Imagine you just splurged £25,000 on a bed.
(You baller, you.)
Now the salesperson is telling you about 2 small accessories priced at £3000 and £5000. Peanuts, right? After all, what’s £3000 and £5000 considering you just spent £25,000?
“Why not! Yes, throw ‘em in!” you exclaim, euphoric from your £25k-induced dopamine rush.
This, my friend, is the Anchoring Bias at work.
Having just spent £25,000, now £3000 and £5000 seem “cheap” in comparison.
Whereas without the £25,000 anchor, you’d probably scream “over my dead body!” before handing over £5000 for a small bedroom accessory (unless it’s attached to the mate of your dreams).
The Anchoring Bias a form of Cognitive Bias.
First theorized by psychologists Amos Tversky and Daniel Kahneman in the 1960’s, the Anchoring Bias makes you base your decision on a particular reference point (the “anchor”), such that your line of reasoning is heavily influenced by, or is hinged on, that anchor.
According to Princeton University’s definition, cognitive bias is a feature of human thinking that “can lead to perceptual distortion, inaccurate judgment or illogical interpretation.”
In 2006, Dan Ariely asked MIT students to write the last 2 digits of their Social Security number and then asked them to bid for various items (a bottle of wine, a book, a trackball).
He found there was a correlation with their bids and the 2-digit number:
“Those with high social security numbers paid up to
346% more than those with low numbers. People with
numbers from 80 to 99 paid on average £26 for the
trackball, while those with 00 to 19 paid around £9.”
In Ariely’s book Predictably Irrational, he wrote:
“Social security numbers were the anchor
in this experiment only because we requested them.
We could have just as well asked for the current
temperature or the manufacturer’s suggested retail price.
Any question, in fact, would have created the anchor.”
What does this tell us?
That we tend to just accept the anchor given to us. We just can’t help it.
In fact, the Anchoring Bias is so powerful that it doesn’t even have to be relevant at all. Once one has an anchor, it’ll be the basis for evaluating all subsequent data. The anchor could be totally arbitrary and yet one could still act under its influence.
Using the Anchoring Bias to sell more and boost your conversion involves influencing what anchor your prospects use as they evaluate their options. If you know how to set their anchor to one that supports your pitch, you’re golden.
Now I know what you’re thinking…
Here are 6 ways you can use Anchoring Bias for your own nefarious purposes…
(And by that I mean getting more sales and increasing your website conversions. That’s what you’re thinking too, right? 😉 )
In Dan Ariely’s famous TED talk, he showed how he came across this offer from The Economist magazine, where they had 3 subscription options:
As you can see, options 2 and 3 are priced the same ($125) but option 3 is “obviously the superior choice” because you’ll get both print and digital copies.
When Ariely experimented on 100 of his MIT students and asked them to choose between these three, 16% chose option 1 and 84% chose option 3. Nobody went for option #2.
Since nobody chooses option #2 anyway, shouldn’t The Economist just remove it?
So in phase 2 of his experiment, Ariely removed option #2 and asked a different set of 100 MIT students to choose which magazine subscription they’d buy.
Here’s what happened:
Without option #2 in the mix, 68% now went for option 1, the cheaper option. That’s a drastic uptick from 16%!
It turns out that option #2 isn’t useless after all. In reality, option #2 is helping people decide with more conviction.
In the absence of option 2, the only comparison people could make was between $59 (“the cheap option”) and $125 (“the expensive option”). Understandably, the cheaper option won most of the time.
But in the presence of option #2, the comparison people made was between $125 (print only) and $125 (print + web). This contrast made option #3 appear as the “the obvious best choice”.
You can see the same principle at work here although the details are different:
Because of the way the information is presented, most people looking at this will compare the options based on their monthly price.
And for those who are in the market for higher-end phones, what they’ll see is:
“For the same price of $33.34/month, I could get either a Galaxy S21 or a Galaxy S21+.”
Just like with The Economist scenario, many of these people will be induced to think:
“Hhmm I might as well get the S21+. Sure, the downpayment is slightly more, but that’s only because its retail price is higher. Since I’ll be paying the same monthly price anyway, I might as well get the S21+…”
How can you create the same effect when you present your options?
Let’s look at a Samsung VS Apple iPhone comparison:
Virgin Mobile’s target market here are those who are shopping for phones on a monthly installment plan. Although they’re not looking to pay the retail price (shown below the monthly price), the retail price serves as an anchor nonetheless.
Placed side by side with the iPhone 11, the prospect who’s looking at the higher-end options is being led to think like this:
“The iPhone’s retail price is $325 cheaper than the Galaxy S20 but I have to pay £6 more monthly for the iPhone? Bonkers. So Galaxy S20 FE 5G looks like the best deal overall because it’s got a bigger screen, and even though it’s $1200 retail, I’ll pay $6 cheaper than the iPhone 11 AND get 2 months of YouTube Premium! Clearly, the Galaxy S20 is the better deal…”
See how the way they presented the various info and the visual design accomplished this?
So if you’re not doing it yet, test your pricing strategy by adding a decoy option and see what happens.
Here’s a “formula” you can use:
a) Present an option that’s way too inferior (and cheap) that you know your prospects wouldn’t even consider it. It’s not good enough for them or it just simply does not meet their buying criteria. This is how you get them to turn their attention to the other two options.
b) Then price the decoy exactly the same as the “best option”, but make the decoy slightly inferior in 1-2 features or aspects compared to the best option.
For offers that have multiple service or pricing levels, it’s pretty standard to present the cheapest option first, right?
Why not put the Anchoring Bias at work and do a test?
Back in 2010, NYC restaurant Serendipity 3 earned the Guinness record for selling the world’s priciest hot dog at $69. The restaurant also held the record for the most expensive ice cream sundae at a whopping $1,000.
But that was 2010. At the time of this writing, the world’s most expensive dessert is Strawberries Arnaud at a ridiculous USD $9.85 million.
But I digress.
All the fanfare and publicity didn’t result in a massive increase of Serendipity 3’s hotdog sales.
But you know what it did?
It boosted sales of their $17.95 cheeseburgers!
Keep in mind this was 11 years ago, so not many sane people would pay that much for a burger. But hey — compared to a $69 hot dog that burger is a bargain, right? (See how that works?)
So what can we learn from this, folks?
“Pick a random item in my product range and 100000X the price, and then phone Guinness!”
As much as I love the way you think, I was suggesting more along the lines of…
When presenting your packages, test how presenting the most expensive option first affects your conversions. See if it effectively serves as an anchor, thus adjusting the prospects’ perception of the subsequent options.
You can see it in action below. This is one of Crazy Egg’s earlier pricing structure:
Although they listed the Pro ($99/mo) first and it’s the longest box out of the 4 choices (which helps make it visually dominant), the Plus option ($49/mo) is in a different color making it grab the reader’s eyes.
This is actually known as the Von Restorff effect, which says that “an item that sticks out is more likely to be remembered than other items.”
Because of the way the information is presented here, “$99” serves as an anchor, making the $49 price point seem very reasonable and good value.
Another layer of persuasion here is the claim that the Plus option is “the most popular” choice. This taps into another form of cognitive bias: the Bandwagon Effect or our tendency to have a herd mentality. It influences website visitors to think: “it’s the most popular choice so it must be the best option!”.
Other things you can test:
Monthly prices for the default view VS showing annual prices first: what converts better for you? If you use a high monthly price, it’ll make the annual cost seem lower.
Leadpages.com’s pricing table defaults to the annual subscription:
The user needs to click the Pay Monthly option to see it:
I wonder how it would affect their conversions if they set the default view to the Pay Monthly option?
Notice how Leadpages also displays their priciest option first and uses the Von Restorff effect to emphasize the “Most Popular” option, just like the CrazyEgg pricing table.
When the user toggles back to the “Pay Yearly” plan, Leadpages highlights the savings the user stands to make. This is a good way to subtly nudge users to go for the annual package.
Another thing you can test is to bundle your products up in multiple units, “add a discount” (or bulk pricing), offer several tiers, and see which bundle sells the most.
Unless you’re selling something that’s so cheap it can be an impulse buy, you can safely assume your prospects will shop around and compare your offer with your competitors’. Before they buy, they’ll read reviews, ask around, lurk in forums, stalk you online…
Suppose you’re selling unicorn tears. Joe, your prospect, Googles “unicorn tears for sale” and visits your competitor’s site first. Joe sees they’re selling a 750ml bottle of unicorn tears for £1500. That price is now his anchor.
Somewhere along his Google journey, Joe finds your online shop and sees you’re selling the same magical stuff for £1600 per bottle.
“That’s £100 more expensive than the first one I saw”, Joe mumbles.
Uh-oh. Now you’re competing against his anchor price.
So what can you do?
Highlight the fact that you only harvest unicorn tears in the light of the Super Blue Blood Moon and why that makes its magical powers 10000000X more potent?
That’s one way of doing it. Effectively, you’re taking Joe’s fixation away from price comparison and more towards value comparison.
What matters here is to understand the competitive landscape so that you can anticipate the comparisons that your prospects are bound to make — so you can position yourself more powerfully.
So find out what solutions Joe could be blowing his dough on and see how you fare. See where they are weak. Identify the holes in their value proposition and see how you can bridge those gaps better. Then write your copy and frame your offer with that intel in mind.
Here’s an example from Basecamp:
In one graphic, Basecamp demonstrates how the prospect (whom they know are using many tools to manage the different aspects of their projects) can replace at least 4 other apps with Basecamp. That’s a compelling value proposition.
How you can apply that to your business specifically will depend on several variables, but here are some ideas to whet your creative juices:
You can bet that every qualified prospect perusing your website is asking themselves: “why should I buy from YOU instead of your competitor?”
Your answer to this question is a huge component of your Unique Value Proposition (UVP).
Find out what really matters to them to make sure your UVP is compelling for your target customers. Then design your web pages to convey your UVP immediately. Present it in a way that’s easy to grasp even if they’re only skimming.
Understand the cost of switching and what that means for your users.
In certain situations, switching is painful, time-consuming and costly for your users.
Apple understands this very well. That’s why they created a dedicated funnel to address Android users:
Who wouldn’t scroll to find out more after reading that?
Don’t be afraid to get creative when it comes to making it as painless and seamless as possible for your prospects to switch to you.
Frame your offer such that it turns the conversation inside their heads from being price-oriented to value-oriented.
Maybe for your business it means having the fastest response time.
Or having a revolutionary method that means they’ll get their desired results a lot faster while having more fun.
Or making your product in a portable size so that it’s more convenient and easy to use.
Or creating taster kits or a sampler edition at a break-even price with free shipping, to make “trying you for the first time” more accessible. You won’t make money on those purchases but they could serve as the foot-in-the-door you need to keep getting new customers flowing into your funnel.
You can position yourself as the no-brainer choice in comparison to your competitors by shattering “Industry anchors”.
For example, as smartphone users, we expect the battery power to last for about 8 to 12 hours (about a day of reasonable use) before we need to charge it again. In our world as smartphone users, 8-12 hours is an “industry standard”. It’s an anchor.
Now if a brand releases a model that boasts of a battery that lasts, say, up to 72 hours of moderate use, and it can re-charge fully within 12 minutes, we’ll perceive that as jaw-droppingly revolutionary.
One example is the legendary Domino’s promise:
For nearly a decade (1984 – 1993), Domino’s enticed customers with their “Get your pizza delivered in 30 minutes or it’s free!” guarantee.
The prospect of getting free pizza is practically every pizza lover’s wet dream.
In fact, this delivery guarantee helped drive Domino’s rapid growth — catapulting it to becoming the largest pizza-delivery company in the US, and paved the way to their global expansion.
But, in 1993, a jury verdict in St. Louis awarded $78 million in punitive damages to a woman who suffered head and spinal injuries after she was struck by a Domino’s delivery driver, effectively putting an end to all the joy the guarantee brought to countless pizza addicts worldwide. (Although it seems to be in effect in Sri Lanka at the time of this writing).
Now I know what you’re thinking…
“MmmMmm me hungry. Me want pizzzza!”
Sorry, I just anchored your mind to pizza.
But before you order that pizza, I want you to ask yourself: What industry anchors can I shatter or exploit?
First impressions are a form of anchor.
A study by Gitte Lindgaard at Carleton University found that website users form opinions within 50 milliseconds of viewing a webpage (Google’s study found users form their opinions on websites in as little as 17 seconds even)…
and that this first impression creates a cognitive bias in the user that affects their long-term opinion of the website.
Another study by B.J. Fogg et al at Stanford University involved 2,684 people who evaluated the credibility of websites in 10 categories (Entertainment, E-commerce, Finance, etc).
It revealed that:
In short, if it doesn’t “look trustworthy” or it doesn’t look like what they expect it to be, they bounce.
These findings were consistent with Google’s study, which found that:
“Websites with low visual complexity (VC) and high
prototypicality (PT) were perceived as highly appealing.”
Now before you throw up from all that gobbledygook, lemme un-jargon it…
Visual Complexity just means the number of visual features present like the level of detail, the amount of colour differences, contrast differences, etc.
Prototypicality means how representative your website is for the category it belongs to. Put simply: your website users have certain expectations about how an e-commerce site (for example) or a company website should look like, what elements should be there and how those elements should work.
These studies are basically saying that if you deviate too much from these widely-held conventions and schemas, it will likely cause friction and thus hurt your conversion.
A key principle here is to ensure your website design doesn’t place unnecessary cognitive load on your users. The less cognitive effort users make as they interact with your site, the more they’ll perceive their user experience as easy. And we love easy!
So if you want your website to make a good first impression (and thus convert better), Mari Kondo the heck out of your website.
Sure, make your web pages aesthetically pleasing to your users but don’t let the pursuit of “being pretty” get in the way of simplicity, ease of use, and familiarity.
Here are some Actionables…
Are you passionate about a particular activity, topic, or thing?
Most people are. And whatever we’re passionate about, we splurge on it (often in irrational ways).
Whether we are into antiques, books, luxury watches, photography gear, biohacking wearables, or rare Chinese teapots, it doesn’t matter. Most aficionados can’t help but hunt for the latest item they can add to their collection.
This compulsion is called Gear Acquisition Syndrome or GAS.
It’s why many of us trade in our perfectly functional and relatively pristine phone or laptop for the model that just got launched.
It’s why you keep buying new designer clothes and accessories even though, in the last 3 months, you haven’t used 80% of what you already own.
Whenever we hear about the newest and greatest specs, they become our new anchor.
Compared to the newest and greatest, what we have suddenly feels ugh or meh.
Or we look at the new item and see how it can enhance what we already have in ways that we just gotta experience.
At a drop of a hat, the new anchor can make our status quo excruciatingly mediocre… unacceptable, even.
As a marketer, you can take advantage of GAS by:
The Anchoring Bias is one of the most powerful cognitive biases you can exploit as a copywriter or marketer, because we humans can’t help but default to thinking under its influence.
And we do so while smugly convinced that we only make rational, logical decisions — especially when it comes to making purchases!
I invite you to now review the current ways you’re executing your pricing strategy, ad campaigns, web copy and your value proposition.
Come up with specific changes you can make to apply the 6 tactics we’ve outlined here and see how they boost your conversions!
And if you ever need our help in crafting persuasive, high-converting landing pages, just hit the button below to tell us all about your project!
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