Blu-tack Signals

Picture the scene...

You are an inventor. You have just invented an amazing new type of blu-tack; twice as sticky as normal blu-tack. How do you communicate the awesome stickiness of this new blu-tack to consumers?

You could launch adverts with the slogan "twice as sticky". You could put "twice as sticky" on the packaging.

One of the most powerful ways to signal quality is price. If something is expensive it must be good. If it is cheap, well, you get what you pay for.

If I were the blu-tack inventor I would attempt to signal the greater stickiness by charging more.

This kind of thinking is contrary to the idea that lower prices increases demand. Why? Because consumers like you and me do not know the quality before purchase. We do not have perfect information. We respond to signals, even about blu-tack.

And the power of price doesn't end there. If we expect the blu-tack to be twice as good, we are more likely to think it is after using it, regardless of whether it actually is. Paradoxically, if we pay more for a product our enjoyment of said product may increase. Funny old world.