gauge hardware-store cable.  Of the 39 people who took the test, 61% preferred the expensive cable.  More telling, the audiophiles at the show were more likely to pick the expensive wire, although they found it a just noticeable difference.

It's possible that the wine experiment would have turned out differently if the subjects had been wine experts.  The lesson for the rest of us is that it is often possible to get improvements in quality by paying more money it may take an expert to notice the difference, but if we are given good reason to believe we are getting a better product we really will enjoy it more and not just imagine that we are enjoying it.

You can draw your own conclusions as to how this applies to wine, Starbucks, $1,600 handbags, and Harry Cipriani.

Charline Li on Facebook

At Graphing Social Patterns Charline Li of Forrester Research gave a talk on Big Brands & Facebook that had useful information for brands of all sizes.  One of the more startling data points she presented was that according to Facebook's data, only 6% of it's US users are 35+ years old, but Nielsen's stats say the number is 45%.   WHen asked later, Charlene said one plausible explanation for the discrepancy was the sampling method used.  In any case, her advice was that things were changing rapidly and that whatever works this year would almost certainly require adjustment to work in the future.

In addition to presenting a load of interesting statistics, she offered some examples of brands that we successfully leveraging Facebook as a platform to communicate with customers and not merely advertise to them.  One of the best was Ernst & Young, who in order to further their program of hiring 5,000 college graduates every year has one of their recruiting executives answer questions from students.  In contrast Wal-Mart keeps trying but may just not be the type of business that college students want to brag about being associated with.

Some other advice:

• Create useful apps than model what friends do naturally
• Plan out how to make the app viral (a recurring theme at the conference)
• Get feedback once you launch

 

Emotional Adoption Curve

One of the most interesting and useful presentations at ETel was not about telephony at all, except in the most general sense.  Jeff Bonforte of Yahoo had to abandon his original presentation at the behest of his lawyers and instead gave an excellent discourse on understanding the emotions behind consumer adoption of new products.  In an update of Geoffrey Moore's Crossing the Chasm, Bonforte called attention to the emotions behind the behavior of each segment of the adoption curve and gives them new names:

• Lovers
• Irrational
• Efficient
• Laughers
• Comfortable

The Lovers (Innovators in Moore's lexicon) are the techies who buy the product because they find the technology intrinsically interesting.  They can send misleading signals to the seller because their emotional response to technology is the opposite to that of the larger population.  They look on solving tough technical problems as fun.  This 3% of the market is likely to acquire product X through the "X Club."

The Irrational (Early Adopters) feel the same emotions are the general population, but feel them with more intensity.  These are often negative emotions such as anger, fright, or loneliness.  The strength of these feelings can lead to buying behavior that is not economically rational, such as installing Skype because one hates the phone company,  The good news is that once the technology improves, ordinary people who feel the more moderate versions of the same emotions will also be motivated to buy.  There are plenty of targets for these emotions, such as taxes, banks, telcos, health care providers, government services, airlines, lawyers, Microsoft, the opposite sex, and "The Man" so there is plenty of opportunity.  This 22% is likely to purchase product X at The X and Y Store.

The Efficient (Early Majority) will purchase when the technology becomes practical.  This 25% goes to Best Buy.

The Laughers (Late Majority) are Yahoo's core constituency.  This 35% goes to Costco.

The Comfortable (Laggards) are the 15% who go to Walgreen's or Safeway because the Costco parking lot is too confusing.