You’ve worked out at home for the past year. You had a great rhythm going but lately your workouts are feeling pretty stale. You want a bit more energy — something new and exciting.
You decide to stop by a gym close to your house to see what they offer.
As the sales rep walks you around the gym, you see the workout rooms, pool, and sauna. You nod as they give you the rundown because you’re feeling it.
“This is a good decision,” you think to yourself as you make your way back to the sales rep’s office.
The sales rep slides a brochure with the monthly prices over their desk towards you. A standard membership costs $129/month for unlimited access. The premium membership is $549/month and includes a session with a personal trainer once a week.
The premium membership is super expensive, which makes the regular membership seem like a steal.
“I’ll do the $129/month membership, please.”
Why do you feel like $129/month is a great deal?
In today’s edition of Why We Buy, we’re exploring Price Anchoring – how our perception of price impacts our buying decisions.
Let’s get into it…
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The Psychology of Price Anchoring 🧠
Researchers discovered that people look for a price point to reference when making a buying decision.
One stroll through a shopping outlet or your neighborhood Marshall’s is the ultimate lesson in this buyer psychology.
These stores strategically tell you what the price of a product *used to be* so you can see how much you’re saving (whether these prices are real or not is another conversation).
A $60 sweater on sale for $35? What a steal!
But, here’s the thing about price anchoring—even arbitrary numbers impact how much you’ll pay for a product.
MBA students at MIT were asked to write the last two digits of their social security number next to each product on a list. The products were wine, a computer mouse, a keyboard, a book, and chocolates.
Researchers then asked the students to write the maximum they’d pay for each product. The students with social security numbers ending 80-99 said they’d pay more for each product and students with the lower numbers (1-20) said they’d pay the least.
People rely heavily on price anchoring to make their buying decisions—and they don’t even realize they’re doing it.
Inside Your Buyer’s Mind🧐
There’s one question your buyers are asking as they hover over the “Buy” button.
Is this a good deal?
Price anchoring can show your buyers why it’s such a great purchase without a single line of copy.
Check out how Amazon strikes out the original $149.99 price and shows the $119.69 sale price for this electric mug. Suddenly buyers feel like an electric mug that costs more than $119.69 is a bad deal.
They also feel like if they wait to make the purchase and have to pay the full price they missed out.
Creating an anchor price can help you convince buyers that they’re getting a good deal.
And, when no anchor is present, buyers may delay making a purchase until they can do more research and find a comparable option.
How To Apply This 🤑
Alright, so how can we apply this right now to sell more?
Showing the original price next to the sale price makes it easy for buyers to see the savings. Strike-through pricing anchors the sale price and makes buyers think, “Wow, I should buy this now or else I’ll have to pay more for it later.”
REI’s annual Labor Day sale shows strike-through pricing and how much buyers are saving on their product pages. They don’t gatekeep the new price for individual product pages — they show buyers what they’re saving (and add the percent price decrease!) as they’re scrolling. Sure, buyers can wait to buy their gear later… but it’ll come at a hefty price.
Create a more expensive option as an anchor for your core offer
What’s your core offer? The one that you want more people to buy? Choose the price for it… and then add a decoy product as an anchor.
Your decoy product will be more expensive. To be clear, it’s a real product! But, your focus isn’t on marketing it and garnering the majority of your revenue from it. Instead, use an expensive product to anchor that price in your buyers mind. When they see your core offer, it’ll seem like a sweet deal.
This is the exact strategy William’s Sonoma used to sell 2x more $275 bread makers (their priority product) as explained in Yes! 50 Secrets from the Science of Persuasion.
The more expensive “decoy” option doesn’t need to be a similar product either. It can be a different solution to get the same job done.
I’m using this strategy at Customer Camp. I shifted my business and stopped offering done-for-you research projects when my son was born.
I already had two digital products that people could buy anytime to learn how to do customer interviews or mine online reviews for useful insights, yet people kept reaching out asking to work with me one-on-one.
I created an option to Book a Strategy Call with me. But there’s a catch: I only offer 1 call a week and it’s not cheap ($750/hr). Since adding this option, I book about one strategy call a week, which is great.
But even better? Sales of my on-demand products grew by 15%. The high price of the strategy call acts as an anchor for my other products, which are much cheaper by comparison.
Show how your product is cheaper than competitors
Price anchoring is like the photo that speaks 1,000 words. Instead of writing lines of copy about how much cheaper and better your product is than the competitions, you can show your buyers how much less expensive it is.
Quince, an eCommerce clothing brand, adds a price comparison to each of their product pages. They also make it super clear how much buyers are saving by shopping at Quince versus Everlane, Aritzia, or Ralph Lauren. (They even show how their competitors don’t use high-quality linen and only have 30 day return policies. Quince marketers are on top of their game!).
The Short of It 💥
People use comparisons to determine if they’re getting a good deal.
Smart marketers use price anchoring to set expectations and nudge more people towards the buy button.
And remember, if you don’t provide a comparison yourself, buyers will search for one elsewhere, which may result in lost sales.
Until next time, happy selling.
Wanna really get inside your buyer’s head?
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