Chivas Regal Effect

What is the Chivas Regal Effect?

“Chivas Regal effect” is a popular label for using a higher price as a cue to higher quality. Think of two price tags on the same product: does the higher one make it seem better? That is a question about perceived quality, not a change in the product itself.

Rao and Monroe’s integrative review (1989) found a positive relationship between price and perceived quality in consumer-product experiments. The observed effect varied with experimental design and the strength of the price manipulation.

Perceived quality is different from actual quality, willingness to buy, or sales. This evidence does not establish that raising a price will improve all three. A higher price may serve as a quality cue, but it is not a universal recipe for selling more.