Price Management

What You Need to Know About Price Anchoring

Picture this: you’re scrolling on your phone, and you come across an ad for a pair of headphones that says, “Was $100, now only $75!” Sounds like a pretty good deal, right?

Well, that’s a price anchoring strategy. Instead of just listing prices at a flat rate, companies will offer shoppers a discounted deal so they perceive the item as more valuable. This strategy can increase customer enthusiasm about a product, just by providing a little context.

What Exactly Is Price Anchoring?

Price anchoring is a pricing strategy that relies on shoppers‘ tendencies to use the information they initially see to make purchasing assumptions.

For example, a retailer might show that a product was worth a higher amount just to emphasize that it’s now being sold at a discount. Or they might purposefully advertise a higher-priced product alongside a lower-priced option to make the cheaper product appear as a better deal.

In this example, the higher priced product serves as an “anchor” by which the shopper can compare other lower prices.

Price anchoring can be used as an effective marketing technique because it pushes shoppers to make decisions based on relative value, which leads to more sales.

The Legality of Price Anchoring

Price anchoring is not illegal as long as retailers are transparent and are not being purposefully deceptive toward their customers. There should be no misleading or misinformation.

In order to stay ethical, businesses need to remain transparent and make sure they are providing all the information a customer needs to make well-informed decisions.

Does Price Anchoring Work?

When done correctly, price anchoring can drive sales and improve customer experiences.

Shoppers tend to base their purchasing decisions around perceived relative value of the products they want to buy. This strategy leverages that by putting those products into perspective.

Sometimes shopping can be a confusing and even frustrating experience, and it’s easy to feel indecisive. With price anchoring, you are highlighting key products with high value for your shoppers to focus on.

This can make the purchasing process much easier. Customers are more likely to make a purchase when they are confident that they are receiving a good deal.

On top of this, price anchoring allows you to enhance their perception of your product. Prices are all relative, with nothing truly being cheap or expensive in the customer’s eye until you have attached a value to it.

For example, a shopper might be in the market for a new high-end blender. They find a 64oz option with 7 speeds for $120. That feels like a little too high of a price, so they continue looking. Then, they find another option from the same brand that’s 72oz with 9 speeds for $175. Well now that first option is looking a little sweeter.

Price anchoring is a very common pricing strategy, but it’s most effective when used on the right products at the right time.

Often, this kind of pricing is done intentionally with the retailer using the more expensive option as an “anchor” for the shopper to compare other products to.

You can also use a cheaper option as an anchor if you’re trying to boost sales for a particular item or package deal. For example, Netflix prices their Basic with Ads plan at $6.99 per month. Their Basic plan (no ads) is $9.99 per month. For many subscribers, this seems like a pretty minimal difference for a better plan.

In this case, the lower price is the anchor. Customers are going to compare the other subscription package options to the cheapest option to see what they’re willing to pay and how to get the biggest bang for their buck.

Overall, the answer is yes, price anchoring does work. As long as you know how to use it strategically.

The Pitfalls of Price Anchoring

Despite all the advantages that anchor pricing can bring you, it isn’t always a guarantee for success. There are some situations where it may not be the best option. For example:

Fake Prices

Some retailers use made up prices as their anchors when advertising, which can backfire if the shoppers look further into the listing. If you say that a product was previously $50 and now, you’re selling it for $35, and you never actually had the product listed at $50, then shoppers may find out about this and view you with distrust.

This is why it is always better to stay transparent with your shoppers.

Familiar Products

If the product you’re attempting to advertise is already popular or commonly purchased, then price anchoring probably isn’t the right strategy to use.

Shoppers tend to keep tabs on the products that they buy consistently. So, if you’re suddenly saying it’s worth something else and they know it isn’t, then they probably won’t be very influenced by your strategy.

When to Use a Price Anchoring Strategy

Price anchoring is a very common pricing strategy, but it’s most effective when used on the right products at the right time. It’s important to understand your customer base and play on what they want and their perception of your products.

With the right amount of skill and forethought, price anchoring is a great way to generate more sales and improve your pricing strategy.


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