When crafting a high-converting landing page, well, there are dozens of price principles you can take advantage of.
One of the most effective principles is called price anchoring.
We all have come across it at some point. Every time you see a discount with “$90 $50″, the $90 is the price anchor for the $50 sales price.
The idea behind price anchoring is that customers tend to perceive pricing relatively. A product is perceived as expensive or cheap in comparison to the initial price point.
As you can tell, price anchoring is a principle deep-rooted in psychology.
By way of definition, you can think of price anchoring as a cognitive bias where customers depend too heavily on a piece of initial information to make subsequent decisions. Once the opening value is set, all future arguments and estimates will be evaluated based on that anchor.
Price anchoring is very essential, especially when you’re selling expensive products. As you’ll see in the examples used in this article, it’s a principle used by some of the world’s biggest brands.
What Is Price Anchoring?
Price anchoring is a psychological principle that refers to the way people use a reference point to judge the value of something, especially with regard to price.
This principle is based on the idea that people tend to judge value based on relative comparisons to other things rather than on an absolute value.
The reference point, or “anchor,” serves as a starting point for these comparisons and can be a key factor in shaping consumers’ perceptions of value and price.
In the context of sales and marketing, price anchoring is often used as a technique to influence consumer behavior and encourage purchases. For example, a retailer might advertise a high original price for a product and then offer it at a discount, making the discounted price seem more attractive even though it may still be above the market price for that item. The high original price serves as an anchor, making the discounted price appear more reasonable in comparison.
Another example of price anchoring can be seen in real estate, where a high asking price for a property is used to anchor the perceived value of other properties in the area. This can lead potential buyers to view other properties as more reasonable in comparison, even if their prices are still higher than the actual market value.
Price anchoring is effective because it takes advantage of how the human brain processes information. When we are faced with a decision, our brains often rely on mental shortcuts, or heuristics, to help us make a decision quickly and efficiently. One such heuristic is the anchoring effect, which tends to rely heavily on the first piece of information we receive when making a judgment or decision.
This can lead people to make decisions that are not in their best interest, as they may not consider all the relevant information or compare prices to the actual market value.
Price anchoring is a powerful psychological principle that is used by marketers and salespeople to influence consumer behavior and encourage purchases. By providing a reference point, or anchor, marketers can shape consumers’ perceptions of value and pricing, making subsequent prices appear more attractive or less expensive in comparison. Understanding this principle can help consumers make more informed and savvy purchasing decisions.
Examples Of Price Anchoring.
In this section, we’ll look at several eCom brands and how they use price anchoring to boost their sales and revenue.
How NatureBox, Harry’s, and Four Sigmatic Leverage Price Anchoring To Get more subscribers
First, let’s start with NatureBox, which makes any kind of healthy snack shipped to your door. One of their lethal weapons is the membership, which offers significant advantages to the client:
The benefits are mind-blowing. The risk-free membership is enticing and unexpected.
If you look on the right side of the screen, you’ll notice you’ll get $60 in credits annually. $60/year is the equivalent of a small gift and totally unexpected.
But what happens if we dig further?
We actually discover that $60/year is just $5/month. So why should you bother?
Because $60/year is the set anchor, which makes it seem like an unexpected gift. On the other hand, $5/month makes your brand look cheaper in the client’s eyes, which you obviously want to avoid.
Now, let’s talk about Harry’s. This DTC brand sells razors, blades, skincare, and hair care products for men. We can actually say they’re pretty successful with revenue between $300M and $400M/year. On top of that, they even got $345M in funding.
Most of this success comes from the ability to build a stable, repeatable business, leveraging memberships and subscriptions.
If we head onto their pricing page, we can clearly see they’re leveraging the price anchoring bias to lower the annual membership cost.
$15/year may already seem too much for their target audience, but that doesn’t happen if we attach the price to a smaller time frame, like months.
And I’d also suggest using only a monthly anchor because once it is set, people won’t bother too much about paying $15/year: their brain has already been primed by the monthly cost, so they’ll actually convince themselves during the buying process.
Here’s your to-do list for this section:
- Attach your membership price to a small time frame to make it look cheap
- If you offer credits, always leverage a huge time frame to make it look like a significant gift.
How Mindlabpro And Four Sigmatic Leverage Price Anchoring To Sell More Items
First, I found it very interesting how Four Sigmatic leverages Price Anchoring to lower the price of their products.
Their products are not cheap, and they know it, but they’re knowledgeable about psychology too.
In fact, on their membership page, they use anchors attached to a daily time frame for both of the products displayed.
Nevertheless, I’d set this up differently.
Right now, they don’t leverage the full power of the priming and price anchoring effects. Since it’s easier for people to look at the total price.
I’d expect a slight increase in demand if we switched those two prices, but that’s something they can test.
Mindlabpro, a product that I use every day, leverages the price anchoring effect to increase their Average Order Value by up to 50%. How’s that happening?
Because they leverage the price anchoring effect. They’ve chosen a custom anchor bound to its own serving size, which is very common in the supplements industry.
What’s not expected is their offering. In fact, they leverage the most significant package, which includes one free bottle, to lower the price of a bottle and of the standard serving both by 25%, compared to the 2-month supply option.
Here’s your to-do list for this section:
- Choose a custom anchor, like the serving size for Mindlab Pro and day/night for Four Sigmatic, when you want to lower your perceived price.
How Casper Leverages The Price Anchoring Effect To Sell More $1k+ Mattresses
The first option is prevalent and nothing new, but something still worth mentioning.
When you offer loans, especially 0% APR ones, you’re still leveraging the price anchoring. The customer pays a monthly fee, set as an anchor, lower than the full price.
Honestly, though, visitors become dull to this type of stimulus; therefore, it’s not powerful anymore as it was once.
However, Casper has another intelligent way to direct consumer attention, leveraging both consumer and color psychology.
If you want to take this structure to the next level, then use color psychology. In fact, in the section below, Casper is doing two things:
- They make it easier to read the lower price in green.
- They strike through the higher one, so it’s harder to read.
What happens in the customer’s mind here?
First, they notice the lower price and decide it’s high. Then, they read the higher one.
When we use more energy than usual for a given task, we trigger our brains into thinking its value is higher for us. In this case, reading a non-strikethrough, green text is easier than reading a strikethrough, gray text.
Moreover, the green price means reassurance and growth, reinforcing a positive mental association in the customer’s mind for the product’s actual cost.
Following that exact order, people will notice the green price first and then the gray one. In the end, they’ll feel they made a deal for their own bucks since they’ve now associated a higher value to the product, thanks to this one-two punch effect.
Here’s your to-do list for this section:
- Set a monthly anchor like Casper, leveraging installment plans.
- Leverage color psychology and consumer psychology like Casper to lower your actual product price.
- Choose a custom anchor, like the serving size for Mindlab Pro.
Now, let’s see how Organifi and Supply leverage the price anchoring to blow away competitors.
How Organifi and Supply leverage the price anchoring effect to win over their competitors
You’re probably aware of the crazy conversion rate Organifi gets for its pages, about 10%. Although I don’t agree with some of their practices to get more subscribers, I have to say their comparison table towards the end of the page is well thought out.
Here they leverage both the Distinction and Price Anchoring effects.
The Distinction effect tends to view two options as more distinctive when evaluating them simultaneously than when evaluating them separately. People over-examine and over-value the differences between things they are stacking against each other.
In this case, it’s easy to see how Organifi stacks against worse market solutions like Gatorade and Redbull.
However, that’s not all. If you dig further, you’ll see they leverage the price anchoring to let you see how cheaper their product is compared to typical market solutions.
Truthfully, we know the Red Juice costs us more than a red bull in the end. However, after reading that price, your brain is primed, and you can’t help but think about the low serving price.
Last but not least, I enjoyed learning about how Supply leverages the Distinction bias and the Price Anchoring bias in a unique way.
In the example below, Supply emphasizes the difference between the Single edge and disposable razors:
➤ The single edge costs $24/year
➤ Disposable razors cost you $108/year
Truthfully, this is the first price displayed. Going deeper, you’ll learn that:
➤ Razor blades cost you $9 + $9/mo, therefore $108/year
➤ The Single Edge costs you $75 + $6/3mo, therefore $99/year
You may be confused up to this point, but the last sentence solves your concerns: it states the first price comes true after the first year of use.
That’s how you can prime visitors to think of a specific price in the long run, even though your product is more expensive upfront, leveraging both of these techniques.
Here’s your to-do list for this section:
- When your product is disposable, leverage the distinction bias and price anchoring, setting your own custom anchor to face your competitors, like Organifi
- When you’re competing against disposable market solutions and yours is not, lower your perceived price in the long run by showing the cost of your product after the first year of use, then states how it works with an objection-solver sentence below
Conclusion
That was the last section of this article, and I hope you enjoyed it. Actually, this is just one of the over forty psychological principles you can leverage to improve your customer experience and skyrocket your metrics through the roof. Lately, I’ve been working on the consumer psychology handbook, where I share 100+ examples for more than 40 consumer psychology principles from top brands in multiple industries.
It’s a down-to-earth approach to consumer psychology. In fact, I made a to-do checklist for each principle so that you can apply it to your own website. It’ll launch later on, but you can get the first chapter by shooting me an email using this link.
Additional Resources
1.12 Mobile Checkout Best Practices For eCommerce Websites
