Why businesses need to use anchoring?

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?

 

Engagement Rings

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.

 

Anchoring            

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?

Conclusion

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.

 

 

 

The Left Side Problem

Does anybody remember the left side problem of the England Football Team in the early 2000s?

Now the right of midfield was covered by David Beckham whose service and delivery to the strikers was incredibly good.

However the left was a problem for England.Or so they thought.

The media,the football management and the fans were convinced  that the England Football Team needed a left sided midfielder (preferably with a left foot).

They tried many people within that position.These included:

•Paul Scholes who was one of the best central midfielders of his generation.

•Emile Heskey who was a good striker with raw power.

•Alan Thompson because he had a left foot.

•Jason Wilcox from Leeds.

It turned out that there was not a left sided problem.There was a formation problem.

The idea that the football management did not consider was that they should create a system around the personnel not the other way round.

The Powers at be at the F.A were bedded to their system of 4:4:2 that they had not considered any other system that could have accommodated these talented players.

According to Elon Musk,you have to not use systems before but you have to create a completely new system.The England Football team could have learned from this mantra.

When it comes to business,we can be shackled by a system that had a moderate amount of success in the past but is no longer fit for purpose.

 

 

 

The customer is not always right!

IMG_20180308_211013_466.jpgThere is that phrase that age old adage that the “customer is always right”.I believe that this is not only wrong but could be dangerous for most businesses.

Yesterday,I went for a pot of tea at a place called Birdhouse Tea Studio in Sheffield.I was told explicitly that when the timer is finished to take the brew basket out of the tea pot.

I took a photo on posted it to Instagram and took a sip of my tea.It started off pleasant and then I poured a bit more tea from the pot and it was starting to taste bitter.

Initially I thought it was my palate.

However a member of staff said:

“By looking at the colour of your tea,it seems like you forgot to take the brew basket out”.

Oops I thought! Definitely a schoolboy error.

The staff member kindly made me a fresh pot of tea because my tea experience was sub-par. They didn’t make me feel stupid.

The new knowledge I had meant that I enjoyed my second cup of tea.

Imagine if they had listened to that age old adage of “The Customer is right”?I would have been left with a bad experience.However,they used it as a great educational experience.The best sales people are great educators.

Three things I got from this experience:

*A person could look like they know what they are doing but they might not.
*Education of a new concept doesn’t have to be humiliating.
*Guide the customer.

For me:

*Listen to all instructions

Now off to make myself a pot of tea.

“Get on Stage”.

On the 2nd February 2018 I did something incredible.

This was to speak at my local networking meeting called 4Networking about “How one month in Zambia changed my vision!”.

At School I used to have a speech impediment which made me shy of reading aloud let alone Public Speaking. Therefore I tended to avoid anything to do with Public Speaking until a  year ago.

A year ago I started my journey in the world of self-employment.Self-Employment in the 21st Century requires you to put yourself out to the world.This means doing: video,business presentations and pitching.

Through my Personal Development Group called The Now What Club run by 4 Networking Founder Brad Burton I to the first steps in public speaking by doing personal videos on Social Media.

Speaking to a Phone and uploading it on to social media gave me the opportunity to gain confidence and hone my pitch.

As I started to upload short videos I stopped restraining my personality and that built up my confidence

After a couple of months of doing videos, I decided to put myself forward to do a 4sight presentation at my local networking group in Retford. I also decided that there is no better marketing opportunity that to get up on stage.

Was I ready? Of course not.

However in order to grow,sometimes you have to commit to a goal before you are ready.

I committed to doing this presentation on the 2nd February and I practiced in front of my African mother (who is one of my greatest supporters but also very honest).

The day finally came and  guess what?

It went well!

I really enjoyed it

Was it perfect? No,it wasn’t but if I waited for it to be perfect I would not have done it.

I believe that when you want to do something,you have to make a commitment to yourself in order to make a change in your life.

Four Tips I have learned from this:

1.Decide what you want to do.

2.Put a date to it.

3.Make a Commitment.

4.Do it