What would you think if I told you that that box of cereal you want to buy will cost you $10? Likely, you would think to yourself, WTF? Erika is crazy! Is that cereal made of gold? Suppose I followed up by saying, “No, actually it is $8.” Then you would think that was better and you might even come close to being satisfied with the $8 price tag. You would be far more convinced by that pricing than if I had started the conversation by saying the cereal costs $8. That’s because of a little psychological phenomenon called the anchoring effect.
As part of our monthly series about how to use psychology to improve your website presence, we’ll delve further into the anchoring effect and figure out how you can make it work for you.
Before we get started, let me show you perhaps the best example I have ever seen of the anchoring effect in action. Take a look at this video of master marketer Steve Jobs disclosing how much the new iPad will cost. Notice that he starts talking about pricing the device at $999 and leaves that price up on the screen for what seems like ages before disclosing the real initial price of $499 to waves of cheers. Had he started out by saying, we’re pricing this at $499 would people have cheered? Maybe, but likely not as loudly. He created excitement about the lower price by “anchoring” the price at $999.
So how can you use anchoring on your website? Here are three ways:
Offer multiple options with the most expensive first: We all know this basic principle of negotiation: when you are the seller, start with a number higher than what you are willing to accept in the end. The same principle can work with pricing services or products. Keep in mind that many users come to your website with only a vague idea of what they are willing to spend on the services you offer. How can you influence them to move from prospective buyer to actual buyer? Put prices into perspective for them. Seeing the most expensive option adjusts expectations up, so it’s a relief to see the more affordable option. In this example, the middle price is just 25% of the expensive option.
High prices slashed: Everyone loves a sale. That jacket you tried on last week and loved was $350, but this week it’s only $215. What a deal! Notice that it’s the feeling of getting the same benefit for a fraction of the cost that sticks with us, more than details like what we paid in the end. This is because purchasing decisions are largely driven by emotions. You see something sparkly and your inner lizard brain instantly wants it. You see that the price has dropped and your more evolved rational brain can more easily justify making the purchase.
Reducing price of upsells (buy both items and save): What do you first think of when you hear the word ‘upsell?’ Some sleazy, used car salesman trying to sell you something you don’t really want (obviously, you need a paint protection package on a faded Honda Civic), right? But when used well, upselling can actually make your customers happier. And happy customers means happy business owners. eCommerce businesses use this tactic a lot. One great example is 1-800-Flowers. When you put a bouquet in your shopping cart, you’ll see relevant upgrades (balloons, candy, a teddy bear, etc.) that help you send a better gift and you get a discount for buying two or more items together. Offering to upsell at a relevant time and place is key. Simply put what you’re doing in the context of helping your customers win. What could be less sleazy than that?
As a small business owner, your survival depends on influencing customers to use the services you offer. There’s no doubt that learning a little about psychological principles like anchoring can help.
Have you seen any standout examples of the anchoring effect at work? Let me know in the comments below.