Pricing & Sales Tips Birmingham AL

New Study on Pricing

"We have known for a long time that people's perceptions are affected by marketing, but now we know that the brain itself is modulated by price," said Baba Shiv, a professor at the Stanford Graduate School of Business referring to a recent study. Although many studies have looked at how marketing affects behavior, this is the first to show that it has a direct effect on your brain.

In the study, while the subjects’ brain activity was being monitored, they were given wine to taste. Some were told the wine was very expensive and some were told it was inexpensive – but it was exactly the same wine tasted by all. The monitored brain activity of the subjects who were told the wine was expensive showed significant increases in the part of the brain that registers pleasure - the medial orbitofrontal cortex.

Perceptions Trigger Brain Activity

This study shows that perceptions of quality trigger activity in the part of the brain that registers pleasure. Conversely, if a product or service is perceived as being of low value (even if in reality it is of high value), your brain will respond as if it was of low value.

The Dangers of Discounting

This finding directly impacts your pricing strategy. Many business owners are tempted to discount their prices in order to increase sales. This study suggests that if discounting causes the product or service to be perceived as less valuable, it will have a negative impact on the prospects’ brains.

Author: Jonathan Jordan

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