As marketers, we're always looking for proven psychological techniques to persuade consumers and move them down the funnel. One of the most influential but underutilized concepts involves anchoring. Understanding how anchoring biases work allows brands to intentionally apply anchors and increase perceived value and drive more sales.

What is Anchoring?

Anchoring represents a cognitive bias where our judgments become heavily influenced initial provided reference points. In negotiations or when making subjective assessments, we tend to rely too heavily on the first piece of information received - the "anchor" - which then skews our perceptions.

Numerous studies have shown just how powerful anchors can be. In one classic experiment, participants estimated the percentage of UN countries that are African spinning a "wheel of fortune." Unbeknownst to the participants, the wheel was rigged to always stop on either 10% or 65%. Those who spun 10% gave a lower estimate on average than those who spun 65%, showing how the random anchor biased their judgments.

When it comes to pricing and value perceptions, anchors have an outsized effect. Once an initial frame of reference establishes, it's very difficult to adjust away from that anchor, even if chosen arbitrarily. This allows brands to gain an advantage.

Using Anchoring to Increase Perceived Value

The basic anchoring technique in e-commerce involves promoting an inflated "original/list" price that the product discounts from. This establishes the artificially high anchor price consumers fixate on and judge the "deal" against.

For example, a $50 sweater could list at $100 with a "50% off" sale tag. While the true value measures $50, anchoring on the $100 reference primes consumers to feel like they're saving $50 buying it. The perceived value transforms to $100 compared to the actual $50 price.

To leverage anchoring most effectively, brands:

• Set anchors significantly higher than intended sale prices. The wider the gap, the greater the perceived discount and value.
• Display both anchor and sale prices together for strongest impact. Seeing the crossed-out anchor price reinforces it.
• Use persuasive language like "Original Price", "List Price", "Was", to lend credibility to the anchor frame.
• Consider anchoring accessories and add-ons too setting RRPs much higher than actual sale bundles.

With the right execution, anchoring causes consumers to feel they're getting an extraordinary deal, even if sale prices represent normal margins. It increases conversions making offers seem too good to pass up.

Examples of Anchoring in Practice

Examining how some major brands applied anchoring strategies effectively:

Nike

Nike frequently displays items at inflated "suggested retail prices" pieces then discount from. A $90 jacket may frame as originally $150. Consumers feel they're saving $60 buying it during the sale.

Wayfair

Wayfair prominently shows "List Price" anchors on all product pages always much higher than actual sale prices. Combined with constant flash sales and deals, it makes every offer seem like a huge steal compared to the anchors.

Nordstrom

During major sales events, Nordstrom crosses out "Original Prices" often 2-3x higher than normally sells for. Customers believe they're getting top designer brands at deep discount prices.

Amazon

Even everyday low prices employed, Amazon still employs anchoring tactics. Accessories and add-ons will have exaggerated MSRPs crossed out with messaged like "You save $10!" to influence bundled purchases.

All examples show how influential and persuasive anchors become strategically part of the regular marketing mix. It results in stronger conversions without changing underlying pricing structures.

Additional Anchoring Strategies

Other anchoring techniques brands can test:

• Comparative Anchoring - Showing price beats competitors anchors consumers to expect higher costs elsewhere.
• Social Proof Anchoring - Highlighting people viewing a product sets a social frame of reference.
• Scarcity Anchoring - Communicating limited stock available or expiring deals creates urgency the anchored "normal" price.
• Subscription Anchoring - Setting up easily-cancellable free trials anchors users into ongoing paid plans.
• Retail Location Anchoring - Franchise stores anchoring prices upwards versus online-only lower costs.

The opportunities endless provided marketers craft powerful reference points, measure impact on key metrics, and optimize over time.

Measuring Anchoring Success

To optimize, brands must quantify:

• Increased conversion rates and basket sizes from anchored versus non-anchored control groups
• Higher review scores and referrals reflecting stronger perceived value
• Tracking anchored discount amounts real remaining margins
• A/B testing different anchor price magnitudes
• Monitoring anchored versus regular full-price purchase patterns

Ongoing testing reveals most effective implementation approaches each product/audience. Anchoring boosts demand applied ethically to persuade rather than deceive.

Anchoring represents a remarkably simple yet impactful cognitive bias marketers can leverage more intentionally. Establishing powerful arbitrary reference prices shifts perceptions upwards. Anchoring then persuades making discounted offers irresistible. With testing and responsibility, anchoring provides significant competitive advantages increasing conversions while maintaining margins. It deserves prominent placement strategies.

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