“You get what you pay for.” We've all heard that golden rule of shopping and probably call it to mind when selecting a good bottle of wine, a piece of jewelry or a rug for the living room.
But does paying more for something always mean you will walk away with higher quality? A group of business professors who have studied the question have determined that you can't determine quality by price alone.
Wine is a prime example, they say. There are some very good wines at a low price point while some wines with a high price tag might not be to your liking. That's because there are a lot of variables that go into the price of a bottle of wine.
On the other hand, the researchers say you can more easily judge the quality of a detergent by its price.
"What we find, though, is that consumers don't pick up on this difference in consistency very well," said All McGill, of the University of Chicago Booth School of Business. "As a result, if quality is consistent across higher-priced goods, consumers may err and predict that a lower-priced item is lower quality that it really is."
Old perceptions die hard
McGill says once consumers have a perception of the link between quality and price, it's hard to shake it. If they learn that quality is consistently high at high prices, they will assume low-price options are worse, even when they aren't.
"We find the reverse also — if they learn that quality is consistently low at low prices, they may assume quality is consistently high at high prices, when that might not be the case," she said. "In some categories, some of the more expensive items might be great but some not so great."
If consumers can't automatically assume an expensive product is “better,” then how can they reach a conclusion about its quality? This is where gathering information comes in.
The more you know about a particular product, the better you will be able to judge its quality. Consumer reviews, like the ones you find at ConsumerAffairs, can help you judge quality. After reading dozens of posts, you'll be able to spot any themes about the product's quality.
Look at how a product is sold. If it is sold via mail order, there is less overhead the seller must cover in the price. Some high quality apparel manufacturers have gone this route.
On the other hand, if a watch is only sold in upscale jewelry stores, its high price can't automatically be attributed to its quality. The retailer is adding a generous mark-up to cover its costs and increase its profit margin.
When shopping for furniture, a consumer needs to look below the surface to determine quality. For things like tables and sofas, how the materials are joined together says a lot about durability. Dovetail, mortise and tenon joints are signs of high quality, for example. Staples are a sign of poor quality.
Quality can also be a motivating factor when it comes to grocery shopping. Some consumers pass over cheaper store brands because they perceive them as inferior to more expensive national advertised brands.
But a recent report by the market research firm Package Facts concludes that store brands are a case where cheaper does not mean inferior.
“Store brands have moved far beyond cheap generic knock-offs to become trusted, quality lines that can compete effectively with national brands,” said Packaged Facts research director David Sprinkle.
“They usually have higher profit margins for retailers than name brands, help differentiate a retailer from competition, and help build consumer loyalty.”
Sprinkle says private label products accounted for almost a fifth of the $530 billion total food and beverage market dollar sales in 2013.
The University of Chicago study notes that in the end, being able to properly determine a product's quality will prevent the consumer from overpaying for it.
"The relationship between price and quality is rarely perfect," the authors conclude.
That means consumers have to work just a bit harder to make sure they are getting a good value.