Don’t get anchored!

Free yourself from the mental process of anchoring and avoid its effects, especially when it really matters.

Scenario 1: You are out for dinner and you check the wine menu, usually you see bottles listed around around €100 and above, around the €25-35 range and a number around €60-70. $60-70 is more than you were planning to spend, but somehow you are drawn to the € 65 bottle of a good wine. The reason is simple. Because €25, being the cheapest, does not seem right for a special evening out but compared with price above € 100, € 65 is easier to accept.

And this is exactly what the experts call. The prices of €100 and above changed your expectations for what a good bottle of wine should cost for a dinner like this. If the highest-priced bottles were all in the €60-70 range, you probably would choose a less expensive bottle. But this is the classic instance of anchoring.

Scenario 2: If a supermarket, puts a bottle of beer for sale and adds a sign that shows a limit of 12 cans per person, consumers buy about twice as much as when there is no limit. The anchor of 12 bottles make people purchase much more than they usually would buy. This is another form of anchoring and a typical marketing technique called rationing.

These forms of anchoring have relatively small effects as you are usually persuaded to buy low priced items. But be on alert, when this technique is used at very high priced products. If you are aware of anchoring, it can save you a lot of money.

There is nothing rational about anchoring. It doesn’t matter whether the figure used to anchor is well thought out or chosen at random. In one experience, one part of the participants were asked these two questions: Is the height of the tallest redwood tree more or less than 1,200 feet?
What is your best guess about the height of the tallest redwood?

In this experiment, the redwood height was anchored at 1,200 feet for one part of group. The other group of participants was asked the same question, but with the anchor height at 180 feet. So, it comes to no surprise which group, on average, guessed a higher height for the tallest redwood. On average, those given 1,200 feet as the anchor estimated that the tallest redwood was 844 feet. Those given the anchor height of 180 feet guessed an average of 282 feet.

By weighing the difference in guesses against the difference in anchors, the overall anchoring difference is around 55% and this is actually a fairly consistent effect of anchoring. Being aware of anchoring during price negotiations could potentially save you a this percentage of money.

Sven Franssen