Cognitive Bias - Anchoring

We tend to make decisions based on the first piece of information presented to us (the “anchor”). Once the anchor is set, we make all our decisions according to it. It doesn’t matter if they make sense or not.

When it comes to deciding if something is or not a good deal, the  first price we see becomes a benchmark for other prices. It will set the price we are willing to pay for a good or service.

Keep in mind that sometimes you will not have any control over the anchor. Your prospect may have seen your competitor's price first and that will be the anchor.

How to take advantage of the anchoring effect

1- Present the most expensive option first. How the information is presented (framed) influences your prospect’s purchasing decisions.

One memorable example is the presentation of the original iPad. In that presentation, Steve Jobs asked the public, “What should we price it at?” The first price he showed on the screen was $999 and he kept it there for several minutes while explaining its features. Then he announced the actual price $499. Even though $499 is still expensive, the anchoring effect makes the $499 price seems cheap.

See the presentation here: Steve Jobs Announces iPad Price

On your pricing pages, ensure your visitors see the higher price first by placing it on the left-hand side followed by the bargain. It makes it easier for people to compare prices and direct their attention to the price you want. The effectiveness of your anchor depends on its presentation (framing).

2- Have at least one product “on sale.” Show the before and after prices and make sure to emphasize them.

3- Place a limit on something, makes people buy more. Anchoring is the reason people buy more when items are marked as “10 for $10” than “$1 each”.

How to avoid negative anchoring

Let’s say you have a both a monthly and an annual price. If you present your pricing table with only the monthly price, people will be shocked when they see the annual price (even with a discount included).

A better way to do it is by showing both the monthly and the annual prices on your pricing page.