The product or service you have is great but the price is just…crazy. Or that is what you would think?
According to economic theory, people are incredibly rational and will pick the most cost-efficient item or service.
If you think that people are rational, then think again?
How did Jewellers get people to pay ‘crazy sums of money’ for an Engagement Rings?
In the 1950’s or 60’s DeBeers said that:
‘One month’s salary will last a lifetime’.
This has become an accepted societal norm. People wanted somebody to guide them on how much they should spend on an engagement ring. Customers usually have no idea how much they should spend on anything until somebody tells them.
DeBeers used a common technique called anchoring which can be used to frame perception. Perception changes everything.
An ad like this will let the customer do the maths in his/her head:
Average monthly salary=around £2000
Price for a ring= £2000
Married for 40/50 years
=£50/40 per month
This maths is usually done unconsciously. A large purchase has just been broken down in the customers head and does not seem so expensive. Now, the person thinks that they have got a bargain.
It is important that in a business you are able to convey long-term value.
Anchoring as a way to frame Comparisons
Anchoring also can be used to frame comparisons. When you go to a restaurant and look at the wine list, the expensive branded wine is usually at the top of the list. It is not there to be sold, but there as a way to shift your anchor. The expensive bottle of wine is there to make raise customers’ spending expectations.
Expensive branded wine: £500
House wine bottle is £70
A glass of wine is: £20
Most people will pick the middle bottle in that restaurant because they have been guided and primed to do it. If that same customer was in the chain restaurant down the road, then they would struggle to pay half that price.
In terms of the restaurant example,
Do you have a High priced item which raises customer expectations?
Anchoring is not just a way to help customers spend more money, I believe it is a way how you a business can raise expectations of the customer.