Neuromarketing

Why do people do things that will gain them social approval? It turns out that the same parts of the brain are activated for a positive social outcome as for a monetary reward. In other words, the same reward circuitry is turned on both by social and monetary gains. Corporate marketers as well as non-profit fundraisers have always known that most individuals crave social approval, but these new findings show how our brains process these social rewards and how they relate to money. (more…)

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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…)

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I love research findings that run counter to intuition, or are at least unexpected, and the idea that you can get more for your house if you market it with an odd price is certainly unexpected. That’s what University of Florida researchers found, though:

They looked at five years of real estate sales in Alachua County, Florida, comparing list prices and actual sale prices of homes. They found that sellers who listed their homes more precisely—say $494,500 as opposed to $500,000—consistently got closer to their asking price. Put another way, buyers were less likely to negotiate the price down as far when they encountered a precise asking price. Furthermore, houses listed in round numbers lost more value if they sat on the market for a couple of months. So, bottom line: one way to deal with a buyer’s market may be to pick an exact list price to begin with. [From Scientific American Mind - Why Things Cost $19.95: What are the psychological “rules” of bartering? by Wray Herbert]

With the sub-prime meltdown still hammering real estate prices, getting your asking price for your home may be difficult. Just maybe, though, you can get a little closer with a price that’s not a round number - that “odd” price will provide an unconscious implication of precision compared to a number that is too even-looking.

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Consumers must like lots of choices - why else would there be hundreds of shampoo brands and variants on a typical supermarket shelf? Actually, its been known for years that too many choices can reduce consumer purchases. A 2000 study at Columbia University compared consumer behavior when confronted with a selection of either six or 24 gourmet jams in an upscale grocery store. The bigger selection did indeed cause more customers to stop and check it out - 60% vs. 40% for the limited selection. The interesting part, though, was the purchasing behavior. While 30% of the customers presented with the limited selection made a purchase, a mere 3% of those who saw the extensive selection bought something. [See When Choice is Demotivating: Can One Desire Too Much of a Good Thing? Iyengar, S. S., & Lepper, M. Journal of Personality and Social Psychology, 79, 995-1006. (2000).]

Now, additional research conducted by Kathleen Vohs at the University of Minnesota shows that choices can sap one’s stamina and ability to stay focused. Of particular interest to Neuromarketing readers, choices caused subjects to have more difficulty when they needed to make a risky decision later. (more…)

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Erotic images sell better than pictures of office supplies, and a lot better than photos of hairy spiders. Who knew? Actually, that’s a bit of an oversimplification. Stanford researchers led by neuroeconomics prof Brian Knutson have found that positive images, in this case mildly erotic photos of men and women shown to heterosexual men, stimulate the reward center in the brain and induce the viewers to take greater financial risks than subjects who saw neutral (office supplies) or negative (big spider) images. This effect was purely a priming effect, as all of the images were irrelevant to the subsequent decision. The implications of this work could be broad, impacting such diverse areas as gaming and auto sales. (more…)

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In the last day or two, the popular press has been gushing over the finding that meditation can change the brain. I’m not sure why - the twin concepts of neurogenesis (the brain creating new neurons) and neuroplasticity (changes in brain structure and function occurring even in adult brains) are no longer big news. It’s well documented, for example, that the brains of concert violinists allocate more brain space to the parts of the brain that control their fingers. I think what has really caught the attention of the press is not so much that the brain can change but rather that this particular change affected a positive personality trait: the subjects seemed to be more compassionate.

The nasty flip side of this finding is that brains can probably be changed in a negative way - think, for example, of young people fed a constant stream of Islamist rhetoric and hatred of people unlike themselves. The thought that these attitudinal changes could be turning from “software” to “hardware” really gives one pause…

Leaving the scary thought of hardwired hatred, let’s ask a neuromarketing question: can brains be changed by advertising? (more…)

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Readership of Neuromarketing keeps growing, but now Yale researchers have published a paper that reveals my dirty little secret… (more…)

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Did you ever wonder why some people have such insight into the behavior and feelings of others? Certainly, some of the great advertising execs, copywriters, and other pros seem to have it, particularly for certain groups or markets. But are these insights always accurate? It could be these individuals are projecting their own values and feelings onto other people to produce this apparent window into their emotions. Researchers have found that if you know a little about someone, and find that person similar to yourself in some way, your brain behaves very differently if you are asked about the emotional responses of that person: (more…)

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Businesses are often portrayed as rapacious partners, seeking to squeeze every penny out of their deals. Indeed, some are… the result is often a relationship between defined by a fat contract that seeks to protect both parties against bad behavior by the other. New research, which draws on both conventional research and brain-scan driven neuroeconomics studies, reaches the surprising conclusion that fairness is the key to maximizing profits: (more…)

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Most market researchers earn their living by asking questions - what people did, why they did it, what they might do in the future, and so on. The methodology varies - focus groups, Web surveys, interviews, etc. - but in most cases the fundamentals are similar. What would happen if these methods were applied to a person who had a diabolical module in his brain called “The Interpreter” that was constantly making up explanations for that person’s actions? These explanations would usually be logical and plausible, but in almost every case completely false. Unfortunately for market researchers, that person is all of us. (more…)

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