I help entrepreneurs leapfrog over the typical potholes that derail most small businesses with inspiration, motivation, education, and support across a wide range of business topics drawn from over a decade of running my own business, teaching entrepreneurship for the City of New York, and coaching and consulting privately with dozens of women and minority small business owners. Honestly, why go it alone when help is an email away?
Anchors Away
Ever watch an infomercial and get sucked into believing the amazing deal on offer?
I sure have.
Remember Richard Simmons’ Deal-a-Meal? How about the Shamwow or Chuck Norris' Total Gym?
One of the hallmarks of any infomercial is the infamous and all important question, “How much would you expect to pay,” followed by a list of prices.
This technique is all about what's called the Anchoring Effect.
As humans, we are deeply influenced by the first piece of information we receive when it comes to making comparisons or judgments.
So, those how-much-would-you-expect-to-pay prices serve to anchor our perceived value of whatever is on sale.
When we are then pitched an item at a much, much lower price, we can’t help but think what an amazing deal it is.
But maybe infomercials aren’t your thing.
If so, that's too bad, because you can learn a lot about pricing and sales tactics from watching the best of them.
But, ok, let's forget infomercials.
How about shopping for a car? TV? Computer? Cellphone?
You know that Manufacturer’s Suggested Retail Price (MSRP) you’re shown? It's another example of anchoring to influence our perceived value and price sensitivity.
But this tactic isn’t just employed by retailers and shady infomercials. It’s used across the board.
Heck, you may be employing some version of it in your business, too.
Do you:
- Show the ‘list price’ and then offer a discount?
- Share a competitor’s higher price before revealing what you charge?
- Promote or list higher priced offers or items before your lower priced ones?
- Add up the ‘real’ value of your offer, then reveal a lower price tag?
- Disclose what you'll be charging for your offer in the future before revealing the current lower price?
As you can see, anchoring is prevalent in the marketplace. And, it doesn't just apply to products but to all types of offers and offerings.
While anchoring can certainly be used in ways that feel truly manipulative, it can also, just as easily, be used to legitimately help prospects better understand the value of what’s on sale.
Needs some guidance on the best way to structure your pricing and drive conversion? Let's talk!
Until next week,
PS - If you missed it, last week I broke down another common pricing tactic, the Decoy Effect.
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Easily Said & Done
Why grow your business alone?
I help entrepreneurs leapfrog over the typical potholes that derail most small businesses with inspiration, motivation, education, and support across a wide range of business topics drawn from over a decade of running my own business, teaching entrepreneurship for the City of New York, and coaching and consulting privately with dozens of women and minority small business owners. Honestly, why go it alone when help is an email away?
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