Is Your Coffee Too Cheap? Using Brain Waves to Test Prices

Oct. 12, 2013— -- A German scientist is developing a new way of testing prices by measuring brain waves. Some marketing critics are horrified by the idea of feel-good pricing, but others argue it could make products more successful.

The most subversive criticism of capitalism at the moment comes from the small town of Aspach, in the Swabian-Franconian Forest, a region of southern Germany known for its industrious and energetic inhabitants. Kai-Markus Müller is sitting in his office in a nondescript building, thinking about the coffee-roasting company Starbucks. "Everyone thinks that they've truly figured out how to sell a relatively inexpensive product for a lot of money," he says. "But the odd thing is that even this company doesn't understand it."

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Müller, a neurobiologist, isn't criticizing working conditions at the multinational purveyor of hot beverages. Instead, what he means is that the Seattle-based company gives away millions of dollars a year out of pure ignorance. The reason? Starbucks isn't charging enough for its coffee.

It's an almost obscene observation. Müller is convinced that customers would in fact be willing to dig even more deeply into their pockets for products for which Starbucks already charges upmarket prices.

'Classic Market Research Doesn't Work Correctly'

The brain researcher is also a sales professional. Müller used to work for Simon, Kucher and Partners, a leading international consulting firm that helps companies find suitable prices for their products. But he soon lost interest in the job when he recognized that "classic market research doesn't work correctly." From the scientist's perspective, research subjects have only limited credibility when they are asked to honestly state how much money they would spend for a product.

Instead, Müller is searching for "neuronal mechanisms," deeply buried in the human brain, "that we can't just deliberately switch off." In fact, there is a center in our gray matter that monitors proportionality independently of reason. This brain region functions according to simple rules. For instance, coffee and cake makes sense, while coffee and mustard triggers an alarm. Experts recognize the unconscious defensive reaction on the basis of certain waves that become visible with the help of electroencephalography (EEG). Do these graphs also reveal something about consumers' willingness to pay for products?

Using the example of a small cup of coffee, for which Starbucks charged €1.80 ($2.45) in Stuttgart, Müller tried to get to the bottom of the question. He showed subjects the same pot of coffee on a screen several times, but with different prices in each instance. At the same time, an EEG plotted the subjects' brain activity.

Especially in the case of extreme offers, strong reactions appeared in the brain within milliseconds. Prices that were either too low or too high, such as 10 cents or €10 per cup, were unacceptable to the brain's control mechanism. "When the brain was expected to process unexpected and disproportionate prices, feelings of shock, doubt and astonishment manifested themselves," Müller reports.

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