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Of Bacon, The Cloud and Connections

By: Jeff Falk
Posted: November 1, 2011, from the November 2011 issue of GCI Magazine.

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Good retailers, Gildenberg said, are manifestations of what people want to buy, and the smart retailers capture fragmentation in unique ways. However, he said, “There is no correlation between a retailer’s size and its ability to grow,” and I think, particularly as we all operate more and more in this cloud, this has never been more true for any type of business.

Connections

Recently, I heard a report that restaurants know consumers tend to avoid the cheapest bottle of wine on the menu, so the second cheapest bottle of wine is priced to make the most margin. I went searching for more on this news, and found, in 2008, scientists from the California Institute of Technology and Stanford University published its “Marketing actions can modulate neural representations of experienced pleasantness” paper, which found changes in the stated price of a sampled wine influenced both how good volunteers thought it tasted and the activity of the brain region involved in the experience of pleasure—in other words, “prices, by themselves, affect activity in an area of the brain that is thought to encode the experienced pleasantness of an experience.” The subjects consistently reported they liked the taste of the $90 bottle better than the $5 one, and the $45 bottle better than the $35 one, and scans of their brains supported their subjective reports. However, they thought they were tasting five different, variously priced wines when they actually had sampled only three. These results reflect, in part, that our brains encode pleasure because it is useful for learning which activities to repeat and which to avoid—in short, the brain takes shortcuts based on past experience.

It is interesting to ponder if the economy of the past three years has rewired brains in some way—how is value and luxury assessed and what our perception of price as a reflection of quality and value has become. In Price vs. Value: Packaging’s Role, Craig Sawicki writes that consumers just expect more for their money now than they have in the past, and assess value differently—and value only sometimes relates directly to price.

Consumers are no longer content with what they’ve always bought or used, but, maybe more than ever, they expect more if they’re going to pay more.

It’s strange, too, what happens to how we collectively spend. Consumer spending has clearly changed, but it’s not a black-and-white, “the economy stinks so I’m not spending on anything but necessities.” And we’ve redefined necessitates—and done so on individual and experiential terms.