Anchor Pricing
Quick Definition
Anchor pricing is a cognitive bias strategy where you present a reference price (the 'anchor') to make your actual price seem more attractive or reasonable by comparison.
Conceptual Breakdown
Anchor pricing leverages the Anchoring Bias, where people rely too heavily on the first piece of information offered (the 'anchor') when making decisions. In pricing, this initial price sets a mental benchmark against which all subsequent prices are judged.
Initial Exposure
Customer sees the anchor price first. The brain registers this as the 'Standard Value'.
Comparison
Customer compares the actual selling price to the anchor. The gap creates a perception of 'Gain'.
Decision
The actual price seems reasonable or cheap relative to the anchor, increasing purchase likelihood.
Variations in the Market
MSRP / Strike-through
The 'sticker price' that creates the perception of getting a deal.
Competitor Comparison
Showing a competitor's higher price to frame your value.
Tier Anchoring
Showing a premium option to make the standard option seem affordable.
Strategic Implementation
Choose Your Anchor Type
Decide if you will use historical prices (Was/Now), competitor prices, or a Premium Tier as your anchor.
Set the Value Gap
The anchor should be 1.5x - 2.0x your target price. Too low = no effect. Too high = loss of credibility.
Visual Presentation
Place the anchor to the left or top (read first). Use visual cues like strikethroughs or grey text to de-emphasize it once read.
Evidence-Based Benchmarks
How Anchor Pricing performs in large-scale market studies.
Academic References
Key Papers
- Tversky, A., & Kahneman, D. (1974). 'Judgment under Uncertainty: Heuristics and Biases'
- Ariely, D., Loewenstein, G., & Prelec, D. (2003). 'Coherent Arbitrariness'
- Mussweiler, T., & Strack, F. (2000). 'Comparing is Believing'