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Banking Mess: Blame Our Brains

By |September 26th, 2008|

As the current financial chaos moves toward some kind of resolution, there will no doubt be plenty of Monday morning quarterbacking to explain what went wrong. One group that one wouldn’t expect to have explanations are neuroscientists. As it turns out, neuroscience researchers actually can shed some light on why things went so wrong.

One of the first questions that everyone asks is how so many seemingly intelligent people could make so many errors in judgment. One simple answer, of course, is greed – at least some individuals saw a way to profit personally by making poor business decisions (loaning money to people unlikely to be able to pay it back, insuring such loans, rating securities based on these shaky loans, and so on). While there’s little doubt in my mind that personal interest was the biggest underlying factor, systemic factors and even biology likely played a role. By systemic factors I mean the way many of these markets were structured. Writing a shaky loan sounds like a bad business decision, but if there are buyers for loans of this type perhaps it really isn’t a bad decision for the originator. But, on to the brain science… […]

Anchor Pricing Strategies

By |July 18th, 2008|

Here’s a scenario… You decide to venture into a cell phone store despite your reluctance to deal with a bewildering number of phones, options, plans, along with a confusing price structure. As usual, you find you’ll have to wait a bit for a salesperson. The greeter hands you a card with a big “97″ printed on it, and says, “It should only be a few minutes. We’ll call your number, 97, when a salesperson can help you.” You notice that a large digital display on the wall is showing “94.” You see it click to 95, then 96, and finally 97. The receptionist says, “Number 97, please,” and a salesperson appears to assist you. You thought nothing of the numeric ordering of customers, but it’s possible that the store had an ulterior motive: they could have been attempting to manipulate the price you would pay. Sound bizarre? Read on…

When a consumer is presented with an offer, a key element in the decision to accept or reject it is whether it appears to be a “fair deal” or not. We know that buying pain – the activation of our brain’s pain center when paying for a purchase – increases when the price seems too high. But how does that value equation work? The answer is anchoring – typically, we store an anchor price for different products that we then use to judge relative value. That sounds simple enough… but it’s actually not. Some anchor prices are stickier than others, and at times totally unrelated factors can affect these anchor points. The better marketers can understand how anchoring works, the more creative and effective pricing strategies they will be able to develop. […]

Bikinis, Babes, and Buying

By |June 24th, 2008|

Scantily clad women have been used to sell products to men for decades, and likely for millennia in one form or another. There’s little doubt that the typical male brain is wired to respond to attractive females in revealing attire. But is this a cheap attention-getting trick that has no real impact on sales, or does it actually work? Researchers shed new light on this topic by exposing subjects to either videos of women in bikinis or more neutral videos, and evaluating their decision making ability. […]

CMU Computers Read Thoughts

By |January 7th, 2008|

Most scientists have dismissed the idea of reading minds using technology as pure science fiction, but Carnegie Mellon University researchers have moved a step closer to doing so. Not only have they been able to identify which of several images a subject is looking at using fMRI scans of their brains. The most startling result is that the CMU researchers were able to take the data from the initial batch of subjects and repeat the identification feat with new subjects. […]

Cool Products and Neuromarketing

By |December 17th, 2007|

I’ve often said that the most exciting application of neuromarketing techniques isn’t that of choosing or developing advertisements, but rather designing better products. While some may feel that enhancing ad effectiveness with brain scans (for example) is somehow manipulative, who can argue against products that have more consumer appeal? After all, the objective of every product designer is to come up with a product that best satisfies the intended customer group, so why not look at what’s really happening in these customers’ brains rather than relying on dubious paper surveys or focus groups? Caltech’s Steve Quartz seems to be on of the few academic neuromarketing researchers focused on product design and improvement. […]

Penalty Pain: How to Make Your Customers Hate You

By |November 5th, 2007|

Neuromarketing readers are by now familiar with the idea of “buying pain” or “pain of paying” – when we buy something, the pain center in our brain can be activated. Work by Carnegie Mellon’s George Loewenstein and others shows that this effect is greatest when the price is perceived to be high or unfair. Buying a pack of gum for $10 would be a lot more “painful” than spending 50 cents for the same item. One wonders how painful paying multiple $40 bounced check fees would be, particularly if you knew your bank processed the largest checks first to ensure the maximum number of bounces. […]

Negative Shipping, Less Pain, More Gain

By |October 5th, 2007|

If there’s one persistent theme here at Neuromarketing, it’s that good offers reduce buying pain for consumers, and bad offers increase it. My fellow Web marketer and occasional PubCon co-panelist Andy Beal has identified an ad that he terms “the most enticing banner ad ever,” and he might be right. Endless.com has moved beyond “Free Shipping,” and even “Free Overnight Shipping,” to offer “Negative $5 Shipping.” […]

Five Keys to Selling to Tightwads

By |October 3rd, 2007|

One out of four potential customers for your product may not buy it, even if the purchase makes economic sense or is otherwise a good decision. A couple of days ago, in Tightwads, Spendthrifts, and Everyone Else, I wrote about research that found people could be categorized by their spending behavior into three major groups. While the largest group, described as “unconflicted,” comprised 60% of the large sample of survey subjects, a quarter of the group were identified as “tightwads.” The latter group presents a unique marketing challenge because they will resist spending money even when the expense is reasonable and perhaps justified. How does a marketer not only make the case for her product, but get a tightwad to part with his money? Here are five tactics: […]

Tightwads, Spendthrifts, and Everyone Else

By |October 1st, 2007|

Marketers love to segment their potential customers, and now there’s a new way to do it: spendthrifts, tightwads, and everyone else. Research at Carnegie Mellon University shows that 40% of consumers can be classified as either spendthrifts or tightwads, while 60% fall into a middle category without strong tendencies in either direction. Furthermore, this behavior is related to one of our favorite neuromarketing topics, buying pain. […]

Contest Marketing: Beating the Odds

By |September 7th, 2007|

In This is Your Brain on Money, I mentioned that I’d visit some of the other neuromarketing-related topics raised in Jason Zweig’s interesting article in Money, Your money and your brain. One of these is that our brains […]