Anchoring describes how people rely heavily on the first number or piece of information they see when making decisions. In pricing, the initial price a customer sees establishes a mental reference point that shapes how they evaluate all subsequent prices.
How Anchoring Works
When evaluating prices, people do not assess value in absolute terms. Instead, they compare against available reference points. The first price encountered becomes an anchor. A $200 product seems expensive until you see it was originally $350. The $350 anchor makes $200 feel like a deal.
Tversky and Kahneman documented this effect in experiments showing that even arbitrary numbers influenced people's estimates on unrelated questions. The bias operates automatically and affects decisions even when people know about it.
Common Pricing Tactics
Strike-through pricing: Display the original higher price crossed out next to the sale price. The original price anchors perception, making the discount feel larger.
Tiered pricing: Present three options where the middle tier is the target. The expensive option anchors high, making the middle tier seem reasonable.
MSRP comparisons: Show manufacturer suggested retail price alongside your lower price to establish external validation for the anchor.
Per-unit pricing: Breaking annual subscriptions into monthly costs changes the anchor from a large sum to a small one.
Ethical Considerations
Anchoring works best when anchors reflect genuine value. Inflated original prices that never applied damage trust when customers discover the deception. Effective anchoring presents truthful reference points that help customers understand relative value.
