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Price Anchors

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

Paul Hanke
Post by Paul Hanke
October 26, 2022

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