Psychology
of Selling
Advice
Increasing sales with
price anchoring
James Dion explains price anchoring and
how you can use it to your advantage
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ALTERING
PERCEPTIONS
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candle is now elevated in the customer’s
eye. It’s not the cheapest option, nor the
most expensive. The very existence of that
lower-priced item legitimizes the purchase
of the lower-priced item in her mind.
Now let’s say those candles were
priced at $24, $18 and $12 respectively.
Chances are the customer will go for the
$18 candle.
What these different scenarios demonstrate is that by showing customers high,
mid and lower price points you anchor their
perceived value to the higher price.
Anchors work best when the highest
priced item is no more than three times
the lowest priced item.
OFTEN WE HAVE NO IDEA what a product
should cost, unless it’s a common comparable commodity like milk. However,
most of what we buy doesn’t fit into that
category which is why savvy retailers can
use price anchoring to their advantage.
Price anchoring is the practice of positioning a product so customers anchor it to
a certain price point and evaluate their purchasing decisions based on that anchor price.
For example, say you sell t wo candles. A
customer comes in looking for a hostess gift
for an upcoming dinner party at her boss’s
house. You show her your low-priced ($6)
candle and your medium-priced ($10) candle, which is also nicely packaged. Unless
budget is a real issue, the customer will
likely choose the medium-priced candle.
What if there was a third option,
an even lower-priced candle ($3)? The $6
James Dion has a bachelors and masters degree
in psychology from the Chicago State University
and a Ph.D. in industrial psychology from the Illinois
Institute of Technology. Coupled with 30 years
of hands-on retail experience, he’s one of the most
sought-after retail consultants internationally.
He’s also the author of three books including Retail
Selling Ain’t Brain Surgery, It’s Twice As Hard.
