STRATEGY | 4 minute read

How to influence buying decisions with price anchoring

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Price anchoring is powerful pricing strategy tactic when you use one price point to give your customer’s a frame of reference for valuing your product. It often enables you to guide your customers to choose the exact product you want them to choose at the exact price you want them to buy. Let’s dive deeper into why anchor prices work and look at how you can use price anchoring to improve your pricing strategy and increase sales.

What is price anchoring?

Price anchoring refers to the practice of establishing a price point which customers can refer to when making decisions. This first price provides context for customers, who then judge other pricing options relative to the anchor rather than on their absolute cost or value.

Example: A small popcorn is 40 SEK, a large popcorn is 70 SEK, and a medium popcorn is 65 SEK. Most people will choose the large because it appears to offer the most value.

Why does price anchoring work?

Effective price anchoring works because it simplifies decision making. Customers are often overwhelmed by choices and lack the time to research every option thoroughly. Anchoring provides a mental shortcut, making it easier for them to decide. Customers rely heavily on the first number they see, using it as a baseline for comparison. Even when they know it’s arbitrary, it influences their perception. People evaluate prices relative to a reference point, which makes the anchor critical in shaping their judgment of value. High anchor prices make subsequent options appear more affordable or of higher value.

Price perception

A product is truly never cheap or expensive. It’s all relative. People love to compare when valuing products and having an anchor price allows them to do that. If you’re out shopping for a TV, you might look at two different models and compare their features and prices.

One might be 50 inches and cost 10 000 SEK while the other might be 48 inches and cost 6 000 SEK In this case, you’ll probably think that the cheaper option offers the best value because you’re paying 4 000 SEK less for a 2 inch difference. That thought process is exactly what the retailer intended for you to do. They wanted the more expensive TV to be an anchor so the cheaper TV looked like a bargain in comparison. It’s a human tendency to perceive a purchase price like this, our cognitive bias is always veered towards the best reward for the least money and effort.

The power of suggestion

Humans are naturally indecisive creatures. You’ve experienced this firsthand if you’ve ever been to an ice cream stand and felt conflicted about choosing between mint chocolate chip or cookie dough. The decision can become so debilitating that some folks might even walk away because of the anxiety. Yet, a great way to prevent this is to label choices as the “most popular” option or the “flavor of the day.”

Driving customers to a specific option or product through the bandwagon effect is key because it further develops a frame of reference for customers. Additionally, the suggestion when mixed with the anchor price allows them to make an easy yes or no decision on paying that anchor price. More often than not, their decision will be yes because it is the simplest way for them to relieve not only their pain that the product is relieving, but also the pain of decision making. Bringing the price closer to their ‘willingness to pay’ price will increase the ease of purchasing it.

Avoiding extremes

As humans, we may like risks and extremes in theory, but most of us like to keep with the crowd and not wander to extremes. You’ll see this reflected in something as simple as buying your morning cup of coffee. Most people choose a medium coffee as opposed to a small or a large, because it’s more than the smallest option, and less than the biggest.

This kind of behavior translates especially to price anchoring as well. Essentially, you should surround the ideal option with a higher and a lower price point. The higher and lower options effectively function as anchor prices, which then push your customers toward purchasing that middle options. Of course, price sensitive customers will flock to the lower option and high-value customers to higher options, but letting customers know that you’ve covered the whole spectrum pushes the main group of buyers directly into your target option.

How to integrate price anchoring into your pricing strategy

The easiest and best way to implement price anchoring is to create a tiered pricing strategy, providing different versions of a core product at different prices. This automatically builds in your anchor prices and allows you to take advantage of the multi-price mindset. Here’s how to integrate price anchoring into your pricing strategy:

1. Define your anchor price

tart by determining the price you want customers to compare against. This often means positioning your premium product as the reference point for all other offerings. This sets the perception of value higher, making other options appear more affordable by comparison. The premium option should offer compelling features to justify its high price, even if it’s rarely purchased. If applicable, highlighting competitor pricing can further reinforce the value of your offering.

Tip: This tactic can also work in reverse. Imagine your company has a basic option with only a few features and a second option that is slightly more expensive but offers many more services. Customers will flock to your second option because they’ll see it as a great value for a small extra amount. In essence, price anchoring allows you to put both a floor and a ceiling on your prices in order to guide your customers to the product you want them to buy.

2. Establish your pricing structure

Once the anchor price is established, structure your pricing in a way that guides customer decisions. A three-level model is often the most effective, with a budget-friendly option, a standard choice that balances price and value, and a premium version that makes the mid-option selection more attractive. Most customers naturally gravitate toward the middle option when it is positioned as the best value.

3. Highlight value beyond price

Instead of focusing solely on the cost, highlight the additional value customers receive. A lower-priced product can act as a stepping stone to upsell higher-priced options by emphasizing the added value of the upgrade. Clearly outline the additional value provided and use visuals like checkmarks or badges to differentiate premium options.This makes the price seem justified and positions your product as a smart investment.

Get started

Price anchoring is not just about setting prices. It’s about shaping perceptions, guiding decisions, and delivering value. Whether you’re running an e-commerce store, offering subscription services, or selling premium products, anchoring can help you increase sales and build a stronger brand image. Contact us to learn how we can help your business improve your pricing strategy and increase sales.