Why having low prices isn't always optimal

Does your company always have the lowest price? This can have a negative effect. Alternatively, a high price can even have a positive effect, depending on the product or service you offer. Continue reading to check how this works.

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Consumers' product experience is not only determined by the intrinsic properties of the product or the consumer's mental/emotional state; it is also determined by the product's price. Learning 2 showed that a discount can have negative effects on the perceived value of the product. In this learning, you will discover that a high price can have a positive effect.

A high price can have a positive effect

Pricing Learning 5 - Werkt een zo laag mogelijke prijs altijd het best?

Plassmann et al. (2008) used brain research to show that a high price can have positive effects on the value of the product. In the study, she had participants taste wine in the MRI scanner.

When tasting two identical wines, no differences were reflected in participants' brain activity. This makes sense as the objective taste of the two identical wines, was identical. However, when the same wine differed in price - once with a price tag of 5 dollars and another time with 45 dollars, there were big differences in the brain activity. The participants' perception of taste even doubled. The expensive wine tasted twice as good to participants as compared to the cheap wine.

As a matter of fact, higher prices lead to higher expectations of the product. This was also observed in the study through increased activity in the Medial Orbitofrontal Cortex, the region influencing taste perception.  

A product with a high price is seen as more valuable by our brain

Just as in learning 2, these results show that lowering the price is not always the best solution. In our brains, a high price signals that the product is valuable. 

Crucially, this study also reflects the value of measuring brain signals to find out the consequences of price reductions.

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