The main purpose is to get people to anchor on the money-saving aspect. For example, a set of three mason jars for $5 instead of $2 for each. It’s a pricing technique where you offer a lower price per unit if someone buys a product in bulk. #4: Leverage Multiple Unit Pricing Source Suffice it to say that by organizing your plans from high to low, your prospects are bound to see the mid-price options more favorably. To prove it works, he cites a report wherein billiard table dealers were able to increase the average table sales by 50% by first showing the expensive models and then allowing customers to shop the rest of the collection. Essentially, you make a larger-then-smaller request so that even if someone rejects it at first, guided by the reciprocity principle, they’ll give in to the next request. Robert Cialdini talks at length about it in his book, Influence. Whether people donate the recommended amount or not is a different matter, but, at least they have a number to adjust to.Īnother reason this strategy works is the operative rejection-then-retreat technique. The default contribution value works as an anchor, hinting it’s a popular option, thus making people conform to it. Notice how the folks at The Guardian manage that. After all, with people from behind the counter looking at you, you want to make sure you come across as a person with a big heart and an equally big wallet!īut unlike in the example above, it’s a good idea to take cognitive load off a customer’s mind. For example, wouldn’t you be suspicious if I propose selling you a brand new BMW whose actual price is $45,000, for $8,000? #2: Offer a SuggestionĮver noticed transparent donation boxes for various charities at checkout counters in stores and eating joints? How do you decide how much to give? My guess is you’ll look at the most popular bills in the box. Note: The Anchoring Effect can backfire if there’s a ridiculous gap between the original and discounted price. The offer becomes more persuasive with social proof used as a secondary anchor. Here’s an example from the Columbia website where the original price is struck off, anchoring users to consider the discounted price as a good bargain. And this is exactly the reason why we’re tempted to buy them for much less on sale. Expensive products, for instance, are assumed to be excellent quality, stylish, long-lasting, and hence worth buying. We often rely on the price of a product to determine its worth. #1: Display Original and Discounted Prices Next to Each Other Let’s look at how some brands use the Anchoring Bias to appear affordable and increase the perceived value of their products and services. Ultimately, this experiment proved Kahneman and Tversky’s prediction that people rely on the initial cue to make estimates, even though it may result in an error in judgment. What’s the reason behind this big a difference?īasically, faced with a time limit, participants quickly anchored to the product of the first few numbers of the mathematical expression (1x2x3=6 & 8x7圆=336), which then influenced their estimates: a smaller number for an ascending sequence and a bigger answer for a descending sequence. The first group’s median estimate was 512, while the second group’s median estimate was 2,250. Now, although the answer to both questions is 40,320, the groups gave different answers. In the above example, the leading anchor was the $150 price tag, which helped you make a price comparison and conclude that the $150 shirt’s a steal! Origin of Anchoring Biasīack in 1974, Kahneman and Tversky conducted a study in which one group of high school students was asked to estimate the result of 1x2x3x4x5圆x7x8, and the other group was asked to calculate 8x7圆x5x4x3x2x1. Think of it as a shortcut or heuristic our brain takes to speed up the decision-making process. Know why? Because of a cognitive bias called anchoring.Īnchoring is the fact that people tend to cling on to the first piece of information (or anchor) they encounter, and let their subsequent actions, such as estimates, arguments, and conclusions, be made in relation to it. What do you do next? You go back to your first find and buy it. However, determined to find something similar and cheaper, you continue with your search, only to find that other shirt prices range between $500-850. You check its price tag, and since you see it’s quite expensive – $150 – you put it back on the rack. After a minute of window shopping, you’re drawn to a fancy silk shirt.
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