A Hankering for Anchoring

Back in the mid 70s the psychologists Kahneman and Tversky recognized what is known as the anchoring heuristic.  Just as a refresher, a heuristic is a mental short-cut humans use to simplify decisions.  The anchoring heuristic is the notion that people have the tendency to base their decisions off the first piece of evidence they receive. This is a huge opportunity for marketers to exploit. The following three methods are the main anchoring techniques marketers employ to increase sales:

• Initial Price Setting: The current price is perceived as inexpensive relative to the initial price.  
• We’re online shopping on Michael Kors.com and suddenly we notice there is a thick red line crossing out a price of a hand bag. Right beside it, there is a new lower price.  The handbag that used to cost $300 and now is on sale for $215.  We can’t afford not to buy! We’ll feel that we are “getting away” with something.  Whereas, if the original price was $215 we may bypass the handbag, feeling it is out of our price range.
• Multiple unit pricing: This is a strategy where the customer perceives quantity buying equating to greater savings.  
• If a customer was walking through the isles of a grocery store and came across a large Frito-Lay’s display with a sign that read “4 bags of chips for $2”, the customer is much more inclined to buy instead of if the sign reads “50 cents per bag of chips”.  Although they are the exact same value, the multiple unit pricing is more appealing.  The customer uses the number four as the anchor.
• Purchase Quantity Limits: Customers see the number limit as a guide for how many to purchase.  
• We are buying paper towel and see a sign reading, “limit 10 per customer”.  Although we may be inclined to believe this cap off is to protect the store from losing profit, it is actually there for the purpose of readjusting the anchor of our brains.  Multiple studies (including those performed on Campbell’s soup) have proved this method increases the average number of items purchased per customer. 

Although the content isn’t any different, our perception on if we’re getting a “sweet deal” is based off the how the marketer presents or positions the product or service.