All Vodka Is the Same. So Why Is Some More Expensive Than Others?

It's about what people are really paying for.

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By Gene Marks • Aug 6, 2019

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Opinions expressed by Entrepreneur contributors are their own.

All vodka is the same. Really, it is. Don't believe me?

Then listen to Alex Goldmark and Dan Pashman's entertaining Planet Money podcast, where they prove it. The two journalists sent out three samples of vodka -- an expensive Grey Goose, a homemade version and a bottom-shelf cheap kind -- to an independent lab, and the lab came back saying that the taste of all three was pretty much equal. Actually, because one of the samples had slightly more of a compound that could cause allergies, a rep from the lab said that the cheapest vodka -- and not the expensive Grey Goose -- was actually better.

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Why is this?

"Title 27, Section 5.22 of the Alcohol, Tobacco and Firearm code says that vodka must be distilled and treated until it is 'without distinctive character taste, aroma color,'" Pashman reported. "By law you have to make an industrial grade pure alcohol first, and then all you do is add water and you have vodka."

All vodka is the same! It's, according to Cornell Law School's Legal Information Institute, a "neutral spirit" that is "so treated after distillation with charcoal or other materials, as to be without distinctive character, aroma, taste or color."

So if it's all the same, how come a bottle of Grey Goose costs about $35 while Sobieski Vodka is only $12? That's almost three times the price! Vodka aficionados will tell you that the costlier brands are "distilled more" or use "higher quality ingredients" (uh, water?) or won't cause vicious hangovers come the morning. Maybe they're right about that. But there's really just another reason: People pay based on perception.

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It's cool to drink Grey Goose, or Absolut or "Stoli," aka Stolichnaya. You look hip to your friends -- or that date you're trying to impress -- and you feel cool doing it. It's the same reason why people pay more for a BMW or drop $70 for a steak at Morton's when you can get a perfectly good steak at Outback for half the price. It's about image. It's about impression. It's about feeling good.

My little tech firm charges $175 per hour for our services. That's expensive. People can hire techs for less than half the price. But do they have the "knowledge" that we have? Do they have the "comfort" of knowing that we're so "experienced?" Don't they want to tell their employees and investors that they're using "the best"? And doesn't "the best" always cost more? I admit that other, less costly, techs may be able to do the same kind of job we do. But, after 25 years in the business, there's a certain intangible allure about our firm that appeals to certain kinds of clients. Yeah, pizza is just pizza, but gourmet pizza is definitely worth it, right?

Related: These Women Entrepreneurs Have Created a Multimillion-Dollar Business by Reinventing Sorbet

Science shows that all vodka is essentially the same. The ingredients that go into a bottle of Grey Goose -- just like the materials and labor hours you put into a job -- really don't matter in the end. What matters is how the customer feels when they order a Grey Goose on the rocks... or hires your company to do a job.

Gene Marks

Entrepreneur Leadership Network VIP

President of The Marks Group

Gene Marks is a CPA and owner of The Marks Group PC, a ten-person technology and financial consulting firm located near Philadelphia founded in 1994.

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