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Brand illusions: the Palessi psychological experiment and the lessons we can learn from it

June 23 | 2023

Is it possible to sell $20 shoes for $500? As it turns out, yes. Today we will tell you about an interesting experiment conducted by Payless, an American chain of budget shoe stores.

Imagine this picture: you walk into a luxury boutique, immersed in the atmosphere and charm of haute couture. Designer labels and three-digit price tags catch your eye, and a polite employee offers you champagne. And then you find out that the designer shoes you've been admiring are actually from Payless, a budget store where you can buy shoes for under $20. Gotcha!

That's exactly what happened in the Payless/Palessi social experiment - an experiment that became a marketing campaign that opened our eyes to the astounding power of perception. It raises important questions about how we perceive value and quality.

Why do we associate a higher price with higher quality? How do branding and environment influence our decisions? And, most importantly, what lessons can we, especially those in the UX industry, learn from this situation?

Let's take a closer look at the Payless/Palessi experiment, and consider the psychological and social theories that explain why we succumb to such illusions.
Ambiance, branding and first impression
In 2018, budget footwear retailer Payless Shoes, is about to pull off a daring stunt. The team is taking over a former Armani store in Santa Monica, turning it into a high-end boutique and calling it Palessi.

"It was a private launch party for Palessi, a new luxury shoe brand designed by Italian designer Bruno Palessi."

Before the launch, the team creates an Instagram page*. It's designed like a real luxury brand page - high-quality images of the shoes, carefully considered aesthetics and storytelling that matches the overall luxury atmosphere.

Having finalized the preparations, they invite Influencers to the grand opening with a red carpet and champagne 🍾.
Influencers walk into the store, they are struck by the luxurious atmosphere and the elegantly arranged "designer" shoes. Without knowing it themselves, they are looking at the typical Payless assortment - shoes that are usually priced between $20 and $40. Yet they are happy to shell out hundreds of dollars for them.

"I would pay $400, $500. People would ask, 'Where did you buy them? They're amazing.'

Why? Because their first impression was carefully planned. In fact, there was no such person as Bruno Palessi.
A story about Palessi's experiment in the news.
The psychology of mistakes
So, our Influencers are in the store, sipping champagne and feeling like VIPs. The price tags they see on Palessi shoes are quite in line with their expectations - three-digit figures translate exclusivity and high quality. But how does price have such a significant impact on perception?
The primacy effect and the halo effect
Have you ever heard of the primacy effect? It's the idea that the information we encounter first has a lasting impact on our perception. The branding and the setting formed certain expectations for Influencers: they were ready to see luxury, and that's exactly what they think they saw.
There is also the halo effect, a cognitive distortion in which our perception of one aspect of something affects our impression of the object as a whole. In Palessi's case, the glamorous setting and high price tag created a "halo" around the shoes, making them seem more valuable than they actually were.

Now let's get back to UX. The environment in which a user interacts with a product or service can have a significant impact on the user experience. Think of an app with a carefully designed interface or an intuitive website - these platforms form a positive first impression, laying the groundwork for further interaction.

Similarly, the visual and auditory cues of the environment can have a significant impact on the user experience.
Anchoring effect
Behavioral economics is a field that combines psychology and economics. It studies how people make decisions. One popular concept is the anchoring effect: we become overly attached to the first piece of information we receive (anchor ⚓) and compare all subsequent data to it. The most obvious example is a crossed-out previous price next to a new one.
In the case of Palessi, the high price acted as an anchor that radically distorted the perception of the value of the products. In interviews, Influencers said that they were willing to pay triple-digit sums for shoes that were already highly overpriced.
What is the price of trust?
Have you ever wondered why some digital services operate on a Freemium model, but offer a greatly expanded Premium version?

It's a UX strategy.

The free version allows people to get to know and trust the product, while the premium version offers more features.

Back to Palessi. Influencers were willing to pay significantly more for shoes that they felt were worth their money. A higher price is often indicative of the quality and exclusivity we associate with a premium user experience. The principle of "you get what you pay for" can be a powerful driver of behavior, whether it's signing up for a subscription or making a one-time purchase.
Cognitive dissonance and reconciliation
Moving on to the moment of truth. Influencers learn that they were part of an elaborate ruse. The "luxury" shoes they so admired are actually from Payless. Some laugh at this, others are shocked. What is going through their minds at this point? Let's turn to psychology again.
Example of a freemium business model Source.
The basis of emotional buyer confusion is a psychological phenomenon known as cognitive dissonance - the mental discomfort experienced by a person who holds two or more conflicting beliefs or values. On the one hand, people believe they have bought a luxury item, while on the other hand, they have just learned that the shoes were budget-friendly. Reconciling these conflicting beliefs causes emotional tension and a need to resolve the dissonance.
This concept applies to design as well. Users need to trust the platforms and products they interact with. A poorly designed UX that doesn't meet expectations can cause similar cognitive dissonance and ultimately lead to a loss of trust. Whether it's a slow-loading website or an app that doesn't deliver on promises, the psychological stakes in UX are very high.

So how can we prevent such situations?

The Payless experiment shows that setting expectations is key. Provide a transparent and consistent experience that is consistent with branding. If your service is budget-friendly, reflect that. If you sell a premium product, demonstrate premiumness at every touchpoint.

Inconsistency is the shortest path to cognitive dissonance and a negative interaction experience.
Social consequences
While the Payless experiment has given us many insights, its implications go far beyond design and psychology. What happened at this fake boutique in Santa Monica raises questions that permeate our society.

You may be wondering, "Why did Influencers buy into this? Weren't they fashion experts?".

Well, look at their behavior through the lens of social conditioning. From a very young age, many of us are inured to associate price and brand with quality and social standing. This is not an accident, but the result of years of marketing strategies and cultural influences that reinforce materialistic values.

The Payless experiment is a living embodiment of Andersen's fairy tale "The King's New Clothes." It demonstrated our susceptibility to groupthink and social approval. We often rely on social cues to make judgments, sometimes to our own detriment.
We are part of a larger system, a social construct that shapes our values and judgments. Recognizing this fact can be the first step towards making more informed choices in any situation, whether it's designing a UX or defining your role as a consumer in a complex socio-economic landscape.
Source: Medium
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