“How can people tell you what they want? If we ask them what they want, we’ll end up doing Swan Lake every year!” – Mario D’Amico, senior VP of marketing at Cirque du Soleil.
This month’s neuromarketing conference, hosted by the Neuromarketing Science and Business Association in Amsterdam, provided once again the latest and greatest findings and methodologies from this growing field. The recurring topic was that if we attempt to predict the behaviour and purchase decisions of consumers, we’d do better not to ask them.
One of the expert presenters, Dr Kai-Markus Müller, demonstrated this on the example of price setting: When tested students had to give their views on how much they would pay for a latte macchiato from the coffee machine in the university cafeteria – two different research methodologies suggested two very different ideal price points for the proposition.
According to the questionnaire results, 54% of students claimed that they would be willing to pay up to 0.95 euros, whereas the EEG brain scan results predicted that only 31% of students would pay this price.
What did the reality check reveal? Only 27% of students were actually willing to pay this price, much like the EEG scans had predicted.
Source: Dr. Kai-Markus Müller, Neuro Retail Revolution Conference, Amsterdam 2013
Now, there are different reasons for this, but more importantly a number of practical tips to consider when thinking about the pricing of your services and products:
1. Don’t ask customers what they would pay – they are terrible at predicting their own behaviour!
2. As with any other perception phenomenon, price perception is relative and it is influenced by what we have seen before. This is why good salespeople start with a high anchor price, to frame all following offers against this in the consumers’ minds.
3. Don’t necessarily take your most expensive products off the shelf if they don’t sell, because products interact with each other in terms of price perception and some expensive ones can just be there to sell other product.
4. Regarding the question of how to communicate a price mark-down in the most effective way, always have the original price displayed physically bigger than the discounted new price. Why? Because when physical size of the numbers of the price is smaller, it is actually perceived as lower. This made a 22% difference in sales to the unfavourable alternative of a small original and a bigger discounted price when tested!
5. Know your audience. Not everyone’s brain is cheering when they see discounts; some consumer types actually reject buying discounts.
All of the above are things people wouldn’t be able to tell you when asked directly, for example, in a focus group.
Happy Swan Lake reinventions!
Katharina Kuehn is the director of RDG Insights.