Checking the Facts: The Chivas Regal Story

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We wanted to use a “classic” marketing example in a one section of a book my client was working on. The example he chose was the “Chivas Regal Effect.” I’d certainly heard of it. You may have heard it, too.

The story is that Chivas Regal was a struggling brand of scotch whiskey until they doubled their price. Then they not only made more money per bottle, they also doubled their unit sales. The example appears in several marketing books and has been cited in Time Magazine.

It’s a great example of the impact price can have on perceived value. It would be even better if the story was true. When we got to the part of the book where we wanted to use the story, we did some research so we could be sure we had the facts right.

We dug. We found many references to the story, but no details. We could verify that the price of a bottle of Chivas increased in the early 1950s and that there was also a dramatic increase in unit sales. But it turned out that there was more to the story.

Seagram purchased Chivas Regal in 1949. They pumped up the advertising budget dramatically. They used their distribution muscle to get Chivas on more shelves than ever. The price increase may have had an impact on unit sales, but it’s not likely that it had as much as increased advertising and distribution.

We couldn’t use the story the way we originally intended. We used other, verifiable, examples instead. And my client now uses the story of the Chivas Regal Effect as an example of why you shouldn’t believe every “true” story you read.

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Navin Harish   |   05 Mar 2013   |   Reply

I agree that the Chivas Regal effect is not as simplistic as it is made out to be. Still you can change the perception of a product by increasing the price.

Wally   |   06 Mar 2013   |   Reply

Absolutely, Navin. And, if you’re writing to make that point you can use any of several true stories or research studies to support it. Thanks for adding to the conversation.

ML   |   09 May 2013   |   Reply

What are those other “verifiable examples” similar to Chivas? Please share.

Wally   |   11 May 2013   |   Reply

I didn’t mean to suggest that there was some list of “verifiable” examples. In the book mentioned in the post, we used an example of pricing in an Indian jewelry store that was reported by Dr. Robert Cialdini in his book on the psychology of persuasion. Lots of people study pricing and many of those studies deal with the psychological effect of price. The behavioral economists, especially Richard Thaler and Dan Ariely share many examples. You’ll find a treasure trove of examples and insights in Priceless: The Myth of Fair Value (and How to Take Advantage of It) by William Poundstone.

ML   |   11 May 2013   |  

Thanks!

Paul Hebert   |   17 Sep 2013   |   Reply

The other “favorite” story is the Harvard/Yale Written Goals study referenced by almost every consultant in the world. Oh – if it were only true…

http://sidsavara.com/personal-productivity/fact-or-fiction-the-truth-about-the-harvard-written-goal-study

Wally   |   17 Sep 2013   |   Reply

Ah yes, I wrote about that too, in The Urban Legend of the Great Goal Study
http://blog.threestarleadership.com/2010/09/23/the-urban-legend-of-the-great-goal-study.aspx

Thanks for reminding me of another thing that “everyone” knows that just ain’t so.