I heard about anchoring prices in a talk last month and it blew my mind a bit because I’ve definitely fallen for it a million times.
Ever plan on buying a bottle of wine at a restaurant, to then browse at a menu to see that you’re looking at £60 – £100? Now, good for you if you’re ok with that kind of price but for me, it makes my blood run cold.
You then see a bottle for £35. Phew! It’s about £15 more than you’d ever consider paying usually, but it’s so much cheaper than everything else (which you just wouldn’t pay for) – and it’s a nice place, so it’s bound to be nice, so you’ll get that.
Well, that’s what anchoring is. A restaurant, shop or whatever will ‘anchor’ a high price on something to make the ‘cheaper’ things seem less expensive than they already are.
My example is just that (before I get emails about never paying that much for wine), this counts for £6 ice-creams, bathroom units or watches.
The best way to sell a £2,000 necklace is to put it next to a £10,000 necklace.
The science behind price anchoring
*Picture this* Imagine me not hungover with a white coat on WITH ACTUAL SCIENCE FROM YALE. Here goes…
There’s this thing called ‘analysis paralysis’, where if you have too many choices, you can get demotivated. So research from Yale said that if you had two things that are similar prices, you’re less likely to buy one than if they were slightly different.
In one experiment, they give people a choice of buying a packet of chewing gum or keeping the money. When given a choice between two packs of gum, only 46% of people bought one when they were the same price, when 77% of people bought a pack when the prices were different.
There’s a huge amount of science backing it up and stores/restaurants etc implement this trick because it works.
What does this mean for me?
I suppose knowledge is power eh?
Now you know about price anchoring, odds are you’re going to see it all over the place. It’s important to remember to ignore the upper prices making you think you’re getting a bargain, and look at what you’re thinking of buying objectively.
- Is it a deal?
- If not, would you be happy to pay for it in isolation?
- BE PREPARED TO WALK AWAY
Life is long and there to be fun, so you don’t always have to get a bargain or a deal (I overpay for things all of the time – mostly if it’s for a nice occasion). But at least now you’ll know if you’re being tricked.
Have you noticed price anchoring before? Who are the worst culprits? Let me know in the comments.
When we bought an exterior double glazed door, the salesman first offered a few astronomical prices which we refused, so when he then offered a much lower price, we were tricked into thinking it was a bargain and purchased it. Some weeks later, we were visiting friends who had an identical door for significantly less. It was an expensive lesson to learn, but at least we weren’t fooled when later on we had to replace the windows as well.
In the double glazing world that is known as “price conditioning”. Start with a really high price and then negotiatiate down to about the half the original price. The oldest trick in the book.
It pays to do your research first so you get an understanding of the price for similar products.
I have no problems paying more if I get a better product or better service. That’s why some people buy a Mercedes instead of a Ford or stay at the Hilton instead of the Holiday Inn.
Whenever I am spending a significant amount of money I always think of my favourite saying from Warren Buffett “Price is what you pay, value is what you get”!
I always try to get a deal and pay less than something is “worth”, used car vs new car, 2 for 1 at the supermarket etc.
I find all these psychological tactics really fascinating! The shopping channels use them all the time, and I love watching them sometimes just to pick apart what they’re doing and how it’s supposed to impact viewers’ behaviour. One thing that I’ve noticed they often do is that they’ll spend quite a while really building up the value of the product before revealing the price. So by that point, you’re convinced you need this thing, and then the price is always revealed in a way that makes it seem like a steal. If someone told you that a mop was £60 then you might think it’s ridiculous. But a mop that might change your life seems like a total bargain at the same price. It’s really easy to get sucked in!