In an earlier post, I introduced the The Contrast Principle and a diabolically effective decoy strategy.
Today, as a warm up for my April 27 Webinar, I’d like to discuss a related technique: Anchoring.
Anchoring is a cognitive bias that affects our decision making. For example, when evaluating the attractiveness of a product’s price, we are heavily influenced (or biased) by the first price we see.
If we are told, “Regular Price: $129”, then $129 becomes our “anchor” or reference point. Our perception of whether we’re “getting a good deal” is thereafter tied to this anchor. As the price moves farther and farther from $129, an offer becomes more or less appealing.
This, of course, is why marketers so often advertise very high “list prices” for their products: The list price becomes the anchor, making the actual selling price seem like a bargain.
Watch any TV infomercial, and you’ll see marketers take this technique to absurd levels. They’ll reduce the high initial price multiple times, sometimes settling at less than 25% of the original.
But wait, there’s more! Then, they’ll put anchoring on steroids… with a final, all-out pitch. Usually, it’s “buy one, get one free”. (With, of course, the added urgency of a short time limit.)
Tacky and obvious as this technique is, marketers will continue to use it for the simple reason that it works. Even if we know we’re being played, the deal just seems so good, we can’t resist.
And it all starts with the anchor. We really want to believe that those (cheap, made-in-China) sunglasses really did sell — somewhere, some time — for $225. And now we can get two pairs for $15!
But Anchoring explains much more than cheesy infomercial pricing. It also explains why, when asked to estimate something, our responses are highly dependent simply upon how the question was framed.
In a classic study*, researchers asked test subjects to estimate the percentage of African nations that belonged to the UN. But first (setting an anchor) they asked participants either:
- Is it more or less than 10%, or
- Is it more or less than 65%?
The results were amazing. On average:
- The first group estimated 25%
- The second group estimated 45%
For more on anchoring — and the contrast principle in general — be sure to join my webinar on April 27.
* Tversky, A. and Kahneman, D. 1974. Judgment under uncertainty: Heuristics and biases. Science, 185:1124–1131