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Cashebo Effect

Is it worth the extra dosh?
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The Cashebo Effect is a way to measure the relative placebo effects of brand names.

For example, it is often possible to buy either cheap or expensive versions of products. The Cashebo Effect measures whether people rate the more expensive product higher just because it's more expensive. The Cashebo Effect is calculated as follows:

For two versions of a product, one made by PoshDosh Inc. and the other by CheapasChips Corp., you conduct four tests.

Test 1: Users are told they are using the PoshDosh version. They are.

Test 2: Users are told they are using the CheapasCheaps version. They are.

Test 3: Users are told they are using the PoshDosh version. But they're using the CheapasChips one.

Test 4: Users are told they are using the CheapasChips version. But they're using the PoshDosh one.

Appropriate data is gathered (e.g. quality of hi-fi, tastiness of toast).

The Cashebo Effect for the PoshDosh version is:

Cashebo Effect = Average score in Tests 1 and 3 - Average in Tests 2 and 4

The Cashebo Ratio for the CheapasChips version is the opposite.

Products which people rate highly just because of the brand name would score highly on the Cashebo Ratio. A score close to 0 means the brand name does not sway people's perceptions either way relative to the other brand.

(For some products the difference might be due to other causes, e.g. marketing gumpf: "PoshDosh cables infra-magnetically transmutate the electricity going into your stereo, giving you a crisper, clearer, minty-fresh sound.")

We can also calculate a Real Difference showing the real difference in performance:

Real Difference = Average score in Tests 1 and 4 - Average in Tests 2 and 3

People seeking objectively better products will choose products with high Real Differences and not fork out extra cash for products with high Cashebo Effect alone.

(On the other hand, some people might actively choose products with high Cashebo Effects because they want to gain the admiration of others: "Wow, is that a PoshDosh stereo?")

Because of the cost of doing the trials, the Cashebo Effect would probably be calculated for four types of products:

1: Expensive products e.g. hi-fis
2: Products where there's a big price difference between brands e.g. some hi-fi cables can cost over $1000 more than others
3. Brands which are suspected of talking cobblers about their products e.g. Magnoferrific Cat Health Bracelets
4. Products which matter greatly to people e.g. toast - where anything that can help us get closer to complete and toastal satisfaction is a good thing.

To some extent this already happens on an ad hoc basis (e.g. the Bad Science columns in The Guardian) but having a website where people can access this information for whatever type of product they are interested in, and a standardised testing method to measure the Cashebo Effect, would be a great step forward.

imaginality, Apr 26 2006

Transparent Audio Opus MM loudspeaker cables http://www.aurant.c...ignaturefeature.php
At $30,000 a pair, they'd better sound gooooood... [wagster, Apr 26 2006]

Placebos work better when they cost more http://www.guardian.../05/medicalresearch
A relevant research study [imaginality, Mar 08 2008]

[link]






       Is this a re-expression of utilitarianism?
st3f, Apr 26 2006
  

       Nope, more an attempt to distinguish the subjective and objective aspects of perception as applied to consumer products.
imaginality, Apr 26 2006
  

       This would be an interesting test of a product's price to value ratio, it would be great if people like Which magazine would run some of these. They could start with Transparent Audio speaker cables (link).
wagster, Apr 26 2006
  

       This would be an interesting study for sure. I tried to find one done for marketing students and I think I found a couple of sites that have done this kind of study. Of course they were all locked up and you either had to pay for the info or be part a some secret marketing cult ( granted my searching abilities are not what you would call my forte). This would be a good thing to do in conjunction with Consumer Reports, as they already do the product testing part.
NotTheSharpestSpoon, Apr 26 2006
  

       This is done every day at your local car dealer. Chevrolet/Cadillac Toyota/Lexus are basically the same vehicles with different badges.
Galbinus_Caeli, Apr 26 2006
  

       Consumer reports does single blind testing of a myriad of products. Probably they have some sort of database you can access (I assume).
GutPunchLullabies, Apr 26 2006
  

       //Chevrolet/Cadillac Toyota/Lexus are basically the same vehicles with different badges.// This may surprise Americans, but in the UK: Chevrolet/Daewoo Toyota/Lexus are basically the same vehicles with different badges.
wagster, Apr 26 2006
  

       Daewoos are sold with the Chevy nameplate here.
Galbinus_Caeli, Apr 26 2006
  

       More evidence of the effectivness of cashebos - I feel much better when someone gives me a large amount of cash.
normzone, Apr 27 2006
  

       Edmunds.com rates cars (for the US at least) using both an Editors' Rating and a Consumer Rating. If you don't mind interpreting the Editors' Rating as a fairly objective measure of quality, you can view the Consumer Rating as a measure of hype/cashebo response.
luxlucet, Apr 27 2006
  

       <!-- you can view the Consumer Rating as a measure of hype/cashebo response -->   

       Or, you can view it as a measure of how open consumers are about their post-purchase cognitive dissonance.
reensure, Apr 27 2006
  

       baked. widely known phenomenon widely studied & used by marketers. Interesting, but still widely known & used by those in the field, so [-]
sophocles, Apr 28 2006
  

       Is there a unit for it, [soph]?
moomintroll, Apr 28 2006
  

       The Yankee? Or, more e-friendly, the Yank.
reensure, Apr 28 2006
  

       Another well known mechanism here is that once someone shells out serious cash for something, they know they'll sound like a fool if they say they spent a fortune on crap.   

       So, people tend to brag about the benefits of expensive items they just sunk their retirement on, and such bragging impacts future buyers & brand image.
sophocles, Apr 28 2006
  
      
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