Three examples of effective price anchoring
You are constantly bombarded with options and ideas for attracting more buyers as a business owner. You know that price is a decision-making factor, but you're struggling to get it right.
The price influences a big part of the decision process. Depending on how your customers see your pricing it can be swayed in one direction or the other. To get the best outcome from your pricing strategy, you need a better understanding of price anchoring.
In this blog, we've touched on price anchoring and how to use it as a tool for persuasion. We've also provided some examples that you can use to anchor prices in your business.
What is price anchoring?
While people may not realize it, we often rely on certain factors to help us decide on purchases. One of these factors is price; as the price increases, so does our perception of quality. The reason for this phenomenon is something called "price anchoring"—the way an item's price can anchor our perception of its quality.
This happens because to measure the value of an item we often compare it to other things. In the case of pricing, the items being compared are not just the same category of goods—they are also similar products. This means that when we find a cheaper version of something we want to buy, we automatically assume that it is inferior in quality to the more expensive product. But when we see a higher-priced product than expected, our assumption changes—we start to believe there must be some extra value in this item over and above what we would typically expect from an item in this category.
How does price anchoring work
The basic idea behind price anchoring is this: You're more likely to buy something if you think it's a good deal than if you think it's overpriced. For example, say you're shopping for a jacket. You find a coat that looks almost exactly like the one you want at a store for $75 (but which you've seen elsewhere for $75). You also find a jacket with one feature that isn't quite as nice as the first one, but it also sounds like it might fit your needs—it has two fewer pockets and costs $100. Which one do you buy?
If the answer is "the first one," you've fallen victim to price anchoring. The second item is offered at a higher price but with similar features. The store wants you to focus on the fact that this item is "only" $25 more expensive than the first item rather than on the fact that it costs an extra $25 compared to other jackets.
Examples of price anchoring
The package comparison strategy is also known as unit-bundle pricing. It is a pricing strategy where some items are sold together as a package. Each item in the package is usually lower than if you were to buy them separately. This makes it easier for customers to decide about buying products and services because they don't have to think much when comparing prices and features.
The main benefit of this strategy is that it can increase sales by upselling (selling more profitable items) or cross-selling (selling other related items). Packages also help reduce the cognitive load on buyers by making it easier for them to compare prices and features. This means you'll have less customer confusion, which translates into fewer returns and complaints.
The retail pricing strategy in price anchoring is to make customers buy an item by making them think that the item's price is lower than it is. This can be done by showing a similar item with a lower price tag or placing another item next to it with a higher price tag.
The idea behind this strategy is that when someone sees a product at a lower price than they expect, they will think that they are getting a good deal and will be more likely to buy it. When someone sees an item at a higher price than expected, they won't think they're getting such a good deal and may not want to buy it.
Comparing Prices with Competitors
The comparing prices with competitors' strategy in price anchoring is a method of keeping your customers happy while maximizing profits. This is done by telling customers that they are paying less than their competitors for the same service or product. This can be achieved through different ways like having comparisons in the store, online, promotions on social media, etc.
The method also focuses on highlighting the price of a competitor's product; it could be any other brand competing in your specific market space. By doing this, you present your company as the better option and show that you provide better value for money. It helps to increase your sales because it brings more people to try out your products.
Find the best strategy.
When the anchor idea is used correctly, it can help increase sales for stores by getting customers to spend more money. Even if it's a slight increase, it's still an increase. With price anchoring, you also need to know how to make your brand stand out from the crowd to fully maximize the strategy. To help you strategize price anchoring for your business, contact us to know more!