WHAT IS PRICE ANCHORING: HOW IT INCREASE SALES
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Published: 2020-10-25 14:33:40

---
title: WHAT IS PRICE ANCHORING: HOW IT INCREASE SALES
published: true
date: 2020-04-19 12:45:41 UTC
tags: Uncategorized
canonical_url: https://upnrunn.com/blog/2020/04/what-is-price-anchoring-how-it-increase-sales/
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When Steve Jobs introduced the iPad, he said, Apple should price the iPad at $999 – and a giant $999 appeared on the screen behind him. Later, the $999 was crushed by the actual price that is $499. They had pulled off one of the oldest pricing strategies – price anchoring.

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## How Does Price Anchoring Work?

How do you sell a $2000 watch? Put it next to a $10000 watch. The essential idea behind this is that  **customers perceive pricing relatively**. An item is perceived as cheap or expensive in comparison to the initial price point or to another item whose price they knew about first.

**Price perception** – A product is truly never “cheap” or “expensive”; it’s all relative. In the case of the iPad, the initial price flashed was $999. Then,when the price was revealed to be $499, customers felt like they had saved $500. What if the initial price flashed was $399?

For companies that have multiple product offerings, price anchoring can work in two ways.

1. **High price anchor** – One could price a 50″ TV at $1000 & a 48″ TV at $600. Customers will buy more 48-inch TVs since they can save $400 by buying a TV that’s only 2″ smaller. The idea is to price a slightly more premium product higher than the product you want to sell.
2. **Low price anchor** – A data subscription service could price 500MB/day package at $14.99 a month & unlimited data package at $29.99 a month.500MB per day is nothing today. The idea is to price your product slightly above a  basic product so they feel like they are gaining more.

**Decision making** – Humans are naturally indecisive creatures. 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 “recommended.”

## Use Case

- A kitchen retailer sells a basic mixer for $200, a mid-range one for $500 and a high-end one for $600. Some people buy the basic mixer because it is much lower than the other two, particularly the $500 anchor.

- Many others, however, who usually buy the mid-range, see the high-end mixer as ‘only’ $100 more, which is a much smaller gap than the $300 down to the $200 one, and so buy the high-end machine, seeing it as a relative bargain compared to the $500 anchor.

- The normal price of the mid-range mixer is $400 but has a low-profit margin. This strategy sells lots more basic mixers, attracting buys from people who were not thinking of buying, as well as upselling to the high-end mixer.

- A car salesman shows a customer an expensive car, anchoring the perception of the price at the high end. Then they show them mid-range cars which seem so much cheaper than the expensive car that customers often decide to buy these.

- A magazine offers a print subscription for $190 & print & online editions for a $200.They sell lots of the dual subscription. When online studies show many customers making good use of online edition, they offer this as a single item at $150, which takes up.

- A camera manufacturer offers the basic camera at a bargain $200. Lenses are extra and cost a lot more. 

- **For any digital product,** While using high price anchoring, order plans by most expensive. Add level to “ **most popular** ” option or the “ **recommended** plan”. Make the most popular plan stand out.  

More detailed work by [@dliciousbrains](https://twitter.com/dliciousbrains)

> For any digital product to be successful, it needs a pricing page that converts. Here are some tried and tested methods that may give your conversion rate a boost. ![🚀](https://s.w.org/images/core/emoji/12.0.0-1/72x72/1f680.png) ![💰](https://s.w.org/images/core/emoji/12.0.0-1/72x72/1f4b0.png)[#DeliciousDesign](https://twitter.com/hashtag/DeliciousDesign?src=hash&ref_src=twsrc%5Etfw) [pic.twitter.com/wZIN6LpAMp](https://t.co/wZIN6LpAMp)
> 
> — Delicious Brains (@dliciousbrains) [April 15, 2020](https://twitter.com/dliciousbrains/status/1250409648261402625?ref_src=twsrc%5Etfw)

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More reference:

[https://www.priceintelligently.com/blog/bid/181199/price-anchoring-to-optimize-your-pricing-strategy](https://www.priceintelligently.com/blog/bid/181199/price-anchoring-to-optimize-your-pricing-strategy)  
 [https://www.feedough.com/what-is-price-anchoring-how-it-works/](https://www.feedough.com/what-is-price-anchoring-how-it-works/)  
 [https://www.neurosciencemarketing.com/blog/articles/anchor-prices.htm](https://www.neurosciencemarketing.com/blog/articles/anchor-prices.htm)  
 [http://changingminds.org/disciplines/marketing/pricing/price\_anchoring.htm](http://changingminds.org/disciplines/marketing/pricing/price_anchoring.htm)

> WHAT IS PRICE ANCHORING: HOW IT INCREASE SALES  
>   
> THREAD …
> 
> — upnrunn technologies (@upnrunnHQ) [April 19, 2020](https://twitter.com/upnrunnHQ/status/1251836320969678848?ref_src=twsrc%5Etfw)

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