How do consumers know what a faucet costs? They learn through manufacturers’ suggested retail prices, ads and promotions. Market prices themselves influence consumers’ willingness to pay, Ariely says. This sets the anchor by which consumers judge prices in a category.
Price tags are not necessarily anchors, though, notes Ariely. If a consumer sees a faucet for $1,500, it only becomes a relevant anchor if the consumer considers actually buying a faucet at that price.
“From then on, we are willing to accept a range of prices, but…we always refer back to the original anchor. The first anchor influences not only the immediate buying decision but many others that follow,” Ariely stresses.
Understand the context in which your client operates. Where have they looked? What brands have they considered? Where might their anchors be?
Anchors can drive decisions for years. Remembering what their first kitchen cost will affect what prospects are willing to pay. Find out how recently your prospects have done a kitchen or bath. What pricing are they likely to have in their minds as an anchor?
“Once a choice is made on how we’re going to spend money, we tend to repeat it over and over,” Ariely writes.
So how is a new anchor set? By creating a new experience, the old anchor no longer applies. That’s how Starbucks set a new anchor for the price of coffee – by changing the experience.
If a consumer goes to a big box store and then a high-end showroom, their anchors could change because the experience is so different. But if they go from one big box store to another that offers a similar experience, their anchors will stay the same.
When it comes to pricing, one of the biggest emotional hot buttons is the word free. “Free gives us such an emotional charge that we perceive what is being offered as immensely more valuable than it really is,” Ariely observes.
For example, which is the better choice – a free $10 gift certificate or a $20 gift certificate for $7? Most people choose the first option, even though the second option provides greater profit ($13 vs. $10).
A free dishwasher won’t get people to come in and buy a kitchen. But if they’re deciding between you and someone else, the free dishwasher will often sway them.
“Free” can encourage add-on purchases, i.e. offer a free towel bar if a bath customer buys a group of accessories (paper holder, toothbrush holder, tissue box, etc.). Having a showroom seminar or cooking demo? Be sure to say “Free!”
In-depth descriptions can influence expectations, too. Consider “a stainless steel six-burner range” versus “a finely crafted, heirloom-quality cooking appliance created in the centuries old French gourmand tradition.” Which creates higher expectations?
“Marketing is all about providing information that will heighten someone’s anticipated and real pleasure,” Ariely concludes.