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Imagine this…

Your friend invites you and 4 others to a wine tasting.

As the waiter greets your table, she slips a thick piece of white paper in front of each of you.

The paper shows a list of the wines you’re about to try, complete with the name, a brief description, and the price.

You immediately notice that one of the wines is almost $40 more per bottle than the rest.

Interesting…

You pretend to know what you’re doing by swirling each of the cheaper wines, sniffing it, and then taking a sip.

Your friends and you agree they’re just okay—nothing special.

But then the expensive wine graces your table.

And even though you all follow the same taste-testing protocol, everyone immediately remarks how delicious *this* wine is.

The waiter asks what, specifically, everyone liked about it compared to the previous wines, yet no one can come up with a good answer.

What made everybody like the more expensive wine more?

In today’s edition of Why We Buy 🧠 we’ll explore Veblen Goods—why we like and want products more when they have a higher price.

Let’s get into it.
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🧠 The Psychology of Veblen Goods

Economist Thorstein Veblen discovered people loooove to buy expensive products (known as Veblen Goods) because they double as status symbols.

This means the demand for Veblen Goods increases as their price increases.

But this does more than signal wealth.

A higher price tag also dictates how we perceive and experience a product.

Researchers asked survey participants to rate the pain of 2 electric shocks. The first shock was the control.

But prior to the second shock, participants were given a painkiller.

• Some participants were told the painkiller cost 10 cents. 61% of these participants said the second shock was less painful.
• Other participants were told the painkiller cost $2.50. 85% said the second shock was less painful.

An identical product created an entirely different physical experience simply due to the perceived price.

That’s why when buyers believe something is expensive, their experience with the product changes.

As a marketer, you dictate whether that experience is positive and leads to repeat buyers or is negative and results in lost customers.
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🤑 How to Apply This

Ok. So how can you apply this right now to sell more?

eCommerce​
​Position your product as the must-have solution

Fun fact: Diamonds are readily available.

So De Beers positioned diamonds as the jewel of choice for engagement rings.

In doing so, they flipped the messaging of diamonds from being a commodity to a luxury item that symbolizes everlasting love.

Thanks to this brilliant messaging and controlled supply, they’ve continued to charge a massive premium (we’re talking tens of thousands here)—even when most diamonds don’t hold their resale value. 🤐​

Luxury products​
​Create a cult following through the buyer journey

In 2012, Hermès released the most expensive Birkin bag: The Sac Bijou Birkin.

Price tag? $2,000,000. Status? Sold out.

Buyers sometimes wait years to get a Birkin bag.

And they usually have to build a strong relationship with an Hérmes sales advisor during that time.

By tapping into extreme exclusivity and scarcity through the buyer’s journey, Hermès successfully transformed their product into something people happily spend 5+ figures for—despite being in a saturated market.

​Ads​
​Sell to buyers’ selfish desires

The purpose of watches is to tell time, right?

Wrong.

Instead of promoting their bomb time-keeping abilities, Rolex focuses on selling the class, prestige, and high social status that comes with their watches. *flips hair*

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By tapping into their target audience’s ultimate selfish desire (letting others know they have class and wealth), Rolex ads serve as the Bat Signal to these affluent buyers.

And because of this, their high prices (base price is ~$6,000) only increase demand.
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💥 The Short of It

You don’t need to be the cheapest option on the market to win.

In fact, brands create a legacy by doing the exact opposite.

These brands know expensive products are much more than just “products.”

They help the buyer embrace—and, most importantly, signal to the world—their most selfish desires.

That’s the psychological power of Veblen Goods.

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Until next time, happy selling!