Have you ever reflected on a decision you made and wondered how you came to make it in the first place? Science writer Jonah Lehrer was wondering just that while standing in the grocery store aisle weighing the advantages of Apple Cinnamon versus Honey Nut Cheerios. Most of us wouldn’t take the time to think about the process we use to make such a mundane decision. But then again, most of us are not trained neuroscientists who work for Nobel Prize winning researchers or write articles on brain research for magazines like Scientific American.
Wondering how we make this and other simple decisions led Lehrer to investigate how our brains take on the task of making a decision, including which parts assume what duties, and how these parts battle and debate within the confines of our heads in quiet confrontations that are often subconscious. His work resulted in a book—“How We Decide”—that includes research every businessperson should know.
Brain research has advanced to such a degree that we can now understand some of the inner workings of the mind. In his book, Lehrer writes about how our minds evaluate a potential purchase. What may seem to us like a decision based on logic might actually be the result of an intricate dueling match that takes place in our brain. Further, depending on the situation, one brain function can overpower or immobilize another.
In truth, the brain works much like a muscle, often responding with reflex actions that are not always as logical as they might seem. So think of this article as a sort of anatomy lesson of the brain that may have huge implications for the business side of your career. Here are some of Lehrer’s concepts that I find literally and figuratively mind-boggling:
The placebo effect: It’s estimated that somewhere between 35 percent and 75 percent of people who are provided with a placebo sugar pill get better. A neuroscientist at Columbia University proved that this reaction is brain related. In his study, volunteers were given a cream they were told would help control pain and then subjected to electric shocks. Surprisingly, the volunteers who applied the cream reported less pain—even though the cream was a placebo.
How does this work? During the experiment, the volunteers were connected to an MRI and researchers observed how their brains responded. What happened was the frontal lobes actually inhibited the activity of the emotional part of the brain that reacts to pain. In other words, these people didn’t register pain because their brains didn’t acknowledge the pain existed. In essence, our experience is in part influenced by our expectations. This effect ensures that when you attach expectations to a product or service and communicate them to a consumer, that fact alone can affect the final outcome(s).
Price control: One of the most important variables in setting up consumer expectations is pricing. Research has proven consumers have a prejudice for brand names and higher priced items, believing, for example, that name brand pain relievers are more effective than generic—even though the ingredients are exactly the same.
One such study had volunteers taste five different samples of a specific type of wine. The samples were only differentiated by price. At one end of the spectrum was a $5 bottle while at the other sat a $90 bottle, and several varyingly priced wines in between. Unknown to the subjects, however, the cheapest and most expensive samples were actually the same wine. Invariably, the $90 bottle outperformed all the others in the research and placed the $5 bottle at or near the bottom. But the reason had nothing to do with taste or aroma and everything to do with the emotional machinery of the brain.
As the subjects sipped wine while hooked up to MRIs that showed what part of their brains was being triggered, researchers witnessed again and again the prefrontal cortex becoming highly activated only when the testers sipped the $90 wine: the emotional centers of their brains were firing, sending out signals that what they were drinking tasted really, really good. The same wine identifi ed as a $5 bottle didn’t even send out a spark.
Anchoring: Another revealing pricing concept is called the “anchoring effect.” Researchers directed subjects to write down the last two digits of their social security number as a way to begin the tests. As you would expect, some numbers were high and some low. Then, test subjects bid on a cordless keyboard.
The outcome showed respondents with higher social security numbers bid 300 percent higher than those with lower numbers. Studies prove that our brains lock onto numbers (however irrelevant), and these numbers have a strong impact on our subsequent buying decisions. So, placing a higher price on items naturally increases perceived value.
Loss aversion: The desire to avoid loss is stronger than a person’s desire to win or gain something. For one thing, those two different experiences impact different parts of the brain. We are emotionally programmed to avoid the pain of loss—we want to stop the bleeding. This negativity bias is inherent in everyone who experiences normal emotions and triggers the emotional part of the brain associated with negative feelings. Normal people experience this whenever they part with their hard-earned cash.
There is one dangerous exception that a lot of us are too familiar with, and that is credit card spending. Because using credit cards places the payments into the future, it does not trigger a monetary loss in the emotional area of our brains, and therefore does not make us feel bad about spending. This little known fact explains why rational, regular people can easily get into credit card debt. It’s just the way the brain responds to this situation—it can’t project the loss into the future so the purchase doesn’t hurt. The part of the brain that deals with desire wins by default. Using a credit card simply does not register as a “real” monetary loss.
One way of looking at it is that using a credit card does not allow a person’s thought process to have the normal checks and balances that occur naturally whena rational person feels the pain of parting with money in exchange for something they feel they need or want. Research on the brain continues to inform us about why and how people make all the multiple decisions they make every day. In the context of marketing, knowledge of how the brain works and how people relate to brands and pricing, for example, allows us to understand the underlying law of human behavior that controls decisions.
Jean Bailey has 27 years of corporate marketing and advertising experience and has held key positions with several Fortune 500 companies. She teaches marketing and sales for a Chicago-based massage therapy school and lectures and consults on marketing and communication for other health-related businesses. Jean is also a certified reflexologist and maintains a small private practice.