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That is something that scientists call the price quality heuristic. and that means that not only the high quality influences the price which is how we usually think about the world no, the price also influences the quality perception, and that has been shown in a number of incredibly interesting studies. for instance, it s been shown that the same wine, the same wine tastes better if it s designed to be expensive. also, painkillers. the placebo effect of a painkiller is much stronger if you label that painkiller as an expensive painkiller as opposed to a cheap painkiller. and, kai, what do you think about companies using shrinkflation? you know, keeping prices the same, but making the product smaller? i mean, is that effective? if shrinkflation is ....
Written the book on this. it s called the invisible game: the secrets and the science of winning minds and winning deals. kai markus mueller, a real pleasure having you on this show. and, kai, let s start with this. what are some of the tips and tricks that retailers use? well, there is a wealth of them in consumer psychology. but i ll tell you a few of them. a very, very, very strong component is, for example, the default effect. so, for example, if you have a subscription, it renews by default, and we have trouble thinking about the renewal, wejust let it go. then there are things like red signs for discounts. people have learned these things, over and over that red signs give you pleasure. people believe that they get a good deal, despite the fact that they are actually playing a game that is set by the company that sells these products. and, kai, i m wondering, ....
And how do they negotiate with their suppliers? well, to find out, i ve been speaking with the director general of eurocommerce. that s the organisation that represents retailers and wholesalers in 27 european countries. christel delberghe, a real pleasure having you on the show. and, christel, can we start with this? because as we ve been seeing the costs of raw materials heading higher, how much pressure are your members facing to keep the prices down? well, the pressure on retail is immense. today, inflation in europe is about 10% and inflation in groceries is 19%. and the pressure on retail is exerted via the higher cost of the goods for resale, the higher cost of operation. and they re facing consumers hit by a severe cost of living crisis. for them in the retail, the retailers have been able to cushion consumers from the worst of the inflation. retailers have been absorbing part of the higher cost increases. and they ve been doing this via promotions by making a huge ....
Investment in pricing to ensure that consumers. ..to ensure that consumers can get good deals. and, christel, i m wondering, what kind of conversations are the retailers having with the suppliers? well, the conversations are pretty tough and the situation is very difficult at the moment. retailers negotiate on behalf of consumers for the best deal and the best assortments. and what we have seen is a concerning trend by the manufacturers to seek, in particular from the large global manufacturers, large global brands, who have been seeking to push up price increases beyond the cost increases. and, christel, i mjust wondering, are your members, the retailers, are they reporting the changes, any big changes in consumer ....
Do you think, you know, are consumers more likely to be accepting of rising pricesjust because of all the information about inflation that we re constantly hearing about? yes, absolutely. 0ur minds adapt very quickly to new situations. and a very important concept in that respect is anchoring. so, if i am getting used to high numbers, also my price perception goes up and i am more much more willing to accept high prices. however, one problem from the corporate perspective is that, if you train your consumers to become bargain hunters, it s very hard to retrain them to accept high prices. well, kai, economics would suggest that we would always choose the best value. but that s not always the case. i m wondering, do consumers find reassurance in higher prices? indeed. ....