Anchoring Bias

Anchoring bias is something that occurs daily, impacting both our decisions, and the marketing world. This bias states that all decisions that we make are affected by the information in our environment, as the first piece of information we encounter becomes the “anchor” for future expected outcomes. In marketing, the anchoring bias is important with pricing, as the first number we see impacts that number that we are expecting to see, and how much we are willing to pay for items.

There are many applications of the anchoring effect within marketing, as this bias can be used to your advantage. Here are a few:

First, if you read last week's blog on psychological pricing, You will remember that we discussed charm pricing, in which products often have prices ending in .99, as customers are more likely to buy them. This also relates to anchoring, as the reason that this is effective is that the whole number (the pound) acts as an anchor, so the brain perceives the price as closer to the anchor number, than the next pound.

Anchoring can also be used to encourage customers to buy your more expensive products. A common technique is when providing services, to provide a basic, middle, and high end option. The high end option then serves as a price anchor for the middle range option, and people are more likely to purchase the middle option, than if only a middle and basic option were available. However, this technique can also be applied to physical products. If your products are highly priced, maybe due to high quality, or sustainable and ethical sourcing, people may not be willing to pay a high price, as it is not expected. In this scenario, a customer is anchored to the price of similar products that are available on the market, at a lower and more standard price. In order to overcome this, you can place these items beside similar products that are of an even higher price. This will then act as a new anchor, and your pricing will become more reasonable, thus customers will be willing to buy these higher priced products.

Finally, anchoring bias can be applied in bundles and packages. Often, packages and bundles offer a group of products at a discounted price, to when they are bought individually. By showing this discount, the non-bumble price acts as the anchor, and customers feel that they are making a saving by buying the bundle, meanwhile you are increasing the amount that the customer is buying, and ensuring that the customer is buying all of these products from you, and not shopping around if they had been planning to buy the bundle products in the future.

Anchoring can be a confusing topic, however it has many applications to business and marketing. I have only briefly covered a few areas of anchoring here today, however, below some more applications of the anchoring effect, for you to explore

-- From Marketing to Mind --

Photo by milan degraeve on Unsplash

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