Expensive Clothes are an Investment (or How to Turn $60 into $160,657.62)

by JT McGee

Brand name clothes might just be the best investment you can make, according to new research.

A study by Tilburg University in the Netherlands found that people who wear brand name clothing are more likely to have a favor request fulfilled, a job recommended to them by another person, and garner more trust when soliciting for charity donations.

The Research Results

I’ll summarize an article from The Economist on the results of the study. Some interesting data points include:

  1. Social Status – Profile pictures of various men wearing a polo shirt were digitally altered with obvious brands. Researchers then asked people to rate each picture on 5-point scale for perceived social status. Those with the Lacoste shirt earned a 3.5 rating, whereas a Hilfiger branded shirt earned a 3.47 score. Pictures where the polo shirt had no logo scored 2.91, and a less expensive brand, Slazenger, scored 2.84 out of five.
  2. Wealth – Hilfiger apparently means wealth, winning this round with a 3.94 score, with Lacoste came in second at 3.4 out of 5. The unbranded shirt earned a rating of 2.78, whereas the less expensive brand earned an average score of 2.8.
  3. Survey Questions – A female assistant asked passers-by to fill out a random survey. Wearing a sweater with a Hilfiger logo, 52% of people agreed. The next day, with no logo, only 13% of people agreed to take the survey. Yep – four times as many people filled out the survey when she wore a Hilfiger sweater compared to a non-branded sweater.
  4. Charity Donations – People wearing designer shirts raised 34 cents on each answered door knock, compared to 19 cents for people wearing non-designer shirts.
  5. Job Interview – Two videos were captured of a single man applying for a job interview. In one video, the man wore a shirt with a logo, and in another, no logo was visible. Those who watched the interview in which the man wore a branded shirt rated him more suitable for the job, and recommended a salary 9% higher.

You Have to Earn it!

The researchers wanted to determine why a brand would be valuable, so they created a game to find out why branded clothing seemed to have the effect that it did. In a game where the researchers told participants that the shirts were given to the models by researchers, the shirts had no effect on how the game was played. However, those who were left to assume clothing was the choice of participants favored brand wearers by a 36% margin.

The results were consistent with most marks of quality and perceived worth. The expensive brands are something to be had only by the very best, so when participants knew that the clothing was distributed by the study organizers, the brand on the shirt had no real value. It was only when clothing was believed to be a choice of a particular individual wearing the shirt that the brand had any influence on human action.

Turn $60 into $160,657.62

The most interesting finding here is that branded clothes provide for salary offers 9% higher than people who do not wear obvious brands.

Assuming that a dress shirt is $40 for any random label, and a branded shirt is $100, we can run some numbers to see just how much more value comes with a branded shirt. We will assume an average starting salary of $40,000, with wage increases of 3% annually for the next 30 years.

A quick DCF calculation discounted by 4% per year finds that someone wearing an unbranded shirt with a starting offer of $40,000 would enjoy a career worth $1,785,084.56 in today’s dollars. The same person wearing a branded shirt, who receives a starting offer 9% higher ($43,600) would have a job worth $1,945,742.18.

Whoa! A simple $60 investment into a branded shirt for an interview provides for a difference of $160,657.62 in future income discounted back to today. Where else can you get a $160,657.62 return on a $60 investment?!

We obviously have to discount for the fact that the participants watching the videos were not hiring managers, nor necessarily involved in human resources. However, there is a case to be made that brands may have an even larger effect on a hiring manager. Someone with more expensive clothing may be less likely to accept a common job salary. Someone who is used to the more expensive things in life may demand more pay for the same job.

Hmm…

I have to say, I’m not all that surprised with the results. However, I do have a few lingering thoughts as well as a few concepts I find interesting:

  1. Brand transfer – Marketing has a lot of value; it turns $2 aluminum foil into $4 Reynold’s Wrap and $500 computers in $1,200 Macs. As branding is all about trust, it is interesting that perceived trust can be so easily and inexpensively transferred from a clothing manufacturer to an individual just by virtue of wearing a particular shirt design.
  2. Efficient Clothes Hypothesis – Markets are efficient in the aggregate, at least as efficient as they can be. It is only logical that younger people are more brand-centric given that they have the most to gain from any perceived increases in their own worth.
  3. A brand or no brand – A non-branded shirt scored third in social status, but fourth (last) in wealth. The difference between third and fourth place are not entirely statistically significant, but I find it interesting that a “lower price” brand beats out a plain polo. A brand – no matter the brand – is apparently a better sign of wealth.

{ 18 comments… read them below or add one }

Marina K. Villatoro March 18, 2012 at 15:52

Appearance is everything and people want to be around people who look rich and act the part even if they are dead broke.

I use brands for many things, they have always proven to be better in the long run.

But not really when it comes to plastic bags or aluminum foils.

In Spanish there is a saying – What costs cheap, ends up being expensive.

I’ve learned the hard way.

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JT McGee March 19, 2012 at 11:50

You’re right. People want to associate with people who have qualities they would like to see in themselves.

I’m totally with you in paying more for something of quality, there are quite a few things I’m willing to pay a premium for because of quality. Biking gear comes to mind. Aluminum foil and trash bags…not so much.

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funancials March 18, 2012 at 20:01

Interesting but not surprising. The only thing I found surprising was that Hilfiger is associated with wealth. I think Lacoste, Ralph Lauren, Vinyard Vines, etc. are wealthy. Not Hilfiger.

The can think of a number of instances where someone is treated better because of what they’re wearing.

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American Debt Project March 18, 2012 at 23:44

I was going to say the same thing about Hilfiger! But in any case, it makes sense. We do put a value on expensive and aspirational brands, multi-million dollar ad campaigns wouldn’t exist if they weren’t effective. In the case of the interview or a meetup with someone who could be a potential investor or business partner, take the time to look good. But don’t go broke doing it!

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JT McGee March 19, 2012 at 11:19

Yeah, looking good goes a long way. Top off a look with a good brand, and apparently you are instantly more valuable. Amazing how a little marketing can go a long way!

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JT McGee March 19, 2012 at 11:18

The study was done in Europe, so maybe Hilfiger has a little more pull there. I’m not sure.

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After College Money March 18, 2012 at 22:09

This is interesting. And here I thought high school was the only place where brands mattered!

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JT McGee March 19, 2012 at 11:46

Same here. I guess I’m not surprised at the results, but more so the magnitude of the difference between branded and non-branded clothing.

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Kari@Small Budget Big Dreams March 18, 2012 at 22:37

A good friend of mine once told me that if you wear one expensive designer piece that’s recognizable, the rest of your outfit doesn’t matter because people will assume it’s expensive. Interesting study, just proof that appearance does still matter, whether we like it or not.

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JT McGee March 19, 2012 at 11:47

Ha, that’s a pretty interesting thought from your friend. It’s also probably true.

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JP@Novel Investor March 19, 2012 at 00:47

So basically, all we need to do is get a hold of several expensive name brand logos and sow them on plain, cheaper shirts and we’re good. Something the black market has been doing for years.

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PK March 19, 2012 at 10:32

… or order on second hand sites? You never know if it’s legit when you get it from some places, haha. As long as it lasts one wear!

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JT McGee March 19, 2012 at 11:49

Exactly. You only need it once.

Although, for a 9% salary increase, you better just play by the rules and get the real thing. 😉

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JT McGee March 19, 2012 at 11:48

I like the way you think! My parents have some “Tommy” shirts they purchased thinking they were real in the late 90s, early 2000s. Nope! Check the tags – Fruit of the Loom.

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ImpulseSave March 19, 2012 at 11:49

Very interesting piece. I find it surprising that those asking for donations did so much better while they were wearing expensive brands. I would have thought that this would undercut the sense of need in the situation. However, based on what you said about “perceiving trust”, it makes sense: donating to a charity is still in many ways just like marketing anything else.

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JT McGee March 19, 2012 at 12:02

I thought that too. See, my frugal self would think, “hey, if the cause is so important, why not sell your shirt and donate yourself” and then probably pass on a donation. But really, when I think back to all the people who have knocked on my door to sell me something, it’s the people that were poorly dressed that sketched me out the most.

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Jai Catalano March 19, 2012 at 12:19

It reminds me of when I worked in a pastry shop when I was a kid. The owner used to say keep an eye out for a “certain kind” of person. It was the man in the business suit that was stealing and not the “certain kind” of folk. Point is our brains are tricked into thinking that those who look or wear expensive things are regarded more than those who don’t.

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Financial Samurai March 20, 2012 at 04:10

Once you go tailor made, you don’t buy off the rack anymore. If you go to Bond St. in London or in Kowloon, HK… all you will want to do is buy clothes that are custom made and fit perfectly!

Trust me on this!

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