It’s no secret that anchoring marketing works wonders for businesses. In the following article we would try to explain what is the anchoring effect, and share some tips about how you can implement it into your marketing efforts.
What is the Anchoring Effect? To put it simply, the anchoring effect is a psychological phenomenon used in marketing, copywriting, branding, and most aspects of business where people buy products. An anchoring effect is when a purchase decision is heavily influenced by the first piece of information offered to the consumer. Think about clothing stores, you see the perfect coat which is priced at $300, but you notice a discount sticker of 40% off, thus creating the idea in your head that this coat is a great purchase. Other examples of the anchoring effect can be seen in multi-unit pricing, purchase quantity limits and initial price setting.There are many ways you can leverage the anchoring effect in your marketing campaign to increase your conversion rates.
One of the most famous examples of the anchoring effect can be seen in the Judgement under Uncertainty: Heuristics and Biases (1974). In 1974, Psychologists Amos Tversky and Daniel Kahenman conducted a study about how estimates or predictions can be made based on initial information.
The Experiment involved two different groups.
In the first group, the participants were tasked to give an estimated answer of 8x7x6x5x4x3x2x1, while the second group was tasked to give an estimated answer for 1x2x3x4x5x6x7x8.Each group of participants were given only 5 seconds to give the estimated answer.
Tversky and Kahenman found out that in the first group, students gave a mean estimate of 2,250 as their answer, while in the second group, students gave a mean estimate of of 512 as their answer. In reality, the correct answer to the multiplication sum is 40,320.
Based on these findings, Tversky and Kahenman concluded that when an anchor is set, it can affect participants’ estimations/predictions.
Tversky and Kahenman concluded that Group 1’s initial calculation (8x7x6) was higher than group 2(1x2x3) due to the anchoring effect. Since there was a time limitation, participants were only able to calculate the first few digits of the multiplication sum and calculated the rest using their “anchor”. Since group 1 started with a higher calculation it stands to reason that their estimated multiplication sum was larger than group 2.
So how can you effectively use the anchoring effect in B2B marketing? Follow these four steps:
Use multi-tier pricing- When companies give multiple pricing options, customers tend to purchase either the cheapest or mid range package. An example of multi-tier pricing can be seen in Netflix’s subscription model. In this example, the premium option is our anchoring point, which fuels our perception that the basic or standard packages are better options.
Use Price Perception- By anchoring your product or service as a cheap alternative in your customers’ mind it will increase your conversions. For example: Try to anchor your product or service as a cheap alternative compared to your competitors. By creating this price perception, you can increase conversions and ‘steal’ from your competition.
Seasonality-Companies can use holidays to their advantage! You can market your products and services throughout the year. A great example of the anchoring effect is Black Friday in the United States. Black Friday( the day after Thanksgiving) is the busiest shopping holiday of the year and we often see discounted items or specials. People will use the ‘higher’ price throughout the year as their anchor when deciding to purchase the discounted item on Black Friday.
Leverage the power of FREE- Always show the cost of your product or service and give your customers a free offer. For example: the original price of carpet cleaning for company A is $80, but they are giving away one free cleaning service for the month of June. Since there is an external anchor, customers are more likely to opt in to the free service and convert in the future.
As you can see, the anchoring effect can only benefit your marketing efforts. You can use anchoring to frame the right message to your potential customers and to drive them towards your goal. Using anchoring in the right way can increase your lead conversion rate and help your B2B marketing efforts!
Want to find more leads by applying behavioural economics to your lead gen campaigns? Get in touch!