A reader sent in the following:
Would be interested in hearing your thoughts on Gas.
I usually always by the regular 87 octane at ~$2.00. The Next level of fuel is +~$.30 I have never bought this. The premium fuel is +~$.60 I use this every time in my Harley and when I have a high compression engine.
I’ve never given it any thought before, but now that you ask …
First, a little Internet research shows that only 7% of gasoline purchased in 2005 was mid grade. That agrees with your experience. Now let’s explain it.
Here are the rules for how people make decisions when faced with a “good, better, best” product portfolio:
- If the buyer knows what they need, they buy that.
- If the buyer is scraping to get into the product category, they buy good.
- If the buyer purchase is a small portion of their budget and they don’t want to be wrong, they buy best.
- Everyone else buys better.
I’d argue that almost everyone buying gas fits into the first category, they know what they need. Manufacturers of sports cars tell the buyers to buy the best gas. The rest of us have tried the good (low octane) gas and seen that it works well or it doesn’t. (It usually does.) The people buying the mid grade have probably tried the low octane gas, but upon experiencing engine pinging, they moved up in quality.
A lesson we can take from this though is that when buyers purchase repetitively, they have a chance to test the different quality levels to learn what they truly need. In that case, the psychological effects of good, better, best has less impact.