The Anchoring effect is a cognitive bias that causes people to rely too much/too heavily on the first piece of information they've received as a point of reference. How this works? Let's say you want to buy a nice bottle of red wine online. You come across a nice bottle which is $20,- would you buy it? Now imagine it's an offer, normally it would be $40,-. You're more eager to buy it now, since that's one hack of deal right? You're using the initial $40 as your point of reference to determine the perceived value of the product. When you see the 'sales' price being $20 your head will convince you that you're getting a lot of value for your money.
This cognitive bias, the Anchoring effect, is often related to pricing, it's something that's used by salespeople a lot. They start with a very high price so you give the product/service a higher value for yourself, you probably will end somewhere in the middle. But what if you would have started with an offer, that becomes the anchoring and you're more likely to pay less than when the anchoring effect is played the other way around.
The Anchoring effect can also occur in other situations than only with pricing. It occurs when you use an initial piece of information in order to make subsequent judgments. Judgments are made once the anchor is set by using it as a point of reference. We use these 'anchors' as reference points to make our decisions instead of thinking rationally and objectively to make the best decision overall.
Influencers are paid by brands to advertise. When there is an influencer who tests a certain product and does a positive review, all people who see the review are being 'anchored' without them being aware of this. If you really trust this influencer you'll tell others that the product/brand is pretty good instead of doing extensive research online about the product. The influencer is often biased since this person got the product either for free or is getting paid to promote something.
This Anchoring effect can also be applied online. Have you ever thought about why eCommerce sites aren't filtered on price but rather on 'popular' or 'relevance'? This way the eCommerce party has an influence on what the results will look like for you. The first item(s) are not the cheapest this way they create an 'anchor' or a so called reference point. Everything you see after the 'anchor' is a good deal or definitely worth your money.
For SaaS products, you can use the Anchoring effect to be applied to the pricing table for example. There are different ideas for this pricing table (for desktop). Most pricing tables contain around three or four packages. The low price is a little lower than the average, but you can barely do anything with this package so no one will choose it. The medium package is the best deal, low in price compared to the high package and not a lot more than the low package but with all the features to get going. The medium package is also labeled with 'most popular', 'most bought' or 'best deal' or anything like that to add social proof. Either you set an 'anchor' with the low package price or the high package price, both might work but remember to always test it before you implement it.
Suggestions to test for eCommerce websites:
Add the average price on top op the product grid. The average cost for an airplane ticket is X, when they see cheaper prices than the average people can be more likely to buy that ticket. This could really work for people that are price sensitive.
Place a expensive item as first on the grid of products, everything after that will look 'cheap' which will make them more likely to buy the product(s) and it will increase the perceived value of the product.
This was first studied by Tversky & Kahneman in 1974
Would you like to go more in-depth? Here are our recommendations:
Never Split the Difference: Negotiating as if Your Life Depended on Itby Chris Voss & Tahl Raz