The Psychology Of Luxury and The Perception Of Value

Pricing on the brain and the beauty of “branding” is an amazing phenomenon!

People do not just say they enjoy expensive things more than cheap ones. They actually do enjoy them more.

I have said for a long time that the intrinsic or inherent value of an item is the least significant arbiter of what it is actually “worth” on the open market.

I would say that the perceived value of any given item for an individual consumer accounts for about 80% of this persons purchasing decision.

The fact is, people are tremendously influenced by the “psychology of luxury” and its resultant impact on the perception of actual value.


EVERYONE loves a bargain. But retailers know that people will sometimes turn their noses up at a cheap version of a more expensive item, even if the two are essentially the same. That suggests something is at work in the mind of the consumer beyond simple appreciation of a product’s intrinsic qualities.

This is exactly the reason consumers will opt for the incredibly expensive Hearts On Fire Diamonds instead of entirely comparable and equally beautiful diamonds (without the “name”) at an absolute fraction of the price.

I was quoted in this recent article by Deidre Woollard of where she points to the perception of value as a result of an effective marketing strategy and brand image.

The something in question is expectation, according to research published this week in the Proceedings of the National Academy of Sciences by Antonio Rangel of the California Institute of Technology. Dr Rangel and his colleagues found that if people are told a wine is expensive while they are drinking it, they really do think it tastes nicer than a cheap one, rather than merely saying that they do.

Rangel figured this out based on a unique an interesting test he performed.

Read about it here in The Economist.

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