Neuromarketing: how to understand consumer’s mind

1. Neuromarketing: how to understand consumer’s mind

2. Customer satisfaction • Customer satisfaction and business success • “The key to customer retention is customer satisfaction” (Kotler)

3. Consumer‘s mind “Marketing and environmental stimuli enter the consumer’s consciousness or subconsciousness. A set of psychological processes combine with certain consumer characteristics to result in decision processes and purchase decisions. The marketer’s task is to understand what happens in the customer’s consciousness between the arrival of the marketing stimuli and the ultimate purchase decision.” Kotler and Keller (2006)

4. The main objective of marketing is to help match products with people. Marketing serves the dual goals of (1) guiding the design and presentation of products such that they are more compatible with consumer preferences and (2) facilitating the choice process for the consumer.

5. Neuromarketing “By studying activity in the brain, neuromarketing combines the techniques of neuroscience and clinical psychology to obtain insights into how we respond to products, brands, and advertisement. From this, marketers hope to understand the subtle nuances that distinguish a dud pitch from a successful campaign.” - Mucha (2005)

6. There are two main reasons for this trend. First, the possibility that neuroimaging will become cheaper and faster than other marketing methods; and second, the hope that neuroimaging will provide marketers with information that is not obtainable through conventional marketing methods. • There is growing evidence that it may provide hidden information about the consumer experience.

8. Neuromarketing - linking science and marketing • Overconsumption and compulsive shopping can be traced back to a dysfunction of the orbitofrontal cortex (ORF) Leake (2006) • Impulsive buying decisions are based on the emotional state of the buyer (governed by the limbic system), rational buying decisions are processed in the frontal cortex. Mucha (2005) • Memory retention is processed in the amygdale and ventro-medial lobes (VFML) Ambler, Ionnides and Rose (2000) • Irrational buying is associated with the autonomic nervous system Peterson (2005)

9. What are the potential impacts of neuromarketing?

10. Neuromarketing-its potential impact on product development • flavour • smell • colour • health/fashion trends • identifiying new target groups

11. Neuromarketing-its potential impact on product packaging/design • logo • colour scheme • packaging materials • packaging size • limited editions • smell

13. Neuromarketing-its potential impact on advertisement designs Poster/billboards Radio promotion size sports person music balance information/entertainment slogan/message length voice Colour arrangement TV advertisement balance information colour arrangement length image voice/music product focus

14. Neuromarketing-its potential impact on promotion campaigns Sponsoring -celebrities -events • Posters/billboards • location • duration Web adverts -duration -contents TV/ radio adverts -channels/stations -time slots Freebies/promotion extras -location -product choice

15. Neuromarketing-its potential impact on distribution • shelving • product grouping • special offers • smell • music • general atmosphere • availability

16. Pepsi Challenge • The Pepsi Challenge has been an ongoing marketing promotion run by PepsiCo since 1975. • The challenge takes the form of a taste test. At malls, shopping centers and other public locations, a Pepsi representative sets up a table with two blank cups: one containing Pepsi and one with Coca-Cola. • Shoppers are encouraged to taste both colas, and then select which drink they prefer. Then the representative reveals the two bottles so the taster can see whether they preferred Coke or Pepsi. • The results of the test leaned toward a consensus that Pepsi was preferred by more Americans.

17. Competition between taste and brand power Most people liked the taste of Pepsi, yet the majority bought coke. This is the brand power. Human Neuroimaging lab, Baylor College of Medicine New York Times 10/26/03

18. Neural correlates of culturally familiar brands of car manufacturers (Schaefer et al., NeuroImage, 2006) • The aim of this study was to examine the neural correlates of culturally based brands. We confronted subjects with logos of car manufactures during an fMRI session and instructed them to imagine and use a car of these companies. • As a control condition, we used graphically comparable logos of car manufacturers that were unfamiliar to the culture of the subjects participating in this study. If they did not know the logo of the brand, they were told to imagine and use a generic car. • Results showed activation of a single region in the ‘medial prefrontal cortex’ related to the logos of the culturally familiar brands.

19. Michael Schaefer, Harald Berens, Hans-Jochen Heinze and Michael Rotte, Neural correlates of culturally familiar brands of car manufacturers, NeuroImage 31(2):861-865 (2006) Results showed activation of a single region in the medial prefrontal cortex related to the logos of the culturally familiar brands. We discuss the results as self-relevant processing induced by the imagined use of cars of familiar brands and suggest that the prefrontal cortex plays a crucial role for processing culturally based brands.

20. Thinking on luxury or pragmatic brand products (Schaefer and Rotte, Brain Res, 2007) • They aimed to examine whether socioeconomic information conveyed by certain classes of brands (prestigious versus pragmatic classes) differentially evoke brain response. • We presented icons of brands while recording subject's brain activity during a functional magnetic resonance imaging (fMRI) session. After the experiment, we asked subjects to assess the brands according to different characteristics.

21. Michael Schaefer and Michael, Rotte, Thinking on luxury or pragmatic brand products: Brain responses to different categories of culturally based brands, Brain Research, 1165(24):98-104 (2007)

22. Sportscar is a social reinforcer! • Using event-related fMRI, they investigated the rewarding properties of cultural objects (cars) signaling wealth and social dominance. • It has been shown recently that reward mechanisms are involved in the regulation of social relations like dominance and social rank. • Based on evolutionary considerations they hypothesized that sports cars in contrast to other categories of cars, (e.g. limousines and small cars), are strong social reinforcers and would modulate the dopaminergic reward circuitry. • Erk, Susanne; Spitzer, Manfred; Wunderlich, Arthur P.; Galley, Lars; Walter, Henrik, Cultural objects modulate reward circuitry, NeuroReport, 13(18): 2499-2503 (2002)

23. On the basis of the hypothesis that brands may function as reward stimuli, we investigated brain responses to favorite brands. • Results revealed activity in the striatum for favorite brands that positively correlated with sports and luxury characteristics, but negatively with attributions to a brand of rational choice. Reduced activation of a single region in the dorsolateral prefrontal cortex was demonstrated when viewing the most beloved brand, possibly suggesting reduced strategic reasoning on the basis of affect. • Michael Schaefer and Michael Rotte, Favorite brands as cultural objects modulate reward circuit, NeuroReport 18(2):141-145 (2007)

24. Important issues in this lecture • What is the neuromarketing? What are the reasons for the neuromarketing trends? What are the benefits and advantages of the neuromarketing approach over conventional market research methods? • What are the potential impacts of neuromarketing? Name examples of success or failure cases in real. • What are the Pepsi challenge and its fMRI experiment version? What are the implications of the results in the challenge?