Sunday, 19 January 2014

The famous Christmas mineral water experiment

Here's the setting. It's Christmas 2012 and our family are all sitting around the table. There's turkey, ham, salads, a few beers and wines, and party hats. There is also our star of the evening - mineral water!

Price as the cue to set expectations

Option 1 for mineral water was priced at $4.41 per litre.
Option 2 was priced at $0.70 per litre

Which do you think would taste better?

Most people are conditioned by the price, to expect that the more expensive product will be better.

Don't forget about the brand

In addition to price, products like mineral water have brands.  We didn't have the opportunity to do a controlled test that isolated price and brand, so the reality is that we were testing a combination of price and brand, which is, of course, the real-world scenario.

Option 1 was the imported, Italian brand, San Pellegrino

Option 2 was the private label version from Australia's second largest supermarket, Coles

The great Christmas experiment

Well, the debate was on.  Deon claimed that nobody could tell the difference.  Some of us (including me) disagreed, and argued in favour of the expensive liquid.  This set the scene for our very own behavioral economics experiment! Claire was in the San Pellegrino camp, but nevertheless she was entrusted to run the controlled trial.

The glasses of fizzy water were carefully prepared. Glass A was sipped with the care of a fine French champagne. Glass B was tasted likewise.

Deon gave his verdict. Glass B was definitely the more expensive, San Pellegrino.
I thought and thought, and tasted again, and finally conceded - nope, I can't tell the difference! A win for Deon!
And then Claire announced - Glass B was the Coles $0.70 option, so Deon had proved his own point as well.

The aftermath

So, we all went to our own homes, having had our expectations shattered (except for Deon, whose expectations were confirmed). Did anything change?

Well - yes.  We've become Coles mineral water loyals! Claire doesn't buy San Pellegrino anymore. Deon never did.

How does this happen? The very personal experience of sensing, tasting and feeling facts that contradict your prior expectations is sufficient to break those expectations.

Whether your expectations will change or not will depend on the strength of your prior expectations, the new facts you encounter and the power of this information to the old part of the brain.  Those prior expectations aren't purely logical, so they can't be overridden by pure logic, you need to feel that they are now invalid before you can discard them, you can't just think that they are invalid.

John Kenneth Galbraith summed up how tough it is to discard those prior expectations with this quote:
Faced with the choice between changing one's mind and proving that there is no need to do so, almost everyone gets busy on the proof.
But, the great mineral water experiment of Christmas 2012 shows that it actually does happen quite often, given the right conditions.

Let me know what you think

Mark S

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