What are price anchors?
A price anchor sets a buyer's expectation at a certain price level. They are often used to increase the perceived value of the goods offered.
Explanation
Price anchors provide a reference that influences a product's perceived value. They can also stimulate pre-conceived expectations about the features of products sold at these prices.
Both of these factors can influence the buyer's willingness to pay for products.
What are the disadvantages of price anchors?
They can be overused
Price anchors can be viewed as misleading, especially when all your products have them all the time.
They can affect your whole portfolio
Price anchors can cannibalize the sales of your undiscounted products and future sales for the same product. It is, therefore, important to monitor your whole portfolio.
They can conflict with other behavioral tactics
Price anchors do not operate independently of other strategies. They can conflict with other behavioral tactics, such as price thresholds.
Further reading
Nudge: Improving Decisions about Health, Wealth, and Happiness by Richard H. Thaler & Cass R. Sunstein
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