Premium Mediocrity

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What is Premium Mediocrity?

Premium Mediocrity is an ordinary good placed in a refined package and under a high price, so a buyer can treat that price as settled proof of quality or of effect.

Mediocre with just an irrelevant touch of premium, not enough to ruin the delicious essential mediocrity.

That sentence is Venkatesh Rao on Ribbonfarm, 17 August 2017. He is naming a costume. The core stays ordinary. The premium touch is peripheral, and it is cheap relative to the signal it sends. On the same page he writes that this pattern is not clueless consumption of something ordinary under the mistaken impression that it is actual luxury. His core buyer knows the core is mediocre, knows the premium part is peripheral, and buys it anyway. A French word on a label, used for no further reason, is his example of that cheap touch. This page keeps his costume, and it keeps a second pattern beside it. In the second pattern the high price is read as a certificate. The certificate is the comfort: the buyer treats the tag as if quality and effect were already settled. A light-luxury bottle and a wellness jar can share the shape. The glass, the wording, and the number can be finished before anyone has set the liquid beside a plain version of the same job. That picture is an illustration. It names no brand, and it is not the pill count below. Illusion of Control uses “illusion of certainty” for a different expectancy. Once a chance task wears the cues of skill, a person expects a personal chance above the odds. A price tag is not that task. Veblen Effect counts extra demand that comes from a higher price other people are meant to see. This page counts a price read as proof the good itself is better, or that it works.

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Premium Mediocrity in 3 Depths

• Beginner: Before you pay, write one plain version of the same job. Same ingredient, same minutes, or same use, at a price that does not wear the costume. The gap is the question. The costume does not answer it.
• Practitioner: Split the receipt into three lines. What is ordinary and checkable. What is packaging, wording, or a high tag. What you felt after paying. Only the third line can be a felt change. A felt change does not show the good was scarce or tested.
• Advanced: Rao’s buyer can know the core is ordinary and still buy the signal. The people in the pill study below were not told the pill was inert. One sentence that calls both groups fooled drops his essay. One sentence that calls both groups knowing drops the study. The 85.4 percent and the 61.0 percent stay on those two inert pills.

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Origin

Premium Mediocrity, as a name for the costume, comes from a phrase Rao says popped into his head at Veggie Grill a few months before the essay. The essay is dated 17 August 2017. He was writing as Venkat. His wife understood the phrase and did not quite agree that the restaurant qualified. He then sets the costume in a wider story about people signaling a life they are supposed to want while holding on to the life they can pay for. He attributes one line to Rob Salkowitz, from a Facebook discussion this page did not re-open: an aura of exclusivity that does not actually exclude anyone. The Facebook thread is not a counted sample. The comfort that a higher price has already settled quality is older than the essay. Akshay R. Rao and Kent B. Monroe review the lab evidence in the Journal of Marketing Research, August 1989, volume 26, number 3, pages 351–357. Rao was then at the Carlson School of Management, University of Minnesota. Monroe was then at the Pamplin College of Business, Virginia Polytechnic Institute and State University. They say Tibor Scitovsky, in 1945, treated judging quality by price as a belief that supply and demand would line goods up on a price scale. They cite his paper as Review of Economic Studies 12(32), pages 100–105. That paper was not re-opened. They say Harold J. Leavitt, in 1954, examined the experimental tendency to use price as an indicator of quality. They cite Journal of Business 27 (July), pages 205–210, under the title “A Note on Some Experimental Findings About the Meaning of Price.” That paper was not re-opened. Their own review pools laboratory studies. A final set of 36 studies reports 85 effects of price, brand name, or store name on perceived quality. For consumer products, they call the price effect on perceived quality moderately large and statistically significant by criteria they attribute to Cohen (1977). The index they print is .12. The brand-name index is slightly larger, .14, and significant. The store-name index is .05 and not statistically significant. These indexes are not percentages of shoppers, and they are not markups. When the same person saw more than one price, the index was .20. When different people saw different prices, it was .10. The level of the price, high or low, was not significantly related to the size of the effect. A wider relative gap between the prices in a study went with a larger effect. They also report an average correlation of r = .27, from Gerard J. Tellis and Birger Wernerfelt, Marketing Science, 1987, for the actual price-quality link across product markets. That paper was not re-opened. Rao and Monroe say the correlation is positive and statistically significant, and that it varies considerably across markets. It is a correlation of measured quality with price. It is not the perceived-quality index above, and it is not one shelf. Two later papers, read here only as abstracts, move from a judgment of quality to a change in what people feel. Baba Shiv, Ziv Carmon, and Dan Ariely, Journal of Marketing Research 42(4), November 2005, pages 383–393, say in the abstract that people who paid a discounted price for a drink thought to increase mental acuity solved fewer puzzles than people who paid the regular price for the same drink. The abstract ties that gap to expectancies. The PDF was not re-read. No puzzle mean and no sample size from that paper are on this page. Hilke Plassmann, John O’Doherty, Baba Shiv, and Antonio Rangel, Proceedings of the National Academy of Sciences 105(3), 22 January 2008, pages 1050–1054, published online 14 January 2008, say in the abstract that increasing the price of a wine increased reported flavor pleasantness and blood-oxygen-level-dependent activity in medial orbitofrontal cortex. The PDF was not re-read. No price, no sample size, and no rating from that paper are on this page. The Chinese title uses 智商税 for a premium a speaker later calls weakly earned, and 锚定 for the high number that later judgments stick to. Published accounts disagree about the first popular post, so this page does not date the word. It is not a tax code, and it is not an intelligence score. The general first-number bias is Anchoring Effect. This page does not import that page’s wheel study. Here the number is a high tag on an ordinary good, asked to certify the good.

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Key Points

Four lines keep the costume, the lab index, the felt change, and the two buyers from collapsing into one slogan.

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Applications

Use the name to separate a costume, a certificate, and a checkable core. The split is a buying habit. It is also a limit on what a high tag can honestly claim.

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Case Study

In 2006, Rebecca L. Waber and colleagues recruited 82 healthy paid volunteers in Boston through an online advertisement. Each person read a brochure about a purported new opioid analgesic, approved by the Food and Drug Administration, similar to codeine, with a faster onset. The pill was a placebo. After randomization, half were told the regular price was $2.50 per pill. Half were told the price had been discounted to$0.10 per pill. No reason for the discount was given. Everyone received the same inert pill and was paid $30 for taking part. Participants were blinded to the purpose. Researchers were blinded to the group. The Massachusetts Institute of Technology institutional review board approved the study. People gave written consent and were debriefed afterward. The letter is Waber, Shiv, Carmon, and Ariely, JAMA 299(9), 5 March 2008, pages 1016–1017. Waber, then at MIT, acquired the data. Ariely, then at MIT, had full access and takes responsibility for the analysis. Shiv was at Stanford. Carmon was at INSEAD in Singapore. MIT funded the work. The sponsor had no role in the design, the analysis, or the manuscript. Shocks were delivered to the wrist and calibrated to each person’s tolerance. People rated pain on a visual scale from “no pain at all” to “the worst pain imaginable,” later converted to a 100-point scale. They received the shocks in 2.5-volt steps from 0 volts up to that tolerance, once before the pill and once after. For each person, the mean of the before-minus-after differences was the score. The question was how many people had a mean reduction, not how large the average reduction was. The table footnote calls the group comparison a two-tailed chi-square test. Forty-one people were in each price group. The groups look similar on the measures the table prints. Women were 27 of 41 (65.9 percent) at the regular price and 24 of 41 (58.5 percent) at the low price, P = .50. Mean age was 30.9 years against 30.0. Mean calibrated tolerance was 51.8 volts against 54.9. Mean number of shocks was 18.2 against 18.6. None of those three gaps is marked significant. On all shocks, 35 of 41 people in the regular-price group, 85.4 percent (95 percent confidence interval 74.6 to 96.2), had a mean pain reduction. In the low-price group, 25 of 41, 61.0 percent (46.1 to 75.9), had a mean reduction. P = .02. The other people had a mean increase: 6 against 16. On each person’s most painful half of the shocks, the shares were 80.5 percent (33 of 41) against 56.1 percent (23 of 41), P = .03. Across the voltages tested, pain reduction was greater for the regular-price pill, P < .001. The methods say that overall comparison is a sign test. For 26 of 29 intensities from 10 to 80 volts, mean pain reduction was greater for the regular-price pill. The footnote’s range of individual mean reductions runs from 0.01 to 48.4 points. The letter does not print the group mean point drop. Do not subtract 85.4 from 61.0 and call the difference a dose. The authors say the pattern fits earlier work on commercial cues and quality expectations, and they cite Rao and Monroe 1989. They say expectations can influence therapeutic efficacy. They offer high-cost medicines and switches from branded drugs to generics as places where the pattern might matter, and they say the findings need replication in broader populations and in clinical settings. Placebo Effect is the wider file for a belief that changes an experienced outcome. The shares on this page are a price told to healthy volunteers about an inert pill. They are not that wider file’s rate, and they are not a shop. The lesson is narrow. A higher stated price on an inert pill was followed by a larger share of people whose rated pain fell. The brochure had already called the pill an approved opioid. A shelf tag that makes no drug claim is a different stimulus. Both pills were inert, and 61.0 percent of the cheaper group also had a mean reduction. The gap does not show that a refined package improves an ordinary product, and it does not show that a high price is a margin you can copy.

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Boundaries and Failure Modes

Rao’s knowing buyer and the lab’s certificate are different rows. His essay says the core buyer is aware, and that the premium touch is cheap and peripheral. The pill brochure said the opposite of the truth about the pill. A shopper who wants the bottle as a signal, and says so, is his row. A shopper who treats the tag as a finished test of effect is the lab’s question. A slogan that merges the rows will mis-file both. The indexes and the shares do not travel. Do not export .12, .14, .05, .20, .10, or r = .27 onto a handbag, a wellness jar, a class, a household, or a year’s margin. Do not export 85.4 percent, 61.0 percent, 80.5 percent, 56.1 percent, $2.50,$0.10, 82 people, or the $30 participation pay onto a store. The .27 figure is Rao and Monroe’s report of an average actual correlation across markets. It varies, and the 1987 paper was not re-opened. A higher price level did not significantly enlarge the perceived-quality effect in their regression. A checkable difference is a different receipt. Better cloth, a longer warranty you can read, a listed dose, or a published comparison can carry a higher price for a reason this page does not erase. Premium Mediocrity is the costume and the certificate standing in for that comparison. A nice package with a published difference is a product decision. It is not, by the package alone, this pattern. The common misuse runs in two directions. One direction calls every high price a weakly earned premium, including prices tied to a checkable difference. The other direction reads the pill shares as a recipe: raise the tag, refine the box, and expect the effect. The letter is one lab, on inert pills, with a false drug description in the brochure. It is not a packaging manual.

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Common Misconceptions

Three swaps turn a costume, a pooled index, and one inert-pill letter into a rule for every expensive good.

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Related Concepts

These pages sit beside the costume and the certificate. None of them is the pill table, and none of them is Rao and Monroe’s .12.

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One-Line Takeaway