A ship’s anchor brings stability. Harsh winds will blow, and tides rise but that ship will stand firm once that anchor has been thrown into the sea. Therefore, it’s no surprise that the fundamental term “price anchoring” derived its name from this concept of a ship’s anchor offering stability. This article explains the importance of the analogy and how you can use price anchoring to get the quality leads you desire.
The Link Between Price Anchoring and a Ship’s Anchor
Price anchoring works on the principle that you give your customers a frame of reference for valuing your product. It’s the price you really want customers to pay for the services you provide. Let’s look at the following example from GetResponse
They have 4 pricing options. However, look at what they’ve done with the Pro option. They’ve added a free email marketing certification and indicated that this is the most popular pricing option. These deals make the Pro package look even sweeter. Consequently, more people will choose this package and that’s what GetResponse wants.
The Pro package is their price anchor. It brings stability because it’s the ideal price GetResponse wants their customers to pay. Attracting customers who pay this price saves their bottom line.
The Benefits of Price Anchoring
When done well, price anchoring can help you win new customers who pay that “sweet spot” price you want them to pay. The 3 reasons for this are described below.
Reason #1: Perception
Each customer’s perception of your pricing differs. What’s expensive to one person may be inexpensive to another. The trick is to have a product or service that seems too expensive so that the customer goes for the next best thing. For instance, if you have a website development service, you could offer 2 packages: enterprise and professional. The enterprise package could be valued at $1000 per month and the professional package at $500 per month. Customers will apply for the professional package because they’ll think they’ve saved $500. Little do they know that’s what you wanted them to do all along.
The reverse is also true. Just look at Get Response’s packages. Their Pro package has so much more to offer than the email package that customers will be willing to invest in that package. It provides better value for money in their minds.
Reason #2: The Power of Suggestion
Sometimes we need help making decisions and look to others for help. You can be that go-to person for your customers by subtly suggesting the best option. GetResponse did this by putting the words “Most Popular” at the bottom of the Pro package. Your customer will value this ideal price package if you make the decision-making process easier.
Reason #3: The Power of the Cushions
Directing customers to the option in the middle makes it more likely that they’ll choose it. This means that you can have a higher, more expensive option and a lower, inexpensive option. There’ll be customers who choose the options on the periphery, but most will flock towards the middle option which is your target option.
Options For Price Anchoring
It’s also possible to use price comparisons as a form of price anchoring. However, it isn’t the best option. There must be more to what you have to offer than lower prices. In fact, customers will be willing to pay higher prices if they perceive that the quality is worthwhile. Nevertheless, it’s important to mention that comparing your price with your competitor’s price to show better value is also a possibility.
Price anchoring is a useful strategy for influencing customers to pay your ideal price for a product or service. Think carefully about how you can group what you offer into tiers so that you can make the most out of price anchoring.