Anchoring is a concept in Behavioural Economics, where a person forms an opinion based on some information they receive, which then influences the way they interpret new information that comes to light.
For example, a study was conducted. People were divided into 2 groups. People in the first group were asked whether Gandhi died before or after the age of 9. Everyone correctly answered that he died after 9. Then they were asked to guess the age at which he died. The average result was 50. Then a second group were asked whether Gandhi died before or after the age of 140. Everyone correctly answered that he died before 140. Then they were asked to guess the age at which he died. The average result was 67.
So just by asking the first question, changed people’s guess in the second question. Lots of other similar studies have reached similar conclusions.
This has important implications for pricing. By using anchoring, you can raise your customers’ perception of the value of your product, making them more likely to buy. 3 Common techniques are:
- Showing the standard price, before any discount was applied.
- Showing the price of competitors’ products
- Showing the price of other products sold by the same vendor
All of these can make the customer think they are getting good value, which means they are more likely to make the purchase.