How much do labels affect our perception of quality? Apparently very much, as shown in study after study.

Wine

In 2001 a researcher at the University of Bordeaux, the very epicenter of the fine wine world, recruited 54 oenology undergraduates (those are students studying to get a Bachelor of Science in winemaking) to participate in a simple experiment. He had each of the students taste one glass of red wine and one glass of white wine. They were then asked to describe each wine in as much detail as possible. The students described the red wine in typical red wine terms (tannins, full bodied, robust) and the white wine was described in typical white wine terms (citrus, floral, fruit). Here’s the fun part: not a single one of the 54 soon-to-be wine experts detected that the wines were in fact identical. The “red” wine they had sampled was nothing more than the white wine with a flavorless and odorless red dye added.

The same group, of students participated in a second experiment (without having been told that they had miserably failed the first one). They were offered a bottle of expensive wine and a bottle of cheap wine – but with the two labels switched. The cheap wine with the expensive label received strong reviews (described by the future sommeliers as “complex and rounded”), whereas the expensive wine with the cheap label was panned (“weak and flat”). Incredibly, these experts were in essence tasting the label, not the wine.

Water

Wine is pretty complex. Could labels affect our perception of something as simple as water?

Penn and Teller, the famous illusionists and entertainers, aired an episode of their television series involving a water “tasting” at a trendy California restaurant. The patrons were asked to participate in a “tasting” of exotic imported bottled water, which they were told cost as much as $7 per bottle. The set up?   All the labels were fake, and all the water was supplied by the restaurant’s garden hose. The segment of the show is hilarious, and can be viewed on YouTube. One after another, the guests ooh and aah over the fabulous water, comparing and contrasting the water that came from the French country springs (the garden hose) to the water from the Norwegian glacier (also from the garden hose). Again, people were fooled by the labels.

Behavioral psychologists have an explanation for this cognitive bias. According to David McRaney (author of You are Not so Smart – A Celebration of Self Delusion), when a label is applied to something it “leads to an expectation quality. The actual experience … is less important. As long as it isn’t total crap, your experience will match up with your expectations.”

This shouldn’t surprise you. For 50,000 years evolution has trained us to look for visual clues to steer us towards the good stuff. So it’s natural to expect more when there is a “good” label on a bottle of wine or bottle of water. What is surprising is how much our expectation actually influences our perception of the event.

Real Estate Brokers

So what does this have to do with real estate brokerage?

Labels play a critical role in real estate. Just ask Donald Trump who admits to making more money from licensing his name than from all of the real estate development in which he was the actual developer. You may or may not agree with his politics, but he is living proof of the importance of labeling in real estate.

Labels are also playing a role in the rapid consolidation we are experiencing with real estate brokerage companies. Everybody is selling out to the guys with the big, fancy labels. And why not? If the experts are right that labels influence our expectations, and our expectations in turn influence how we perceive the actual experience, consolidation should work magic – at least for the brokers. But the problem for the clients of these brokerage houses who may be pleased with the taste of the wine or the taste of the water is that the “red” wine is still white wine with red dye, and the seven dollar bottle of water still comes from a garden hose.

The fact that someone carries the business card of a large, well known company shouldn’t end the assessment of who to hire for your next real estate deal. You need to assess what is behind the business card and make sure that the person you are entrusting the future of your business to is actually the best qualified individual based on your needs and expectations.

So the next time you’re choosing a broker, keep that broker’s business card turned face down and ask the hard questions. What skill sets and strategies will they bring to bear to get you the right real estate solution and the best economic deal? What transactions has this individual worked on and what landlords are he and his firm financially tied to which could lead to troubling conflicts of interest down the road?

In life, not everything is what it seems to be. It’s easy to be fooled, especially when people are selling heavily marketed, well known brands but what you’re really buying is the individual. Don’t rely on labels or business cards to tell you what you are consuming, open your eyes, your ears and ask the difficult questions.  If you do, you’re more likely to avoid the garden hose.

This post originally appeared on tactix.com.

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