The purity premium effect: The asymmetrical value change around pure products

Abstract

Abstract This research documents a purity premium effect, showing that consumers perceive a greater value difference between a pure product containing 100% of a single material (e.g., 100% wool) and a non‐pure product containing lower quality material (e.g., 80% wool + 20% cotton), compared to two non‐pure products with the same composition difference (e.g., 80% wool + 20% cotton vs. 60% wool + 40% cotton), suggesting a nonlinear value change. However, the value change is linear in the higher‐quality direction, suggesting an asymmetrical change in value distance around pure products. This effect happens because consumers use pure products to categorize products into different quality groups such that pure products belong to a different quality category from the lower quality non‐pure products, but to the same quality category as the higher quality non‐pure products. Based on this theorizing, the perceived quality difference between the pure and non‐pure products, which integrates both the objective material quality difference and the categorical difference, serves as the mechanism to drive the asymmetrical change of value around pure products. Five studies support this asymmetrical purity premium effect and the proposed process. The findings offer direct implications for pricing decisions around pure products. A price premium can be extracted when pricing a higher quality pure product compared to the non‐pure products. However, such a price premium does not apply when the pure product is of lower quality than the non‐pure products.