There is a general belief that consumers make decisions by conducting research and then weighing up the options. But that’s not entirely correct and contrary to how most people make decisions.
Marketing and sales experts have for many years used a simple tool to create the anchoring effect.
Unbeknownst to themselves, people tend to unconsciously latch onto the first fact they hear when seeking to make a purchase, basing their decisions on that fact, whether it’s accurate or not.
The phenomenon is called anchoring and is a well established method.
To explain the anchoring effect, a common trick is for a shop to clearly state the original price of the product (the anchor) right next to the sale price. Our decision making process is affected by this as, instead of considering the item’s intrinsic value, we consider the value in comparison to the given value in the situation. Therefore, getting a pair of €400 shoes on sale for €175 seems like a great deal because you save €225, but, in reality, €175 for a pair of shoes is still relatively a lot of money.
You can also see the anchoring effect used by sales people who initially price their products for a large amount of money, only to decrease the price by 50% when they know you are going to walk away. This is in an effort for the customer to feel like they are getting a good deal on that item.
Anchoring provides a context for estimating value, particularly when setting your pricing. The first option the customer sees is likely to be the price that anchors in their brain. So, if your goal is to move your mid-price products, anchor the top-priced item by placing it first or by placing it in the centre in a larger font to draw focus. This will make the mid-price option look like a great deal in comparison.
If your products or services are in the expensive range, make sure that you set the lower price in a similar range and show how much more value comes with the slightly bigger price.
Customers can subconsciously anchor to any number and it doesn’t have to be a price tag. Remember featuring any higher number next to your price increases your chance of a sale. Consider showing the number of items sold, the number of customers who have purchased, or even another unrelated item with a higher price.
The anchoring effect can work wonders for your business and is considered one of the most important effects in cognitive psychology.
When anchoring works for you, it becomes easier to market your products or services. But a big factor of the anchoring effect is the element of the first impression. A good example of this is if a person inquires about your products or services, but doesn’t get a solution to their problem, they’ll move on. In fact studies have shown that first impressions are made in 17 milliseconds!
You can take advantage of the anchoring effect by ensuring your business branding or company name is memorable and catchy, thus becoming an anchor in your industry sector.
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