by: Roger Dooley
The concept of marginal utility, a favorite of economists, is fairly simple to illustrate: a $20 bill is more useful to a financially strapped college student than, say, Bill Gates. Researchers at the University of Cambridge in England have now demonstrated the effects of marginal utility on both brain activation and speed of learning in an interesting series of experiments, as reported by Scientific American in Money Talks: A Brain Image of a Microeconomic Theory. The researchers began by assembling two groups of students, one composed of students with few assets and low income, and one with wealthier students.
They then presented the students with images that, if recognized correctly, resulted in a small financial reward (about 40 cents). The researchers found that the wealthier students took almost three times as long to learn to recognize the images associated with the reward. In addition, fMRI scans showed a difference in response between the two groups:
Researchers focused their scans on the midbrain (which contains neurons or nerve cells that produce dopamine, a neurotransmitter central to reward-based learning), and the striatum, another reward-based center located under the cerebral cortex. This time, however, the participants did not have to physically respond. “We didn’t want them to do that because there are neurons in the striatum that are responding to initiate an action of responding to reward,” [lead researcher Philippe] Tobler says. It was this response preparation that the researchers timed.
Once again, an inverse association between wealth and learning appeared, with poor people displaying more increased activity in the midbrain and striatum when compared with the more affluent subjects.
The research has generated mixed opinions on the Web. Jonah Lehrer at The Frontal Cortex notes, ‘I think there is solid scientific evidence that the brain has a generalized reward system. In fact, the reward system inside our brain actually supports the vagueness of economic utility theory since just about anything can become a reward, at least according to these “reward neurons”. ‘ The Economists View, meanwhile, finds fault with the approach used in the research, “I don’t see how this allows utility to be measured and compared across individuals. They measure learning time or the amount of activity in a defined region of the brain, not utility. Utility must be inferred…”
That people with less money might react more strongly to a small financial incentive is hardly news to marketers, whether or not they are neuromarketing enthusiasts. Still, marketers should note that there is apparently a lot going on without the conscious awareness of the individuals. The wealthier subjects didn’t decide to learn more slowly, or not pay attention. Rather, it seems the reward had lower impact at the brain chemistry level, resulting in a less effective learning process.
Marketers using financial incentives should be aware of this differential, whether it’s a cents-off grocery coupon or a multi-thousand dollar auto rebate. Individuals exposed to the offer won’t necessarily process the information in a rational, dollars-and-cents manner; rather, the impact of the offer on the price of the product may be less important than the marginal utility of the savings to that particular consumer.
Original post: http://www.neurosciencemarketing.com/blog/articles/marginal-marketing.htm