How Our Brain Determines if the Product is Worth the Price

 
 
Are consumers more likely to buy if they see the price before the product, or vice versa? Uma Karmarkar and colleagues scan the brains of shoppers to find out.
 
 
by Carmen Nobel

Think of the last time you went shopping.

By the time you decided to buy a product, you knew both what you were buying and how much it cost. But was your decision affected by whether you saw the price or the product first? That's the question at the heart of new experimental research that uses neuroscience tools to shed light on how our brains make purchasing decisions.

"We were interested in whether considering the price first changed how people thought about the decision process, and whether it changed the way the brain coded the value of a product," says Uma R. Karmarkar, a neuroscientist and assistant professor in the Marketing unit at Harvard Business School, who conducted the research with Baba Shiv, a marketing professor and neuroeconomics expert at Stanford University's Graduate School of Business, and Brian Knutson, an associate professor of psychology and neuroscience at Stanford. "Because we had neuroscience tools at our disposal, we had the benefit of exploring both those questions," Karmarkar says.

“We were interested in whether considering the price first … changed the way the brain coded the value of a product.”

The researchers found that price primacy (viewing the price first) makes consumers more likely to focus on whether a product is worth its price, and consequently can help induce the purchase of specific kinds of bargain-priced items. Their study, Cost Conscious? The Neural and Behavioral Impact of Price Primacy on Decision-Making, will appear in a forthcoming issue of the Journal of Marketing Research.

The research could help retailers and marketers decide when it's best to lead with price, which products work best with that strategy, and how to frame sales messages to consumers. (HBS related research on how consumers view pricing can be found in the article Deconstructing the Price Tag.)

The Brain Shopping Experiment

In a series of experiments, participants went shopping—while lying on their backs inside a functional magnetic resonance imaging (fMRI) machine. The fMRI uses a giant electro-magnet, often 3 teslas strong, to track the blood flow throughout the brain as test subjects respond to sensory cues. In this case, participants were responding to pictures of products and their prices.

A new neuroscience study looks at how our brains make purchasing decisions. ©iStock.com/julos

In the first experiment, conducted at an imaging center on the Stanford University campus, each participant was given $40 of shopping money before viewing a series of 80 products and their prices on a screen inside the fMRI machine. "This made the shopping experience more real," Karmarkar says.

To encourage purchasing, the products were offered at sub-retail prices. Sometimes participants saw the price first, and sometimes they saw the product first. But in every case, they eventually saw an image of both the product and the price presented together. At that point, they chose whether to purchase the product, indicating yes or no with the push of a button. After exiting the machine, participants filled out a survey to rate how much they had liked each product, on a scale of 1 to 7.

The researchers focused on brain activity at the moment participants saw the product and price presented together. They were most interested in the medial prefrontal cortex (the area in the brain that deals with estimating decision value) and the nucleus accumbens (an area that's been called the pleasure center, and whose activity is correlated with whether a product is viscerally desirable). "What we cared about was whether the neural patterns in these areas looked different at the point when the information on the screen was eventually the same," Karmarkar says.

The results showed that the brain activity varied according to whether the participant had seen the price or product first. "The pattern of activity in the prefrontal cortex suggested to us that sequence matters: At the very simplest, the neural signals looked different when the price came first versus when the product came first," Karmarkar says. "When the product came first, the decision question seemed to be one of 'Do I like it?' and when the price came first, the question seemed to be 'Is it worth it?' "

That said, price primacy didn't have much of an effect on actual purchasing behavior. Participants bought about the same number of items and reported similar "liking" ratings regardless of whether they had seen a product or price first. The researchers suspected that even if participants were more critical of a product's value in the price primacy condition, the products were equally attractive under both conditions.

Most of the participants were in their 20s, and most of the products appealed to their demographic—movies, clothing, noise-canceling headphones, and so on. "If you really love something, and you can afford it, you're going to buy it," Karmarkar says. "For those kinds of 'easy' decisions, it doesn't matter much whether the product or the price comes first."

And while the results of this initial experiment had been significant to neuroscience, Karmarkar's team also wanted to show that their research could have real-world implications for retailers—a direct effect on whether a consumer decided to buy a product. They hypothesized that price primacy might actually increase the likelihood of buying products, but only if the decision was related more to the product's usefulness than to pure emotional desire.

Water Filtration Pitchers And Batteries

To that end, the researchers designed a follow-up study in which 83 participants sat at their computers, evaluating arguably boring but utilitarian products: a water filtration pitcher, a pack of AA batteries, a USB drive, and a flashlight. Similar to the fMRI study, the products were offered at a discount.

For all four products, participants viewed only a price or only a picture of the product for eight seconds, followed by a decision screen displaying both price and product. They then indicated the extent to which they wanted to buy the items on a scale from 0 to 100, with anything above a 50 categorized as intent to purchase the product.

This time, price primacy had a direct effect on purchasing decision. Participants were significantly more likely to purchase a product if they saw the price first than if they saw the product first. For retailers this indicates that it makes sense to lead with the price, at least when advertising utilitarian items. At the same time, in cases where they advertise prices first, retailers may want to go out of their way to highlight a product's functionality over its form.

"The question isn't whether the price makes a product seem better, it's whether a product is worth its price," Karmarkar says. "Putting the price first just tightens the link between the benefit you get from the price and the benefit you get from the product itself."

But the research also revealed a notable caveat: After participants indicated whether they wanted to buy a product, they reported exactly how much they'd personally be willing to pay for the item, typing a dollar amount into an online form. Surprisingly, the average willingness-to-pay amount was slightly lower in cases where they had viewed the price first. This indicates that if retailers want to take advantage of price primacy, they need to advertise true bargains. So, for insance, a gigantic neon sign advertising $5 off a $20,000 car? That's going to turn customers away.

"If it's an insignificant discount, then you're actually putting yourself at a disadvantage by highlighting the price first, because people are now cognitively scrutinizing the price and making sure it's worth it," Karmarkar says. "You can't just try to fool people into thinking it's a great price."

About the Author

Carmen Nobel is the senior editor of Harvard Business School Working Knowledge.

Post A Comment

    • Gaurav
    • Engineer
    Insightful. Although it will be intersting to know that while shopping, how does the "decor" of a shop/showroom effects the decision of a customer to buy a product.
    • Anonymous
    What GAURAV said I think is a lot more influential than what has been studied above.

    The bottom-line I got from this article is: Make the price reflect the worthiness of what you are selling and you'll sell
    • Bob Atkins
    • CEO, Gray Associates
    Personally, I find this experiment ethically disturbing. Using an MRI is expensive, the magnetic radiation of the brain must have some physiological effect, and being in the machine is mildly unpleasant (or severely unpleasant if you have claustrophobia). It is hard to imagine that this research should have passed a review board.

    In addition, the environment could not be more different from a retail or on-line decision--so I would doubt if the results have much validity.

    Finally, as a business person, I really don't care about the brain function that caused the decisions--just how the price positioning affected the decisions, so the MRI test and findings are largely irrelevant.
    • PRAKASH KINNY
    • EDITOR-in-CHIEF, MARKET AND BUSINESS ANALYSIS
    THE ARTICLE IS INTRESTING IT HELPS TO KNOW THE CONSUMER BEHAVIOURAL ASPECT IN RELATION TO PRODUCT AND PRICING.
    • Kapil Kumar Sopory
    • Company Secretary, SMEC(India) Private Limited
    Normally, a sensible person goes for need-based purchases and considers both the quality and cost of the goods being acquired.It seems whimsical to me that either quality or the cost will get prioritized depending on which is viewed first. Perhaps the experimentation on very young (in twenties) persons has led to the conclusions. A more matured group may not lead to conclusions likewise. Much also depends on the purchasing power and whether purchases are made in a huff, without consideration of need to have and put to use the items being selected for purchase.
    • Yusuf Khayyat
    • General Manager, Hikma Pharmaceuticals
    This is a very interesting and indicating study. I am wondering if the study conducted differentiated whether the responder is male or female? As It is obvious that most females focus on the product rather than the price in most cases based on their psychology.

    On the other hand & regardless of the participants gender; does the study took into consideration the thinking preference applying the Herrmann Whole Brain Model to Adaptive Selling of Ideas
    • Thomas
    • Manager, Mphasis
    I agree with the points. At the same time, the decisions are influenced with certain external factors too , Like the intent, if the intent is to shop more with less , Then the brain would be on cost saving mode. If we have the luxury with no limit, The price would be the last think to be thought of.
    • Rachel
    • Marketing Manager, www.makemyassignments.com
    I must say Ms. Karmarkar, I am glad to read this whole study and yes, its actually a pervasive study. Hats off
    • Heidi
    • Manager, New Elephant Resale Shop
    Thanks to this article, I now know where I should be placing my price tags on the items in the resale shop I manage. If it's a practical and simple Ikea desk or set of Pyrex baking dishes, I should make the price tag readily visible to the customer. However, if it's a handsome antique mantel clock or a whimsically-painted table and chairs, I should obscure the price tag to allow my customers to fall in love with the item first. Once in love, they'll FIND a way for the item to fit in their budget.

    Another wrinkle to the price tag issue is when there's no price tag on an item at all.
    • Steve Flick
    • Owner, Q9C Quality Consulting, LLC
    When do such studies begin to help the consumer? That is, how do I, as a consumer, use the results of this study to become a better consumer? Thank you.
    • Dr Shadreck Saili
    It was a worthwhile and appropriate study
    • Roland Kyei Atupem
    • Sr. eBusiness Manager, AT&T Corp
    Read the article with keen interest and curiosity.
    Wondering if the fMRI study sheds any light on " Impulsive buying"
    Overall, I think the research is groundbreaking but the lingering question is how one's psychological disposition or informed or uninformed frame of mind effects one's response to the price and the product.
    • Manish
    • Marketing professional
    Would this apply to products which are priced premium or products which try to set price benchmarks?
    Though, I do agree with the findings of the research, these are true when many other parameters are kept constant. For eg, quality of the product, packaging, touch & feel of the products / package, who is buying, how needy is the buyer, etc.
    • Bhagbati Chaudhary
    • Executive Chairperson, Forward Community Microfinance Ltd.
    Thank you article is good and knowledgeable about how to make decision when product & price are there that's the actual fact for determined the make proper decision....!

    Regards
    Bhagbati Chaudhary
    Executive Chairperson
    • Anonymous
    This article initiates introspection in diverse ways. It states that the consumer cannot be taken for granted as indicated by authentic research in the article. The article deeply reflects not only on the value of the product but also the value of human values.
    Congratulations to the authors for this interesting work.
    Dr. Priya M Vaidya
    • Kelly
    • Business Development Manager, CLS.Ltd
    Thanks Uma Karmarkar for such a lovely test, I think the market is very competitive now a days and also it became very easy to compare the price online and go for good quality with good price.

    BDM
    helping small businesses worldwide.
    http://imvendor.com