THE CHIVAS REGAL EFFECT

What is the difference between a luxury product and a utilitarian one? Is it a difference in quality, technological advancement, durability, reliability, design, craftsmanship, raw material or the cost of manufacture? Or is it a question of brand-name prestige; and if so, it may boil down to the simple fact of consumer perception. Naturally, such perceptions are the intended target of advertising which leads one to form a strong and favorable impression about the superiority and desirability of whatever product that is being advertised.

One of the most powerful psychological effects is the one that makes us equate price with quality. This is to implant the idea that if it is logical to assume that a higher quality product would cost more, it would be safe to assume high quality if the price is high. Apparently, the higher the price - the higher the quality. The added snob appeal that is bestowed by the exclusivity that high prices engender only reinforces the intangible value of prestige.

This is called the Chivas Regal Effect. This took the name of a particular brand of scotch whisky called Chivas Regal. Marketing legend says that Chivas Regal once solved their problems of low sales and struggling market share by counter-intuitively doubling the price of their scotch whisky without changing the whisky. Instead of scaring away consumers, it had the opposite effect of boosting sales greatly because consumers saw such high prices as evidence of quality.

One good way of appreciating the power of the Chivas Regal Effect is to look at the world of luxury watches. Watches can cost only $10 to $20 or they may fetch millions of dollars at auctions. Even a run-of-the mill popular model like the Rolex Submariner costs several thousand dollars.

The Rolex Submariner (left picture) costs about US$8,000 on Amazon, the Grand Seiko Spring Drive SBGA029 (center picture) costs almost US$4,000 and the very humble Seiko Sea Urchin SNZF17 (right picture) only costs about US$164. All 3 look similar, feel similar and are all high quality, automatic, stainless steel, water resistant dive watches. It leads to a few questions: If the movement of the Grand Seiko is more sophisticated than the Rolex's, why is it selling at half the price?  If we talk about history, Seiko is an even older watch manufacturer than Rolex! And if both the Grand Seiko Spring Drive and the Seiko Sea Urchin have similar styles and are manufactured by the same company, why is the lovely and lovable Sea Urchin 24 times cheaper?

This is truly weird consumer psychology.