It’s almost time for another Dry July, an Australian fundraising initiative to aid cancer patients. The idea is that giving up alcohol and getting drunk for a month will free up money for charitable donations.
However, participants this year could find they have less disposable cash than they expect, given that costs in the expanding alcohol-free drinks segment frequently approach those of normal tipples.
By employing a marketing strategy known as price-anchoring, traditional alcohol makers, who have entered the US$11 billion non-alcoholic drinks market, have helped make the high prices charged seem acceptable to customers.
When we come upon a new product, we immediately attach it to whatever is applicable in the present to determine its worth. Sellers frequently take advantage of this by setting up materials at purchasing points. The standard is a price tag with $79 filled instead of $99 punched out. Regardless of its accuracy, the $99 reference point influences how we view value and cost.
The so-called “price anchoring” is merely one manifestation of the more considerable anchoring cognitive bias that psychologists Amos Tversky and Daniel Kahneman have described.
The main characteristic of anchoring is that we frequently depend too strongly on an early piece of information (the “anchor”) while making judgments. This can result in distorted judgements and bad choices in various situations, such as deciding whether to have surgery or purchase real estate.
By capitalizing on the fact that consumers are accustomed to paying high rates for alcohol in bottles, cans, or glasses of a specific size, shape, and sophistication, anchoring has been utilized to redefine and enhance the virgin beverages category. We implicitly agree they should be priced similarly when alcohol-free equivalents with similar labelling are offered next to them on the shelf, internet, or menu.
Not merely because the bottle after it has a tempting price. Our marketing-infused brains know that alcohol costs might differ greatly from what is considered “normal,” making them more than benchmarks but also the symbolic $99 scratched out. In light of what we may have spent on a bottle of Grange, we still feel we have saved money even if we spend a lot on non-alcoholic wine.
The impact is most significant at bottle shops and bars, where the flashy alcohol marketing, peer pressure, and the sheer volume of pricey things distract us from making reasonable decisions. However, it also functions on the websites of national liquor stores, which feature standard beer, wine, and spirits alongside special zero-alcohol categories.
It takes a little searching to confirm that pricing is comparable. Currently, a case of 330ml bottles of Heineken Lager (5% alcohol) costs $55 on one of the major merchants’ websites, Heineken 3 (3.3% alcohol) costs $50, and Heineken Zero (less than 0.5% alcohol) costs $49. The same-sized bottle of Gordon’s London Dry Gin, which has 37% alcohol, costs $45, while 700ml of Lyre’s Dry London Spirit, which is “crafted to capture essence of a gin,” costs $51 from another retailer. Gordon’s 0.0 Alcohol-Free, their own non-alcoholic product, is priced at $38.
In the alcohol-free market, price anchoring has an added lemon twist.
Brands will try to convince you that their effort in creating “healthier options” with “high-quality ingredients” justifies their high costs and that a non-alcoholic beverage packaged in a lovely bottle and manufactured with mysterious “botanicals” and “adaptogens” is worthwhile spending extra money on.
But consider the components of the pricing. The goods and services tax is applied to all processed beverages. Additionally, alcoholic beverages are subject to a steep extra excise. Although it’s challenging to estimate with precision, the alcohol-related tax on a bottle of full-strength beer can be higher than 30%.
Players in the industry don’t pay such tax on non-alcoholic beverages. Therefore, in a way, they are pocketing a sizable bonus that well-anchored clients fail to realize is not going to the government. Ouch.
The appearance of non-alcoholic variants of several well-known brands in supermarkets appears to be at odds with price anchoring.
Visibility in a welcoming environment is one reason brands like Heineken, Coopers, and Gordon’s are in supermarkets. Customers who are currently underage but will soon be permitted to purchase alcohol for their 18th birthday party grow familiar with their brand.
But it’s a dangerous tactic that might draw negative attention. In fact, in order to maintain their good names, a number of grocery chains in New Zealand request identification from consumers before selling them drinks that don’t contain alcohol.
The Behavioural Economics Team (Beta) of the Australian government has a helpful blog post on reducing the effect of price anchoring. But according to a study, even specialists might be vulnerable.
Along with being informed, you may lessen the impact by controlling how much price information you are exposed to. Before going to a bottle shop, go to the grocery store if you need non-alcoholic beverages for your house or an event. You might still need to visit the bottle shop even though the selection is smaller and the drinks aren’t necessarily any cheaper. However, the encounter will place the untaxed non-alcoholic goods in a more equitable context—the soft drink aisle. You might find yourself deciding to buy a bottle of ginger ale instead after comparing pricing in those sombre lighting conditions.
You can try to change the narrative in bars and clubs. Request your soda water in a stylish glass filled with ice, lemon or lime slices, and other garnishes. This links the object in your hand to expensive cocktails.
Of course, H2O is a free alternative that, as Nietzsche once stated, always suffices if you choose to live a life of true asceticism. You might even join the craze in Dry July and refer to it as vodka without alcohol.
