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Anchoring
Anchoring is another well-known persuasive technique… although most people who talk about anchoring begin and end with using this tactic to set prices. We’re definitely going to talk about that here and show you how others have done it… but it’s important to know that there are other forms of anchoring that will help you persuade prospects and customers to act.
But before we get into all of that, let’s talk about some of the research that demonstrates how anchoring works.
In his book, Predictably Irrational, Dan Airely points out that “most people don’t know what they want unless they see it in context.” Anchoring is all about setting the context for what your prospects will see.
Airely goes on to write about an experiment he conducted with Drazen Prelec, a professor at MIT’s Sloan School of Management. It was an auction of several items to a class of university students.
Before the auction began, Prelec asked the class to write down the last two digits of their social security numbers. Then he asked the students how much they would pay for six different items. Two of the items were described as highly rated, expensive wines. The other items included a cordless mouse, a cordless keyboard and mouse, a book, and a one pound box of Belgian chocolates.
Remember this was an auction, so the student who was willing to pay the most for the items would actually pay for and receive it… so they weren’t just guessing at a price, they were saying what they thought the items were worth and what they would pay.
Airley took all of the answers, organized them into groups based on the last digits of the social security numbers, then averaged the prices these groups offered in the auction.
The results are pretty remarkable.
For example, the bids on the cordless keyboard looked like this.
Students with social security numbers ending in 00-19 bid an average of $16.09.
Students with social security numbers ending in 80-99 bid an average of $55.64.
And the numbers in between went up as the social security numbers went up.
Each of the students was primed (we’ll talk about priming in a future module) with a somewhat random number… and that number acted as an anchor for the totally unrelated task of choosing a price to pay for each item of the auction.
Once the last digits of the social security number were written down, the students were anchored to a low, medium or high number.
And the prices they chose afterwards reflected that anchoring.
The Economist magazine is famous for its pricing strategy that uses a decoy offer to anchor the value of the magazine’s offer substantially higher than most other magazines.
Although the offers have changed over time, The Economist has traditionally presented three different subscription options. Digital only. Print only. And a combined Digital and Print.
Online access only is just $59. The print subscription is $125. But the print + online access is also $125. The print only option is a decoy. It provides less value than the print/digital version at the same price. But the decoy anchors the value higher— substantially higher—than the digital-only offer… at $125. And because this option adds more value than the print-only version, it feels like a bargain in comparison.
And this anchoring technique works.
When there were only two options: digital or print, 68% of subscribers chose the lower-priced option. But when the decoy is added to anchor the value, 84% of subscribers chose the higher-priced option.
You may be uncomfortable with tactics like this because prospects are not consciously aware of how a decoy offer affects their willingness to pay more. We’re a bit uncomfortable with it. So, as we said in the first module, if you use a tactic like this to anchor your prices at a higher price point… make sure that your offer provides the value you promise. And that your offer truly benefits your prospects.
Ron Popeil is the TV pitchman who sold hundreds of millions of pasta makers, food dehydrators, pocket fisherman, and bottles of spray on hair to fix bald spots.
He was the person who coined the term, “But wait, there’s more.”
When pitching his products, Popeil would start high… often times mentioning the prices of competitive products to anchor a price high in the consumer’s mind. Then as he piled on the benefits and talked about the extra attachments, prospects expected the price to go up even more.
His script went something like this…
“Now how much do you expect to pay for this item? $150? $200? More? Well, it’s not $150. It’s not $100, or 80, or even $60 dollars. If you promise to tell a friend and help me get the word out, I’ll sell it to you today for just $49.95—that’s a fraction of what you can expect to pay for similar—even inferior—products.”
During the demonstration on TV, Popeil anchors the value at $150 or more. Then when the actual price is unveiled, it feels like a great deal you can’t afford to pass up.
You’ve almost certainly seen this in some of the sales pages you’ve read. The copywriter adds bonus after bonus… each one anchors the value of the offer higher and higher.
You can do the same in your copy by establishing a starting price. Once prospects start to consider purchasing your product at that price, it serves as an anchor against which other options (including the final offer you make) will be compared.
Dan Lok did this for his High-Ticket Closer Certification program. Most people would say that $2500 for a training certification is expensive. And they would be right. So notice how Dan piles on the bonuses… each one worth more than the last.
Eventually the program and bonuses add up to $76,995. But the cost to you is just $2,495 for a very limited time. The value is anchored very high to make the final cost of the program feel like a bargain.
Again, we should point out that if you use this tactic, the value you assign to each bonus should be reasonable. Don’t falsely inflate the value of what you offer to make your product seem more valuable than it really is. If you can’t sell a bonus for the price you assign it, then it probably isn’t worth that much and you should consider lowing the price.
This is a good place to apply the Grandma Test… would you let your grandmother pay that much for the bonus? If not, mark it down until you are comfortable sharing it with her.
You can also use anchoring to increase the number of units sold with quantity limits, multiple unit pricing, and suggestive selling.
Rather than using absolute prices, you can set an anchor for the preferred quantity you want customers to buy. So instead of advertising a product for $10 each, you would state the price for multiple units… 3 for $30. Or add a small discount so it’s 3 for $28.
But even if the multiple unit price isn’t discounted, the suggestion that the price is only good when you buy 3 items increases the number of customers who buy the higher quantity.
Researchers tested this and found that multiple unit pricing resulted in a 32% lift over sales of a single unit control.
Quantity limits can have a similar effect. A purchase restriction like “Limit 5 per customer” will anchor a consumer to a higher number of products. Even if they don’t buy all 5, they’re more likely to buy more than they would have without the restriction.
A CEO once told me that he likes to limit the number of products a single customer can buy. He said, “they arrive at the store not sure they want one, but when they see they can only buy three—they do it, and they’re a bit upset that they can’t get 5.”
In a study to test purchase restrictions, researchers found that when consumers were told there was a limit of 12 cans of soup per customer, they bought an average of 7 cans, while those with no limit purchased an average of 3.3 cans.
Not bad.
Copywriters can do something similar by simply suggesting more uses for the products we sell. Arm & Hammer Baking Soda saw a giant sales lift when the copy in their ads suggested keeping one box for baking and another in the fridge to help contain odors. The suggestion of a new use increased sales substantially.
Adding suggestive copy to your promotions… like “buy a dozen to store in the freezer” anchors the “right” number to buy at 12 and helps lift sales. Again, research confirms that a quantity suggestion can almost double sales—even without a discount.
That’s probably enough about price and quantity anchoring. So what other applications does the principle of anchoring apply to?
Well, you can anchor your product to a well-known brand—if customers recognize the brand for a particular trait.
Rolls Royce is known as a high-quality and high-priced brand. So it’s common to see other expensive products referred to as “the Rolls Royce of _______.”
Men’s Journal called this relatively unknown, $6,000 Stromer ST2 the “Rolls Royce of electric bikes” anchoring the bike to Rolls Royce’s reputation. It is expensive and well built. But rather than say that—which might trigger an objection—we use “The Rolls Royce of _____” as a short hand.
The review site, SimplicitySofas, says that the Rolls-Royce of mattresses is the Kluft which costs roughly $30,000. Looking for the Rolls Royce of barbecue grills? That would be the $17,000 Kalamazoo Grill. And the Gurkha Heritage Maduro 51 cigar has been called the Rolls Royce of tobacco.
Anchoring works the other way too.
Carnival Cruises has been called by some “the Walmart of cruises” in part because of its reputation as a cheap (and possibly lower quality) vacation.
Investors have referred to low-price traders like Charles Schwab and TD Ameritrade as the “Walmart of financial planning.” And at least one telecom CEO has referred to HBO as the Tiffany of video on demand (Tiffany is another well-known expensive brand), while Netflix is the Walmart of online video.
You can use this form of anchoring by associating your product or service with other brands that are well-known for the attributes you want to consumers to associate with you.
Finally, there is behavioral anchoring. With this tactic, you suggest the right behavior for a prospect based on the behavior of others (this is closely related to social proof and the bandwagon effect). Since humans have a tendency to act like the others in their social groups, anchoring a product to the behavior of a group can also increase sales.
Coca-Cola has spent billions of dollars anchoring their drinks to family get togethers, barbecues, football tailgate parties, and other events where people gather with loved ones and friends.
The “cigarette break” is an example of a product linked to a particular activity. Today, social media enjoys an anchor to the idea of taking a break. And social media breaks may be just as harmful as those outdated cigarette breaks.
Diamond purchases are anchored to engagement and marriage. For most people, it’s the only time they’ll ever buy a diamond.
And The New York Times enjoys an anchor to leisurely Sunday mornings.
And brands like Duncan Donuts and Starbucks enjoy an anchor to the morning coffee break. Recently Snickers candy bar has made an effort to anchor having a Snickers with that moment when you start to feel hangry and need a pick-me-up.
Before we leave the topic of anchoring, we should point out that this principle works when establishing the price and project specifics when working with clients. When talking about the price of a project, it can help to have a script ready so you can anchor your client’s thinking to a price point that works for you.
Be ready with scripts like:
“I recently did a similar project for a client a lot like you. That project came in around $3500. Is that about what you were expecting?”
Or…
“Typcially when I work on a project like this, I charge between $6,000 and $8,000. Does that sound about right to you?”
Even if your client isn’t ready to commit to a budget, or even if this isn’t the final price you offer for the work, you’ve established the value of the work that you do with the anchor of that first number.
Anchoring is one of the tools you should have in your copywriting toolbox to help persuade your prospects to think of your product differently. And you should use it when working with clients too. Think about how you can anchor your product or service to events, brands, and prices that communicate the value you deliver. Then go and do it.
References:
Brian Wansink, “An Anchoring and Adjustment Model of Purchase Quantity Decisions,” Journal of Marketing Research, Vol 35, FEb, 1998, 71-81.
