Articles about 'Pricing'
Wed 23 Jul 2008
Posted by Roger Dooley under
Neuromarketing[2] Comments
How do you market a product that your customers know is bad before they try it, and which they may well dislike if they do? That’s the dilemma faced by makers of boxed wines - even those of high quality that would fare well in a blind tasting.
Wine is such a subjective product that I could probably devote a blog just to wine neuromarketing. We know that expensive wine tastes better, and that California wine beats North Dakota wine - even when all the wine tasted is the exact same stuff! And these differences have been measured by brain scans, so it’s not just a problem with the tasters saying what they think the researcher wants to hear.
So if the way people experience wine is heavily shaped by their expectations, pity the wineries trying to market box wines in America. U.S. consumers have been conditioned to believe that proper wine comes in a 750ml glass bottle with a natural cork. Artificial corks and screw cap closures are suspect, to say the least. And box wines are traditionally suited only for penniless college students, who will drink anything if it’s cheap enough. Hence, despite the major performance advantages of wine boxes (also called wine casks, or bag-in-box packages), wineries seeking to sell higher quality box wines have major neuromarketing obstacles in their way. What’s a box wine maker to do? (more…)
Share on Facebook
Fri 18 Jul 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. (more…)
Share on Facebook
Thu 10 Jul 2008
A few days ago, I wrote about the power of the word “New” to get our attention - if there’s a more potent attractor out there, it’s almost certainly “FREE!” For years, advertising gurus have listed “free” on every compilation of powerful headline words. Now, research conducted by Dan Ariely (a Duke behavioral economist, previously at MIT) shows us that “free” is far more effective than “almost free.” Indeed, a preference for “free” seems to be another feature hardwired into our brains. (more…)
Share on Facebook
Mon 7 Jul 2008
Predictably Irrational by Dan Ariely does a great job of demolishing the idea that people make decisions in a rational manner. Ariely, a behavioral economist at Duke, describes dozens of experiments that show how we procrastinate, when we cheat, how we interpret prices (definitely a neuromarketing hot button), and much more. Ariely’s work is fascinating at least in part because of the simplicity of most of his experiments. Instead of using multi-million dollar fMRI machines, Ariely’s work tends to involve a simple concept, a few props, and willing subjects (always plentiful on college campuses). The simplicity is deceptive, though, because the results demonstrate the complexity of the brain’s decision-making process. (more…)
Share on Facebook
Thu 22 May 2008
Posted by Roger Dooley under
NeuromarketingNo Comments
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…)
Share on Facebook
Mon 28 Apr 2008
In my time as a catalog marketer, I almost always priced products just below the next dollar increment - a cheap item might be $9.97 rather than $10, while a more expensive item may have been $499, or even $499.99, instead of $500. My strategy was based on a couple of assumptions. First, I thought that there was probably something desirable about offering, say, a “nine-dollar-and-change” price vs. a “ten-dollar” price, i.e., even though the difference was only a few pennies, some customers would perceive the $9.97 price to offer more substantial savings. Second, I observed that big marketers like Sears, who could afford to test any number of pricing options, tended to stick with the “just below the next increment” approach. As it turns out, I was right, but for the wrong reason. New research points us toward the reasons why consumers respond better to a $499 price vs. a $500 price, and it has more to do with the apparent precision of the odd number: (more…)
Share on Facebook
Wed 16 Jan 2008
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…)
Share on Facebook
Tue 9 Oct 2007
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…)
Share on Facebook
Wed 3 Oct 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: (more…)
Share on Facebook
Thu 23 Aug 2007
In our recent article on The Mating Mind, we described how “romantically primed” men were much more likely to spend lots of money than men who were not so primed, and than women in either condition. Separately, we’ve also noted that female salespeople seem to dominate some areas, and that these women seem to skew toward the attractive end of the spectrum. One example is the pharmaceutical sales rep, who prototypically is an attractive female who spends much of her time calling on a predominantly male physician customer base. That’s an overgeneralization, of course - there are lots of female docs, and lots of male drug reps. Still, the stereotype is sufficiently valid that a physician acquaintance of mine expressed mock shock at seeing a middle-aged male drug rep, quipping, “I don’t think I’ve seen one of those before.” (more…)
Share on Facebook
Digg it
Subscribe
