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For Neuromarketing<\/em> readers, it\u2019s not big news that the perception of wine drinkers is altered by what they know about the wine (see Wine and the Spillover Effect<\/a>, for example). Now, researchers at Stanford and Caltech have demonstrated that people\u2019s brains experience more pleasure when they think they are drinking a $45 wine instead of a $5 bottle \u2013 even when it\u2019s the same stuff. The important aspect of these findings is that people aren\u2019t rationalizing on a survey, i.e., reporting that a wine tastes better because they know it\u2019s a lot more expensive. Rather, they are actually experiencing a tastier wine<\/strong>.<\/p>\n \u201cWhat we document is that price is not just about inferences of quality, but it can actually affect real quality,\u201d said Baba Shiv, a professor of marketing who co-authored a paper titled \u201cMarketing Actions Can Modulate Neural Representations of Experienced Pleasantness,\u201d published online Jan. 14 in the Proceedings of the National Academy of Sciences. \u201cSo, in essence, [price] is changing people\u2019s experiences with a product and, therefore, the outcomes from consuming this product.\u201d<\/p>\n Shiv, an expert in how emotion affects decision-making, used functional magnetic resonance imaging (fMRI) to conduct the study with co-authors Hilke Plassmann, a former Stanford postdoctoral researcher; Antonio Rangel, a former Stanford economist; and psychologist John O\u2019Doherty. (Both Plassmann and Rangel are now at Caltech.) Although researchers have used fMRI scans in recent years to gauge brain activity, the study is one of the first to test subjects as they swallow liquid \u2013 in this case, wine \u2013 through a pump attached to their mouths, a tricky complication because the scanner requires people to lie very still as it measures blood flow in the brain.<\/p>\n According to Shiv, a basic assumption in economics is that a person\u2019s \u201cexperienced pleasantness<\/strong>\u201d (EP) from consuming a product depends only on its intrinsic properties and the individual\u2019s thirst. However, marketers try to influence this experience by changing a drink\u2019s external properties, such as its price. \u201cThis type of influence is valuable for companies, because EP serves as a learning signal that is used by the brain to guide future choices,\u201d the paper says. Contrary to this basic assumption, several studies have shown that marketing can influence how people value goods. For example, Shiv has shown that people who paid a higher price for an energy drink, such as Red Bull, were able to solve more brain teasers than those who paid a discounted price for the same product. [From Stanford News Service, Baba Shiv: How a Wine\u2019s Price Tag Affect Its Taste<\/a>\u00a0by Lisa Trei.]<\/p>\n<\/blockquote>\n Here\u2019s the conundrum for marketers\u2026 On one hand, we know that buying pain kicks in when people perceive that a product is overpriced, and that they are less likely to make a purchase. Now, we have multiple studies showing that people enjoy a product more when they pay more for it. How should a marketer determine the price point?<\/p>\n I don\u2019t think these neural reactions to pricing are necessarily in conflict. If the wine drinkers in the Stanford\/Caltech study had been sent to the supermarket and asked to pick up a bottle of wine on the way to the lab, they would have no doubt have felt the pain of paying too much for a bottle of wine and, unless they were wine aficionados, would in most cases have chosen a less costly bottle. (Other factors could influence the selection process, too. Would the researchers see the bottle chosen? If it was too cheap, would they think the subject was a wine ignoramus? Would blindly choosing a costly bottle make the subject look like a snob or spendthrift?) The pleasurable boost from a higher price occurs AFTER purchase and consumption, so marketers still face the same problem they always have: setting a price that consumers will accept and that will yield a suitable combination of profit margin and total revenue.<\/p>\n A large study<\/a> in which 500+ subjects tasted a variety of wines ranging from cheap to very expensive ($150+) showed that most people exhibited no preference for the more expensive wines tasted. When the only thing the tasters knew was the color of the wine, the inexperienced tasters preferred the expensive wines slightly less<\/em>. Even an experienced set of tasters rated the expensive wines only slightly better than the cheapest.<\/p>\n These findings support the idea that for normal people (not trained sommeliers), expensive wine tastes better only when the taster knows it is expensive and expects a superior product.<\/p>\n What this does suggest is that marketers need to understand that price is an important part of the experience for a premium product or luxury brand. This isn\u2019t huge news \u2013 we\u2019ve seen once-proud brands destroyed by over-distribution and pervasive discounting. And it isn\u2019t even the price that the consumer pays \u2013 the subjects in the study didn\u2019t pay anything for the wine they tasted, but still found the expensive wine tasted better.<\/p>\n The consumer has to believe that a product is priced at a certain level for the brain effect to kick in.<\/strong> If someone gives me a $100 bottle of wine, I\u2019ll no doubt taste it as such. If I find the same bottle mispriced at the wine shop and buy it for $10, it will still be a $100 wine to me (and I\u2019ll have greatly reduced my buying pain as well). But, if I find a bin full of the wine priced at $10 and marked \u201chuge sale, save $90 per bottle!\u201d some skepticism will kick in. Did this vintage turn out poorly? Did the shop store a few cases next to the furnace and find they had gone bad? Was the wine simply not selling? I\u2019m certain that these doubts would convince my brain that I wasn\u2019t really drinking a $100 wine. And, if the wine was advertised with a \u201cnew low price\u201d of $10, my brain would be certain it didn\u2019t taste like a $100 wine.<\/p>\n Steven Reinberg covered the findings in an article, Study Spotlights Marketing\u2019s Impact on the Brain<\/a>, and chose to include some neuro-alarmist rhetoric:<\/p>\n \u201cMarketing can trump our senses,\u201d said Susan Linn, an instructor in psychiatry at Harvard Medical School and associate director of the Media Center of Judge Baker Children\u2019s Center. \u201cUsing medical equipment and medical technology to help marketers do their job better is very troubling.\u201d<\/p>\n<\/blockquote>\n I disagree \u2013 if a company can make my experience with their product more pleasurable in real terms, they are doing the right thing. Most consumers will have no problem in deciding whether the better taste (real or perceived) of a more costly bottle of wine justifies the difference in price. That\u2019s why Trader Joe\u2019s has sold more than a billion bottles<\/a> of Charles Shaw wine (a.k.a. Two-Buck Chuck) to date, while $90 bottles mostly gather dust on wine store shelves.<\/p>\n And, as a host, you can help your friends enjoy a better wine<\/a>, too!<\/p>\n\n
Blind Tasting Confirms Price Influence is in Taster\u2019s Mind<\/h3>\n
The Opportunity For Marketers<\/h3>\n
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Related<\/em><\/h3>\n<\/p><\/div>\n