The price that companies set for their products is already a high-stakes game of psychology and competitive strategy. But there’s still a lot of guesswork and uncertainty. Would pricing be more simple and profitable if market researchers could just read consumers’ minds?
Like it or not, such “feel good” pricing could be coming down the product pipeline.
The German news site Spiegel Onlinelast week profiled the provocative work of a Swiss neuroscientist and former sales consultant who is devising a method of measuring brain waves to determine how much a person would be willing to pay for a good or service. Testing his theory has led the researcher, Kai-Markus Mâºller, to conclude that Starbucks is not actually charging enough for its expensive coffee. In fact, it’s probably leaving profits on the table because people would probably still buy it if they charged more.
Mâºller figured this out by targeting an area in the brain that lights up when things don’t really make sense. A coffee for 10 cents? The brain reacts unconsciously because that is so cheap. A coffee for $8? The brain also reacts because it’s too expensive. Measuring our brain activity in this way apparently can get at optimal pricing.
Spiegel Online notes that this idea may seem horrifying, but there could be benefits:
Some consumers are likely to be horrified by what supporters of so-called neuro pricing are already calling a revolution in marketing: the determination of a feel-good price on the basis of brain testing in the laboratory.
From the perspective of the neuroscientist, however, the fear of the transparent customer is unfounded. “Everyone wins with this method,” says Mâºller. He cites as evidence the tremendously large number of flops in the consumer economy. About 80 percent of all new products disappear from shelves after a short time, never to be seen again.
The researcher compared this brain wave method to the prices people were willing to pay in a coffee vending machine he set up that let people set their own price. The two methods matched up – both at a higher price than what Starbucks actually charges. Your brain waves are going to make you poor.
Greed on digital steroids.