Just about every news pundit on TV has declared that THIS is finally the oil price change that shocks Americans out of their gas-guzzling ways. It’s hard to argue with that logic. Trucks and big SUVs are piling up on dealer lots. Consumers looking to trade in one of those thirsty vehicles find that its value has dropped by thousands of dollars in a few months. General Motors is shuttering truck plants and has put its HUMMER brand up for review and potential sale. This looks like the real thing. But is it? Maybe our tricky brains will surprise everyone… (more…)
Articles about 'Buying Pain'
Mon 21 Jul 2008
Digg itFri 18 Jul 2008
Anchor Pricing Strategies
Posted by Roger Dooley under Neuromarketing , Neuroscience Research , Neuroeconomics[3] Comments
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. (more…)
Thu 22 May 2008
Regular cruise ship passengers almost always say that cruising is the least painful way to travel. Once you are on the ship, there’s no packing or unpacking as you visit new destinations, and you are pampered 24/7. Your cabin is straightened and cleaned several times per day, and an endless cornucopia of food is available. Passengers can see live entertainment, attend lectures, play games, or do nothing at all if they so choose. For many, that’s a painless way to spend one’s travel time.
One of the kinds of pain we talk about here at Neuromarketing is the “pain of paying” or “buying pain” – brain scans show that shelling out cash can activate the pain centers in the brain. (See The Pain of Buying.) Cruising generally excels at minimizing this kind of pain, too – once the cruise has been paid for (often many months before the actual cruise), almost everything is included. Elegant dinners, sumptuous buffets, Broadway-style entertainment, and much more is “free” on board the ship. For customers who feel the pain of paying more acutely than others, cruising is about as pain-free as you can get. Want more lobster? It’s free. Care to watch a recently-released movie after the performance by a concert pianist, and then hang out at the disco until dawn? It’s all free. Cruise lines further minimize paying pain by ensuring that their passengers pay for nothing with cash – one’s “cruise card” is a combination room key and shipboard credit card that one can use to buy anything on the ship. (In almost every case, an automatic service charge obviates the need to calculate a tip or even look at the amount one signed for – a great way to further minimize buying pain.)
The nature of cruising is that you are often thrust into contact with other passengers as you share a dinner table, sit next to each other at a show, and so on. Introductions always involve first names and where one lives. By far the most frequent opening conversational gambits are how many cruises one has been on, which lines and itineraries are the best, and what one thinks of the current cruise in the context of past cruises. Aboard the Crown Princess on a cruise I just completed, a new topic cropped up in perhaps half of these random encounters: the small charges that seemed to be mushrooming all over the ship. (more…)
Thu 24 Jan 2008
As described many times here at Neuromarketing, paying for a product activates the brain’s pain center, particularly if the price seems too high to the person making the buying decision. Starbucks is the company that taught us that $5 for a cup of coffee (or at least for a skinny mocha peppermint latte with an extra shot ) isn’t too much too pay. A simple cup of brewed coffee costs less, but the high cost of Starbucks beverages has made the $5 Starbucks coffee a staple of stand-up comedy routines. Now, new competitors like McDonalds are creeping in and showing consumers that maybe Starbucks actually IS kind of expensive for what you get. The buyer pain that Starbucks had suppressed over the years is in danger of returning. (more…)
Wed 16 Jan 2008
Why Expensive Wine Tastes Better
Posted by Roger Dooley under Neuromarketing , Neuroscience Research , Neuroeconomics[2] Comments
For Neuromarketing readers, it’s not big news that the perception of wine drinkers is altered by what they know about the wine (see Wine and the Spillover Effect, for example). Now, researchers at Stanford and Caltech have demonstrated that people’s brains experience more pleasure when they think they are drinking a $45 wine instead of a $5 bottle - even when it’s the same stuff. The important aspect of these findings is that people aren’t rationalizing on a survey, i.e., reporting that a wine tastes better because they know it’s a lot more expensive. Rather, they are actually experiencing a tastier wine. (more…)
Mon 17 Dec 2007
Cool Products and Neuromarketing
Posted by Roger Dooley under Neuromarketing , Neuroscience ResearchNo Comments
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. (more…)
Wed 28 Nov 2007
Big companies often find great ways to aggravate their customers, and cell phone giant Sprint proves the point. John Wall of the Ronin Marketing blog posted a rant about Sprint’s advertising for their Centro Palm smartphone, Screw Your Customers. Wall was understandably miffed when he found out that the $99 advertised price for the phone applied only to new customers, and that as an existing four-phone Sprint customer, he would have to pay $250 for the Centro. Beyond exacting what appears to be a penalty for customer loyalty, Sprint has committed a second sin of the neuromarketing variety. (more…)
Mon 26 Nov 2007
Cyber Monday is one of those recent inventions that seems a bit suspect. Is the Monday after Thanksgiving really the biggest ecommerce sales day? It looks like Cyber Monday will have to work hard to beat Black Friday, when reports indicate that shoppers spent over $500 million online. Just in time for the online sales blitz, Web marketing expert Gord Hotchkiss has written a thoughtful post on Web impulse buying. Hotchkiss brings together interesting research on website impulse buying with some of the neuromarketing/neuroeconomics research on purchases that we’ve previously cited to suggest a model for ecommerce impulse buys: (more…)
Mon 5 Nov 2007
Penalty Pain: How to Make Your Customers Hate You
Posted by Roger Dooley under Neuromarketing , NeuroeconomicsNo Comments
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. (more…)
Tue 9 Oct 2007
Five Keys to Selling to Spendthrifts
Posted by Roger Dooley under Neuromarketing , Neuroeconomics[2] Comments
Neuroeconomics research suggests that roughly 15% of your consumers are “spendthrifts” - they have unusually low sensitivity to the pain of paying, i.e., the neural discomfort associated with parting with money. Selling to people who feel little or no buying pain should be easy, right? With reduced buying inhibition, a spendthrift is more likely to take advantage of any given offer compared to a tightwad or even a normal, “unconflicted” person. Nevertheless, making the sale isn’t a given. For one, your offer is competing with other offers both for similar products or services as well as offers for dozens of other, unrelated items. Unless your spendthrift has the net worth of Bill Gates, he will have to make choices - as much as he might like to, he can’t buy everything. So, in our ongoing effort to translate academic neuroeconomics into practical neuromarketing, here are five ways to help close the deal with these free-spending customers: (more…)
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