October 22, 2013
Get the Best Price: Read Some Brain Waves Today
A German scientist claims to have figured out a better way for companies to determine how much to price the products they sell — reading brain waves.
Kai-Markus Müller, who used to worked for Simon, Kucher and Partners, a consulting firm specializing in pricing, came to the conclusion that traditional methods for determining how much consumers were willing to pay for a product were inadequate since people didn’t always answer honestly when asked how much they would pay for a given product.
According to Der Spiegel, Mr. Müller concluded that brain waves are the answer. Using EEG equipment, he showed test subjects the same pot of Starbucks coffee on a screen with various price points, all the while plotting their brain activity. What he discovered was that in Germany, at least, Starbucks could actually charge higher prices for its drinks.
"The company is missing out on millions in profits, because it is not fully exploiting consumers’ willingness to pay money," he told Der Spiegel.
(Meanwhile Starbucks is defending itself against charges of profiteering in China.)
In a follow-up experiment, Mr. Müller and scientists at the Munich University of Applied Sciences installed a vending machine that sold coffee for 70 cents, cappuccinos for 80 cents, and left it up to students to determine what to pay for macchiatos. After a few weeks, the price leveled off at 95 cents. What was particularly interesting is that when Mr. Müller performed the experiment, a la the Starbucks test, the price that activated test subjects’ brains was also 95 cents.
- Is Your Coffee too Cheap? – Der Spiegel
- Mind-reading your brain’s budget: How neuro-pricing proved Starbucks undercharges – SlashGear
- Companies Will Start Reading Your Mind To Figure Out How Much You’re Willing To Pay – Fast Co
- Will Companies One Day Use Brain Waves to Find Ideal Pricing? – Bloomberg Businessweek
- Starbucks Chief Defends China Coffee Prices – Financial Times (tiered sub.)
BrainTrust
Recent Discussions
Discussion Questions
Do you see a future in which neuro-pricing products becomes the norm? What intrigues and/or concerns you about Kai-Markus Müller’s work?
Poll
Brain wave activation is not emotion-specific. You can get the same level of activation by showing very high prices as you can for good prices that are higher. I’m pretty sure this is not the best science you’ve ever seen.
I don’t see the neuro-pricing of products becoming the norm very soon, as it requires an investment of time and money, not to mention a commitment on the part of marketing. Consumer neuroscience in marketing research is becoming more prevalent across advertising, packaging, and website usability, for example. My own experience in this area has shown me that as marketers become more familiar with the applications and positive results, there is broader use. It won’t be the norm until the technology and methods are cost and time efficient for all (or at least most) brands.
Of course no one questions the ethics of charging the highest price people will pay just because you can…but I digress.
The sub-conscious mind is responsible for about 95% of everything we experience. That means there is precious little that we make cognitive, independent, rational decisions about – 5% obviously. How we were subconsciously programmed growing up influences pretty well all decisions.
Traditional marketing asks the 5% conscious mind what we’d pay for anything. Or if we like this design over that design. The subconscious 95% says “What are you asking him/her for? They don’t know anything and aren’t in charge of spending anyway; ask me.”
Indeed almost everything we do in our organizations is aimed at the wrong level of the human mind. For example, we think people will buy into our new “vision” because we sent a memo around to the 5% announcing it. We all know how excited everyone gets after that.
Honestly what Muller is doing is pretty old news. Researchers have been using neuro-tools for a long time. There are techniques to tap into the subconscious that don’t require a person to be wired up to an EEG machine – that’s a little hard to work into an executive meeting. Techniques from bio-energetics for example. (The classic book here is “Power VS Force” by Dr. David Hawkins.) I’ve used such techniques with an executive team to determine which of their newly formed “Operational Values” they truly believed on a subconscious level. The results were shocking with half the execs showing DIS-belief in the value of having ‘an energizing and fun workplace’. I guarantee you their subconscious decided that “work is hell and is supposed to be miserable, that’s why you get paid” as it was for their father for 45 years.
If this gets off the ground (and I doubt it), professional cheapskates will be in great demand to go shopping for people. Why should I pay $3 for bread when my shopper from cheapskates.com or whatever can get it for $1? (BTW, cheapskates.com is available as a URL. You heard it here first.) And if I were buying a car? I’d get my biggest cheapskate friend to do it for me. Oh, wait, I do that already. Hmmm…
Meh. I do not see a future where neuro-pricing products becomes the norm. Moreover, I simply shudder to think how boring the marketplace would be if EEG equipment and reading brain waves replaced each consumer’s subjective perception of the price they are willing to pay for a product based on their very own personal wants and needs.
Traditional shopper surveys are most always flawed in their findings. If these experiments prove to be viable, I think this technology integrated with price optimization technologies that exist today will be a compelling value proposition for merchants and CPG companies.
Beyond the typical concerns around legitimacy, and applicability to reality (i.e. a store situation is very different from a lab), I foresee that IF this science proves to be reliable and accurate it would become a part of pricing decisions at most.
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Brain wave activation is not emotion-specific. You can get the same level of activation by showing very high prices as you can for good prices that are higher. I’m pretty sure this is not the best science you’ve ever seen.
I don’t see the neuro-pricing of products becoming the norm very soon, as it requires an investment of time and money, not to mention a commitment on the part of marketing. Consumer neuroscience in marketing research is becoming more prevalent across advertising, packaging, and website usability, for example. My own experience in this area has shown me that as marketers become more familiar with the applications and positive results, there is broader use. It won’t be the norm until the technology and methods are cost and time efficient for all (or at least most) brands.
Of course no one questions the ethics of charging the highest price people will pay just because you can…but I digress.
The sub-conscious mind is responsible for about 95% of everything we experience. That means there is precious little that we make cognitive, independent, rational decisions about – 5% obviously. How we were subconsciously programmed growing up influences pretty well all decisions.
Traditional marketing asks the 5% conscious mind what we’d pay for anything. Or if we like this design over that design. The subconscious 95% says “What are you asking him/her for? They don’t know anything and aren’t in charge of spending anyway; ask me.”
Indeed almost everything we do in our organizations is aimed at the wrong level of the human mind. For example, we think people will buy into our new “vision” because we sent a memo around to the 5% announcing it. We all know how excited everyone gets after that.
Honestly what Muller is doing is pretty old news. Researchers have been using neuro-tools for a long time. There are techniques to tap into the subconscious that don’t require a person to be wired up to an EEG machine – that’s a little hard to work into an executive meeting. Techniques from bio-energetics for example. (The classic book here is “Power VS Force” by Dr. David Hawkins.) I’ve used such techniques with an executive team to determine which of their newly formed “Operational Values” they truly believed on a subconscious level. The results were shocking with half the execs showing DIS-belief in the value of having ‘an energizing and fun workplace’. I guarantee you their subconscious decided that “work is hell and is supposed to be miserable, that’s why you get paid” as it was for their father for 45 years.
If this gets off the ground (and I doubt it), professional cheapskates will be in great demand to go shopping for people. Why should I pay $3 for bread when my shopper from cheapskates.com or whatever can get it for $1? (BTW, cheapskates.com is available as a URL. You heard it here first.) And if I were buying a car? I’d get my biggest cheapskate friend to do it for me. Oh, wait, I do that already. Hmmm…
Meh. I do not see a future where neuro-pricing products becomes the norm. Moreover, I simply shudder to think how boring the marketplace would be if EEG equipment and reading brain waves replaced each consumer’s subjective perception of the price they are willing to pay for a product based on their very own personal wants and needs.
Traditional shopper surveys are most always flawed in their findings. If these experiments prove to be viable, I think this technology integrated with price optimization technologies that exist today will be a compelling value proposition for merchants and CPG companies.
Beyond the typical concerns around legitimacy, and applicability to reality (i.e. a store situation is very different from a lab), I foresee that IF this science proves to be reliable and accurate it would become a part of pricing decisions at most.