Subconsciously the decisions we make are often steered by what are known as anchors. This is a piece of information that we are intentionally or unintentionally exposed to, that becomes a reference point for comparison. Psychologists have found that this seemingly innocuous exposure has a profound impact on the decisions we make. Using anchoring in marketing is about leveraging the fact that we use benchmarks to evaluate options, no matter how arbitrary the anchors may be.

Anchors skew our value perception

Demonstrating this effect, MIT professors Dan Ariely, Drazen Prelec, and George Loewenstein asked their students to place a  bid on items in an auction. Prior to bidding each student would set an arbitrary price for the item by using the last two digits of their social security number. Unbeknown to the students this price was an anchor, and when it came time to bid it scrambled their ability to judge the value of the items. Those with high digits 80 to 99 wound up bidding 346 percent more than those with digits 00-19.

How retailers use anchoring to engineer a false sense of value

You don’t have to look very hard to come across an anchor. Visit a travel site and you might be greeted by an offer for a week’s all inclusive holiday in the Caribbean for £899pp. Inadvertently or intentionally, this has set an anchor in your mind – we may not know if that’s what a holiday in the Caribbean should cost, but we know it’s an exotic, faraway location. This price and location becomes a reference point when we return to book our holiday.

Retailer TK Maxx is a master at anchoring. The original price of that designer jacket you picked up is prominent on the label – RRP £510, our price £69.99. For supermarket brands like ALDI, anchoring is a go-to behavioural bias for cutting through the competition. Take ALDI’s ‘Like’ ads for example. They use price comparison to present brands with a higher price first. They do this to anchor the audience’s view on price before presenting the ALDI option, which is much lower. Which do you choose?

As well as being a powerful tool in commerce, anchoring can also be used for more positive pursuits. A simple but effective example  is the ‘5 a day’ push to get people to eat fruit and veg. ‘Five’ has little scientific basis as the right amount to eat, but people have latched on to it.

Top tips

  • Find your ‘5 a day’ – a diamond company told us an engagement ring should cost three months wages, a bed company tells us our mattresses need to be replaced avery eight years. What numbers can you anchor in your customers’ minds to increase the price they pay.
  • Drop big numbers that set customer expectations – Three’s Brexit bus tour stated that its customers would save £187m in roaming charges when the UK leaves the EU. Try to shake that figure from people’s minds if you’re Vodafone et al.
  • Make the important numbers memorable – Simba’s ‘100 days’ is a big round number, once you’ve seen it you can’t forgot it when comparing other mattress brands.
  • Always go big to small – one of the best lines a salesmen can hit you with is ‘normally we would charge £345 for this additional service but as you’re a regular customer we can do it for £225’. Before you’ve even had a chance to think you already feel like you are getting a good deal, even though that £345 might be an arbitrary number.

This is an excerpt from our latest free report: Applying Behavioural Economics in Marketing

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By Greg Copeland

Behavioural Strategist