"We believe future pricing questions should be answered using NeuroPricing® because the results are significantly more accurate than those of alternative research methods." Vildan Ekmen, Revenue Strategy Manager PepsiCo Frito-Lay, Turkije
Does a price increase lead to a decrease in revenue?
Research question PepsiCo:
- What's the effect of a price increase of 0.25 Turkish Lira on the sales of Lays chips?
- Which research method best predicts sales: traditional questionnaires or NeuroPricing™?
How it's studied
Two methods were used to investigate this: traditional questionnaires and neuro-research. We checked which of the two best predicted the results or in other words:
Are the results best predicted by what people say or by what their brain experiences?
Before the NeuroPricing™ study, respondents were asked via questionnaires to give their opinion on the increase of 0.25 Turkish Lira on a bag of Lays crisps. The questionnaire measured to what extent they were prepared to buy a bag of crisps with this price increase. After this the same respondents were measured by using EEG-research (NeuroPricing™).
The choices we make are mostly made automatically and unconsciously. This means that when consumers make a 'conscious' choice, it has actually been made unconsciously. If you ask people consciously what they think of a price increase, they will probably respond negatively. After all, who wants to pay more? To measure whether a price increase of 0,25 Turkish Lira leads to a revenue loss, it has to be measured in the unconsciousness. NeuroPricing™ does this and measures the automatic, unconscious reaction of the brain with EEG (check NeuroPricing™ here)
Via the computer, respondents were randomly shown the Lays packages, each with a different price. For each price, they had to indicate whether they thought it was 'expensive' or 'cheap'. At the same time, their brain activity was measured using EEG. EEG measures the activity of the brain cells (neurons) via the cerebral cortex.
At Neurensics we know exactly which locations in the brain indicate the optimal price, also known as the feel-good price. We have been able to determine the exact location by validating 8 years of EEG research with fMRI scans. This enables us to see what the optimal price is in the brain at the unconscious level, the place where choices are made.
Questionnaire NeuroPricing™ Pepsi Co revenue results
33% drop in turnover 9% drop in turnover 7% drop in turnover
Not profitable Profitable Profitable
The NeuroPricing™ results were strikingly different to those of the traditional questionnaire study:
- The prediction from the traditional questionnaire survey: a 33% drop in sales and not profitable.
- The NeuroPricing™ research showed that the price increase of 0.25 Turkish Lira leads to a 9% drop in sales but is profitable.
- After the price increase PepsiCo shared the actual sales figures with us. It turned out that it was only 7% less than the previous year and it was profitable.
- This confirms that asking people what they think of a price increase does not lead to the right results. Measuring unconscious reactions directly in the brain on the other hand, does.
Advice to Lays
The price increase of 0.25 Turkish Lira leads to a 9% decrease in revenue, but is profitable. The price increase is therefore a safe option.
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