{"id":8365,"date":"2021-09-09T13:54:54","date_gmt":"2021-09-09T13:54:54","guid":{"rendered":"https:\/\/www.price2spy.com\/blog\/?p=8365"},"modified":"2021-09-09T14:28:33","modified_gmt":"2021-09-09T14:28:33","slug":"price-anchoring-is-anchor-price-bringing-more-sales","status":"publish","type":"post","link":"https:\/\/www.price2spy.com\/blog\/price-anchoring-is-anchor-price-bringing-more-sales\/","title":{"rendered":"Price anchoring: Is anchor price bringing more sales?"},"content":{"rendered":"\n

How would you like to choose the price of products that you\u2019re buying? Well, there are some businesses that are offering just that! Such businesses are based on a \u201cpay what you can<\/a>\u201d system where customers can choose among a few prices. 
<\/p>\n\n\n\n

You might be surprised to know that this actually brings profit to the company. <\/p>\n\n\n\n

\"price<\/figure><\/div>\n\n\n\n

But, the secret lies in their pricing strategy: anchor price<\/strong>. This strategy enables you to guide the customers to buy the item at the exact price you want them to pay. 
<\/p>\n\n\n\n

Sounds like a mind trick, right? If we got you interested, let\u2019s dive deeper into the secrets of this pricing strategy<\/a>. 
<\/p>\n\n\n\n

What is price anchoring?<\/strong>
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Price anchoring stands for a pricing strategy where the business is establishing the price to which customers can refer when purchasing. In practice, whenever you see a discount, the higher price serves as an anchor price for the sales price. 
<\/p>\n\n\n\n

For example, the eCommerce apparel brand Everlane used this system a few years ago to sell discounted items. They were offering 3 different prices, where the lowest one covers only the producing and shipping costs. The middle one stands for production, shipping, and overhead for Everlane\u2019s team, and the highest one includes production, shipping, and overhead, and a little extra for Everlane to reinvest.
<\/p>\n\n\n\n

\"price<\/figure>\n\n\n\n

How is this working?<\/strong>
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You might think that all this sounds nice, but how is it possible that it works? A well-known saying in the pricing world goes \u201cHow can you sell a $3000 watch? Present it next to a $10000 watch.\u201d
<\/p>\n\n\n\n

The truth is that there is no cheap or expensive product because customers perceive prices relatively. The essential idea behind this concept is comparison. Apple lovers will for sure remember the presentation of the iPad<\/strong>. After giving the introduction, Steve Jobs said that Apple should sell this product for $999<\/strong> with giant numbers appearing behind him. However, the turning point was him saying that they decided to sell it for $499<\/strong>! As you can imagine, everyone who even considered buying an iPad was overly enthusiastic. Of course, Apple’s revenue was no less enthusiastic either. \ud83d\ude42
<\/p>\n\n\n\n

Customers tend to decide whether a product is cheap or expensive based on the comparison with the price they knew about first. That\u2019s why some prices seem like a scored bargain while others leave a feeling of losing out. Guided by this, companies often show both prices – the previous one crossed out and serving as an anchor price and the new, lower price.<\/p>\n\n\n\n

\"high<\/figure><\/div>\n\n\n\n

It\u2019s important to note that price anchoring can work in two ways:
<\/p>\n\n\n\n

  1. High price anchor <\/strong><\/li><\/ol>\n\n\n\n

    Do you remember that we mentioned that with price anchoring you can increase the sales of the desired product, and even at a price that suits you? Well, that\u2019s done by using a high price anchor <\/strong>tactic. 
    <\/p>\n\n\n\n

    Companies that sell electronic devices usually turn to this trick, so for sure you saw one of those commercials where a 50-inch TV is advertised for $1000, and next to it a 48-inch TV for the price of $700. When seeing this, people who are on the hunt for a good deal will most likely go for the second option. The second TV is only 2-inches smaller, but they will save $300 which is a great catch. 
    <\/p>\n\n\n\n

    And that\u2019s how companies have scored by using the high price anchor technique. The cheaper TV was the product they wanted to sell in the first place – they just managed to present it as a more appealing offer by putting it next to a more expensive option. <\/p>\n\n\n\n

    2. Low price anchor<\/strong><\/p>\n\n\n\n

    The low price anchor<\/strong> tactic achieves the same result but works a bit differently. The aim is to sell the more expensive product by presenting it in a way that seems like a more reasonable option to go for. 
    <\/p>\n\n\n\n

    For instance, if there is an offer of having a 500MB\/day package for $15.99 and having an unlimited data package for $29.99, what would you choose? That\u2019s right – you would go for the second option as probably would everyone else. Nowadays users don\u2019t find 500MB nearly enough, hence, the unlimited package that\u2019s only a tad more expensive really is a catch. We\u2019re sure that you\u2019ve got the idea by now – the goal all the way along was to sell the more expensive product, by making it look like a more reasonable option. 
    <\/p>\n\n\n\n

    When price anchoring doesn\u2019t work?<\/strong>
    <\/h2>\n\n\n\n

    As with all the other pricing strategies, there is a possibility that price anchoring is just not suitable for all businesses. 
    <\/p>\n\n\n\n

    Using this pricing strategy wouldn\u2019t be pretty wise in case the customers are already familiar with the product and its value. They know what to expect and the best that you can get away with is a slightly elevated price. In such cases, the higher price will be connected to a higher quality, but the room for the increase is not so big as it usually would be with anchor pricing.
    <\/p>\n\n\n\n

    Another scenario where it would be smart to avoid this pricing technique is when dealing with savvy customers. Such customers make a detailed investigation before purchasing, therefore, they know how much the product is actually worth. In other words, they\u2019re resilient to anchor prices.  
    <\/p>\n\n\n\n

    Price anchoring examples<\/strong>
    <\/h2>\n\n\n\n

    Strike-through pricing is probably one of the most used and easiest to recognize examples of price anchoring. It\u2019s consisted of two prices, where the old one is crossed out, but it serves as an anchor price for the new price that\u2019s written just beside it. 
    <\/p>\n\n\n\n

    The second also well-known structure is comparative package pricing. Behind this strategy lies a psychological pricing methodology called bracketing. Companies conduct this strategy usually by offering 3 pricing options – on the budget one, standard, and a premium one. This approach relies on the logic that people tend to avoid extremes. The lowest pricing option will be perceived as something too limited, while the premium one as something overly complicated, and therefore pricey. By doing so, you\u2019re making the standard option the best one. Therefore, the two extreme options serve as anchors. 
    <\/p>\n\n\n\n

    Another possibility is to use your competitors as anchors. While promoting their price plans, some companies tend to compare them with their closest competitors to show what would be the smartest choice. 
    <\/p>\n\n\n\n

    \"competitor<\/figure><\/div>\n\n\n\n

    Source: BusinessWire<\/a><\/em><\/p>\n\n\n\n

    How to implement a price anchor strategy<\/strong>
    <\/h2>\n\n\n\n

    One of the easiest ways of doing this is by creating a tiered pricing strategy. In other words, providing different prices for different product versions. Most of the companies go for this option, therefore, you\u2019ll see a few pricing plans displayed on their website. 
    <\/p>\n\n\n\n

    Others decide for showing competitor prices, but we need to ask you to cautious there. Customers are looking for a true value, not just for lower prices. If you only compare the prices without explaining what makes YOU stand out, customers will understand it as a cheap trick. 
    <\/p>\n\n\n\n

    We would recommend you to play on the safe side, while at the same time being cautious of competitor pricing actions. And how do you achieve that? By letting one of the price monitoring tools<\/a> help you. These kinds of solutions can help you track your competitors\u2019 price changes and moreover, help you adjust your pricing strategy so that\u2019s in alignment with current market conditions. 
    <\/p>\n\n\n\n

    Conclusion<\/strong>
    <\/h2>\n\n\n\n

    Pricing strategies can seem overwhelming, not just for beginners, but for business professionals as well. Finding the right strategy is not an easy task and therefore do not be discouraged by not-so-successful beginnings. Price anchoring might look easy, but as you can see, there is a lot of research going on \u201cbehind the scenes\u201d. This is exactly what distinguishes successful from unsuccessful businesses. 
    <\/p>\n\n\n\n

    As always, we encourage you to learn as much as you can about pricing strategies before making a decision. Thus, we hope that anchor prices seem more understandable now.
    <\/p>\n\n\n\n

    In case you are already using price anchoring, please feel free to share your experience with our readers, they\u2019ll appreciate it! \ud83d\ude42 
    <\/p>\n\n\n\n

    Looking forward to reading your comments! 
    <\/p>\n","protected":false},"excerpt":{"rendered":"

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Such businesses are based on a \u201cpay what you can\u201d system where customers can choose among a few prices.  You might be…<\/p>\n","protected":false},"author":13,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[108],"tags":[727,583,728,190,726],"class_list":["post-8365","post","type-post","status-publish","format-standard","hentry","category-best-practices","tag-anchor-price","tag-b2b","tag-b2c","tag-ecommerce","tag-price-anchoring"],"yoast_head":"\nPrice anchoring: Is anchor price bringing more sales?<\/title>\n<meta name=\"description\" content=\"Price anchoring stands for a pricing strategy where the business is establishing the price to which customers can refer when purchasing.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" 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