Anchoring affects consumer choices. Dan Ariely’s research is considered the modern standard. His research (2008) on “The Myth of Pervasive Relativity” explains why humans cannot judge absolute value—only relative value.
Price Anchoring is a psychological strategy based on a cognitive bias where the human brain relies too heavily on the first piece of information (the “anchor”) it receives when making a decision.
In simple terms, the first number a client hears sets the standard for everything that follows. In many cases, clients have to use price as a quality indicator, particularly in the absence of any other information.
Here is the breakdown of how it works and how to use it in your business.
1. The Core Concept: Value is Relative
Humans are terrible at judging the absolute value of things. We don’t instinctively know if a 6-week dog training course is worth $200 or $800. We only figure out if something is “expensive” or “cheap” by comparing it to something else.
Scenario A (Low Anchor):
- You see a generic leash for $15.
- Then you see a $500 training package.
- Brain: “Wow, $500 is huge compared to $15.” →
Scenario B (High Anchor)
- You see a “Board & Train” Bootcamp for $3,000.
- Then you see a $500 training package.
- Brain: “Wow, $500 is a steal compared to $3,000.” → Feeling: Affordable.
2. Real-World Examples
You see this every day:
- T.J. Maxx / Ross / Marshalls: The tag says “MSRP $89.00” (The Anchor), then “Our Price $29.00.” You buy the shirt not because you need it, but because you think you “saved” $60.
- Restaurant Menus: High-end steakhouses put a $150 Wagyu Steak at the very top of the menu. Most people won’t buy it. But because that $150 anchor exists, the $50 Ribeye right below it seems “reasonable.” Without the $150 steak, the $50 steak would seem expensive.
Price Anchoring answers the client’s internal question: “Is this a good deal?” By providing a high number first (the Anchor), you ensure the answer to that question is “Yes.”
Learn how you can use Price Anchoring in your business.
If you have your own copy of Paws, People & Prosperity, turn to page 73 for more help and guidance on price anchoring.
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