Price and Product Brainfluence
Every marketer wrestles with decisions about how to structure a
product line and how to set prices. A small difference in pricing can
make a big difference in profits, but the wrong price can kill sales, too.
Fortunately, neuromarketing has plenty to tell us about these closely
The "Ouch!" of Paying
One of the key insights neuroeconomics and neuromarketing research
have provided us is that buying something can cause the pain center
in our brain to light up. Researchers at Carnegie Mellon and Stanford
universities presented subjects with cash, put them in a functional magnetic
resonance imaging (fMRI) machine to record their brain activity,
and then offered them items, each with a price. Some of the products
were overpriced, and others were a good value. The subjects were able
to choose to buy items with their money or keep the cash. The researchers
compared self-reporting of purchase intentions by the subjects, brain
scan data, and actual purchases.
I spoke with Carnegie Mellon University professor George
Loewenstein after that work was published, and he noted that one significant
aspect of the findings is that the brain scans predicted buying
behavior almost as well as the self-reported intentions of the subjects. In
other words, absent any knowledge of what the subject intended to do,
viewing the brain scan was just about as accurate as asking the subject
what he or she would do.
Loewenstein pointed out that, in this experiment, the questions
about the intentions of the subject were quite straightforward and one
would expect the answers to be good predictors of actual behavior.
The "negative" activation produced by cost is relative, according to
Loewenstein. That is, it isn't just the dollar amount; it's the context of
the transaction. Thus, people can spend hundreds of dollars on accessories
when buying a car with little pain, but a vending machine that takes
75 cents and produces nothing is very aggravating.
Bundling Minimizes Pain
Auto luxury bundles minimize negative activation because their price
tag covers multiple items. The consumer can't relate a specific price to
each component in the bundle (leather seats, sunroof, etc.) and hence
can't easily evaluate the fairness of the deal or whether the utility of the
accessory is worth the price.
Cost isn't the only variable that causes "pain." It's really the perceived
fairness or unfairness of the deal that creates the reaction. Other parts of
an offer that caused it to appear unfair would presumably cause a similar
reaction as a price that was too high.
There's not always a single "fair" price for an item. For most people,
a fair price for a cup of coffee at Starbucks would likely be higher
than a cup from a street corner coffee cart. A famous study by economist
Richard Thaler showed that thirsty beachgoers would pay nearly twice as
much for a beer from a resort hotel than for the same brew from a small,
rundown grocery store.
Credit as Painkiller
Overall, Loewenstein wasn't enthused about using his work for neuro-marketing
purposes. He pointed out that, for many years, credit card
companies have prospered while encouraging consumers to spend too
much by exploiting the principles he's now uncovering in his research.
The problem is that, for many consumers, the credit card takes the
pain (quite literally, from the standpoint of the customer's brain) out of
purchasing. Pulling cash out of one's wallet causes one to evaluate the
purchase more carefully.
We think this makes a lot of sense and is entirely consistent with
real-world behavior. A credit card reduces the pain level by transferring
the cost to a future period where it can be paid in small increments.
Hence, not only does a credit card enable a consumer to buy something
without actually having the cash, but it also tips the scale as one's brain
weighs the pain versus the benefit of the purchase. This can be a bad
combination for individuals lacking financial discipline.
Brainfluence Takeaway: Minimum Pain, Maximum Sales
Pricing and the product itself need to be optimized to minimize the pain
of paying. First, the price must be seen as fair. If your product is more
expensive than others, take the time to explain why it is a premium
If you find yourself in a situation where, for cost or other reasons,
the price of a product is likely to produce an "ouch!" reaction from your
customers, see if some kind of a bundle with complementary items will
dull the pain.
Payment terms and credit options can also reduce the pain of paying.
Don't push your customers into buying products they can't afford,
but even affluent customers will feel less pain if they don't have to make
immediate payment in cash.
Don't Sell Like a Sushi Chef
I love sushi. But I hate the way most sushi restaurants sell it, with a
separate price for each tiny piece. Every bite I take seems to have a price
tag on it. "Mmm ... not bad. But was that mouthful worth five bucks?
Do I really want another one?"
It turns out my brain is normal, at least in relation to my aversion
to the typical sushi pricing scheme. In the last chapter, we met
Carnegie Mellon University economics and psychology professor George
Loewenstein. Another insight from his work is that selling products in a
way that the consumer sees the price increase with every bit of consumption
causes the most pain. This isn't physical pain, of course, but rather
activation of the same brain areas associated with physical pain. In an
interview with SmartMoney, Loewenstein noted:
[Consumers are] not weighing the current gratification vs. future gratifications.
They experience an immediate pang of pain [when they
think of how much they have to pay for something] ...
It also explains why AOL switched from pay-per-hour Internet service
to pay-per-month. When they did that, they got a flood of subscribers
... Why do people love to prepay for things or pay a flat
rate for things? Again, it mutes the pang of pain. The worst-case
alternative is when you pay for sushi and you're paying per piece.
Or watching the taxi meter; you know how much every inch of the way
is costing you.
Marketers have realized this for years, and they have responded with
offers designed to minimize the pain associated with buying their products.
All-inclusive meal options are popular at many eateries. Netflix
crushed its video rental competitors in part by its "all-you-can-watch"
price strategy. Cruises have surged in popularity in part because they
deliver a vacation experience for a fixed price. In each case, the marketer
offers a single, relatively attractive price that removes additional pain
from the buying experience.
Paying for Pain Avoidance
In many situations, the single price is actually higher than the amount
the consumer would have spent on individual food items, movie rentals,
and so on. Nevertheless, the all-inclusive number is likely to appeal to
many consumers, particularly those that Loewenstein would identify as
being most sensitive to the pain of buying.
Brainfluence Takeaway: Avoid Multiple Pain Points
To minimize customer pain, marketers should always try to avoid multiple
individual pain points in the purchasing process. Obviously, some
situations make individual purchases unavoidable; for example, a grocery
store can't offer fee-based shopping instead of item-by-item pricing.
Many business situations, though, will permit some experimentation
with a single-price approach for items usually purchased separately, such
as a monthly or annual fee instead of individual transactions. That simpler
pricing approach may boost not only sales, but because some people
will pay a premium for pain avoidance, profit margins as well.
The concept of priming is simple, although it's also a bit unsettling: if
you present an individual with subtle cues, you can affect that person's
subsequent behavior, even though he or she is entirely unaware of either
the priming or behavioral changes. Money-related images are some
of the more potent forms of priming.
Psychologist Kathleen Vohs has studied priming extensively and
found that supplying subjects with cues related to money increases selfish
behavior. For example, she and her colleagues had student subjects
either read an essay that mentioned money or sit facing a poster that
pictured different types of currency.
The subjects who were primed with money cues took 70 percent
longer to ask for help in solving a difficult problem and spent only half as
much time helping another person (who, unknown to the subject, was
actually part of the experiment) needing assistance.
The money-primed subjects also preferred to work alone and chose
solitary leisure activities compared with unprimed subjects. They even
sat farther apart when setting up chairs to chat with another subject.
Vohs concludes that even subtle money cues change the frame of
mind people are in: they don't want to depend on others, nor do they
want others to depend on them.
This work has interesting implications for advertisers who frequently
use money themes in their ads. Big savings, higher investment returns,
visions of prosperous retirement, money containers ranging from piggy
banks to gleaming bank vaults ... ads are full of these images. Most of these
ads appeal to the selfish interest of the viewer, so any priming that takes
place matches the intent of the advertisement. A mutual fund company
touting superior returns and prosperous-looking retirees clearly wants to
appeal to the self-interest of the customer; the company hopes the viewer
will be sufficiently enticed by these images to transfer funds to it.
Money-related advertising images are pervasive in other types of
ads, though, and not all appeal to selfish interests. Many print, television,
and even in-store ads seem to emphasize savings. Are "save money
on gifts for Mom" advertisers shooting themselves in the foot by subtly
priming the would-be gift givers with selfish feelings?
The advertisers who should be particularly cautious about money
cues are those who want to appeal to the viewer's feelings about others.
Filling viewers with feelings of warmth and a desire to please someone
else, and then reminding them about money, could be self-defeating.
Really, of course, it's a trade-off. Good salespeople often make the
sale using feelings and emotion, and then close the deal with a financial
incentive that has an expiration looming. If you've ever sat through a
time-share sales pitch, you'll recognize that technique. Much of the pitch
is intended to evoke warm feelings about recreation, quality time with
family and friends, and so on, but there's always a financial incentive as
the close approaches. Special financing is available only today, there's a
price reduction for 48 hours, and so on. This approach is clearly effective.
An advertiser must make a judgment call on whether and how to bring
money into the picture if the appeal is primarily an emotional one.
No Money in Sight
Think about the long-running A Diamond Is Forever campaign. This is a
good example of advertising that scrupulously avoids introducing money
cues. Their ads target the luxury gift market. Spending large sums of
money to give someone else a polished piece of carbon whose value is
determined by cartel-enforced scarcity is hardly a concept that appeals
to one's self-interest.
This effective ad campaign is a purely emotional pitch that would
be spoiled by a tagline that offered, for example, "special savings in
December!" The ads even avoid talking about the investment value of
Even a simple currency symbol in front of a price can make a difference.
One Cornell study looked at several common restaurant price display
Numerical with dollar sign: $12.00
Numerical without dollar sign or decimals: 12
Spelled out: twelve dollars
The researchers expected that the written/scripted prices would perform
best, but they found that the guests with the simple numeral prices
(those without dollar signs or decimals) spent significantly more than
the other two groups did. When you visit a restaurant and find the menu
has small prices presented this way, you'll know they are up on their neuromarketing
Brainfluence Takeaway: Use Money Cues Wisely
Use currency symbols in ads for products consistent with selfish
feelings—products that offer financial independence, for example, or
even a self-indulgent purchase like a sports car.
For campaigns focused on giving and thinking about others, such
as gifts, nonprofit appeals, and so forth, advertisers may want to be a bit
cautious and should likely avoid introducing financial imagery.
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, and confusing pricing). 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 arrives
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 views 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 (say, $2 for a cup of coffee for the local
coffee shop) 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.
Gasoline: Drifting Anchor
First, let's look at a nonsticky anchor price scenario that most of us cope
with daily: fluctuating gasoline prices. In the United States, we've seen
prices surge past the $4 level, not high by world standards but a new
threshold for Americans. The first time I saw that "4" digit at the front of
the price, I'm sure my brain registered pain. I had barely become used to
paying $3 per gallon of gas. But, after a short time, my anchor was reset.
The $4 prices were no longer exceptional, and if I had been seeing mostly
$4.29 prices, a $4.09 price would register as a good deal. If I saw a station
offering gas for $3.99—a price that only a few months earlier would have
seemed outrageously high—I'd be hard pressed not to pull into the station
to take advantage of the "bargain." Of course, gasoline is a unique
product; we expect its price to vary, and we have constant feedback on
current pricing as we pass gas station signs. For this product, we are constantly
Real Estate Prices
Other items have stickier anchor points. In Predictably Irrational, Dan
Ariely describes research by Uri Simonsohn at Penn and George
Loewenstein at Carnegie Mellon University, showing it takes about a
year after relocation for home buyers to adapt to the pricing in a new
market with higher or lower real estate prices. People who moved and
bought a new home immediately tended to spend the same amount on
housing as they had before, even if it meant buying a home that was
much larger or smaller than the one they left.
Excerpted from "Brainfluence: 100 Ways to Persuade and Convince Consumers with Neuromarketing" by Roger Dooley. Copyright © 0 by Roger Dooley. Excerpted by permission. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher. Excerpts are provided solely for the personal use of visitors to this web site.