Did this ever happened to you?
You’re in the store of some luxury fashion brand and trying few pieces on, everything fits wonderful, but it’s still way out of your budget. You’re sad, but still looking for something that fits your budget.. And they there are, sunglasses made for you. 350$ is a little bit too much, right? But this is your moment to overcome the sadness from few minutes ago, and to buy them. This happened to all of us, but..
Would you change your buying decision if you knew that this brand doesn’t manufacture sunglasses? If you knew that every luxury brand most sales (both: online and in the store) are accessorize. Probably not.
Economic term for this is Anchoring Effect. This is a cognitive bias that describes the common tendency to rely on the first piece of information offered -anchor- , when making decisions. During decision making, anchoring occurs when individuals use an initial piece of information to make subsequent judgments.
In the other words if you want to sell 5.000$ watch place it next to the 35.000$ watch
At this point you probably understand that all big brands do this all the time, like Apple offering a gold plated watch starting at $10.000, and then slips -practically free- version for $269.
Anchoring effect: Small and medium business
Let’s say you own a gym which offer monthly and annual membership. Of course goal is that client lean towards the annual package, but they usually don’t. How to change their mind without them knowing?
You’re offering monthly membership for 75$, and annual for 750$. Knowing that every tenth new member will pay for the next month it’s still profitable to lose two month subscriptions on annual.
Based on our research, statistic at this point is: 85% of members will subscribe to the monthly membership, 15% to the annual.
Offer a monthly membership for 75$, annual standard for 750$, and annual premium for 750$. Include something that only premium members can use (for gym: 12 individual trainings/sauna/pool/..), you need something in premium package that speaks: You can’t live without me. And guess what? Nobody is going to buy annual standard membership, but annual premium? Based on our research 65%, over the 35% who will choose monthly.
If you find this article interesting, but still not sure how to implement this in your business, feel free to contact us so we can help you to solve the problem and increase your revenue.