Why should Colgate Toothpaste command a price premium?

Recently over a glorious dinner at Nyonya, a friend and I began discussing toothpaste (he is employed by Colgate).

It began with my claim that you’d have to be insane to pay for Colgate’s price premium ($1.50 – $2.00). Colgate’s mid-tier brand, Colgate Total, surely didn’t justify a 100% premium over the generics.

No-no, he claimed. Colgate is a much better toothpaste. It uses Tricoslan, a patented formula, unique to Colgate.

I retorted that Tricoslan, and any patented Colgate concoction, is merely a marketing gimmick.

Blasphemy, he replied. It’s scientifically proven. Colgate Total cleans teeth better. Others at the table agreed. Generics like Aim, though 99 cents a tube, are morbidly inferior. And everyone was sure that they don’t fall for marketing tricks. So I asked, “How do you know that Colgate cleans better? Because that’s what the commercials say?”

It’s odd that an entire dinner table can recall Colgate’s positioning statement (props to their ad agency). Why is it so memorable?

First, a short marketing history lesson. People are very good at inventing why it is that they act a certain way, especially when it is irrational.

Via The Blank Swan by Nassim Taleb: in an experiment, psychologists asked women to select from among twelve pairs of nylon stockings the ones they preferred. The researches then asked the women their reasons for their choices. Texture, feel, and color featured among the selected reasons. All the pairs of stockings were, in fact, identical. The women supplied backfit, post hoc explanations.

The same experiment is often repeated for Coke vs. Pepsi and functionally similar products. Our brains like to interpret our behavior, where benefits like “texture, feel, color” prevail. When we make choices because of an irrational benefit, like brand equity, it’s a tough story for our minds to digest.

The Proctor & Gamble folks, mid 20th century, incorporated this cognitive bias into their marketing. No one pays an additional $2 for toothpaste simply because it is superficially labeled “Colgate.” They need a reason to believe. Suppose you’re in the toothpaste aisle, reaching for the Colgate tubes. It costs more, but you recall that Colgate functionally performs (allegedly) better for XYZ reasons. The “reason to believe” is a nod to the rational mind, justifying the price premium and purchase.

A story like “Colgate has Tricoslan and a patented formula” is the “post hoc explanation.” It’s not invented in the research lab, but rather by a brand manager.

Now I didn’t manage to convince anyone at dinner. Fighting decades of advertising and brand equity is an uphill battle. But that’s why we see brands like Tide, Colgate, and Coke with 30%+ market share. It’s convincing and it works.