Price Anchoring Encourages Consumers to Buy Faster & Place a Higher Value on Your Brand
These four pricing strategy examples explore one valuable tool in the pricing toolbox: price anchoring. In their book Dollars and Sense, Dan Ariely and Jeff Kreisler write:
“Which would you buy? A dress shirt priced at $60, or the very same dress shirt, priced at $100, but ‘On Sale! 40% off! Only $60!’?”
When consumers purchase a single product, they are making several choices (whether consciously or not). The most basic choice is to buy or not to buy. Once they move past that binary, the choice becomes which one to buy—and when to buy it. The selection criteria can include:
- Brands, i.e., Name brand or private label
- Product options, i.e., size, color, features, performance claims
- Channel, i.e., online or in-store
- Price, i.e., good, better or best pricing
In this article, we’ll demonstrate how price anchoring creates a sense of urgency and increases the perceived value of products consumers buy every day.
Price Anchoring Explained:
A Well-Documented Phenomenon
“The anchoring effect” describes how people tend to place high trust in the first piece of information they encounter on a given topic. Wikipedia offers a good basic description:
“The anchoring effect is a psychological phenomenon in which an individual’s judgements or decisions are influenced by a reference point or ‘anchor’ which can be completely irrelevant. Both numeric and non-numeric anchoring have been reported in research. In numeric anchoring, once the value of the anchor is set, subsequent arguments, estimates, etc. made by an individual may change from what they would have otherwise been without the anchor. For example, an individual may be more likely to purchase a car if it is placed alongside a more expensive model (the anchor).”
Price anchoring involves reducing consumers’ price sensitivities by setting the expectation that your product is worth more than you’re selling it for.
Anchor Pricing Strategy Examples in Retail Stores
The simplest way to implement price anchoring is on the price tag or shelf tag in a retail store. The tag contains both a “suggested retail price” and an “actual price.” Consumers can easily see “what a deal” they’re getting. So, we’ll start our examples here and build more complexity as we go.
TJ Maxx Anchor Pricing Strategy Example
Department store discounter TJ Maxx has the clearest pricing strategy example. Each product is given an obvious anchor price, listed on the price tag as the “compare at” price.
| TJ Maxx Tag Copy | Pricing Strategy | Strategy Explained |
| “Compare at $30.00” | Anchor Price | This unsourced “original price” sets the quality expectation in the consumer’s mind. Note that it’s $30, not $29.99, which makes it appear more expensive |
| “$16.99” | Secondary Anchor Price | At $16.99 (not $17), it seems like almost a 50% discount. This “everyday” discount is a pretty good value but doesn’t create much urgency. |
| “$13.00” | Discount Price | The haphazard clearance sticker proclaims the consumer can be a smart shopper and save another $4. It’s priced to sell, so you’d better act now. What a deal! |
Kroger Anchor Pricing Strategy Example
Kroger’s anchor pricing strategy examples are a little more diversified. Along with an anchor price and sale price being given for individual products, higher-priced products help anchor the value for entire categories. For instance, in the juice category, there may be:
- Organic name-brand juice: most expensive
- Name-brand juice: mid-price
- Store-brand juice: least expensive
| Kroger Shelf Tag Copy | Pricing Strategy | Strategy Explained |
| 4.29 6.39 | Anchor Prices for individual products | These products are “normally” priced this way. |
| Low Price $3.59 | Anchor Price for category | The consumer may not be motivated to an urgency to buy this particular product, but it helps set the stage for other products in the category. |
| New! Lower Price $3.99 | Discount Price | The grocery store fates have decided this amazing product can now be offered for less than its actual value. Enjoy at your leisure. |
| Sale Price $5.99 | Discount Price with urgency | Sales don’t last forever, so if the consumer wants this product, they better act now. What a deal! |
Kroger will sometimes offer a third tier of discount in blue:
This extra-special deal is usually related to buying in bulk or using a digital coupon (which requires downloading the Kroger App). You can see that $5.99 is a pretty good deal, but $4.99 is much better and helps consumers feel like savvy shoppers.
Anchor Pricing Strategy Examples in eCommerce
In-store price tags are small and can only communicate so much. However, eCommerce is tailor made for consumers’ research and product comparison efforts. All smart online retailers take advantage of price anchors, as we’ll see in these pricing strategy examples.
2 Amazon Anchor Pricing Strategy Examples
Amazon has two main ways of establishing anchor prices:
- Products related to this item
- Compare with similar items
Let’s check out pricing strategy examples for each: sleeping bags and electric kettles.
There’s a lot going on in the “Products related to this item” feature for sleeping bags. Here’s the breakdown:
| Amazon Sleeping Bag Product Details | Pricing Strategy | Strategy Explained |
| $25.99 Pink $29.00 Waterproof Compact Lightweight One color (orange) | Anchor Prices for related products | If you want pink, this is the price. Or, if you’re looking for performance criteria and don’t care about color, this is the price. Let the comparisons begin! |
| $49.99 5% coupon 0 Degree Winter | Premium Price | If you want “0 degree” performance, expect to pay more. But act now for a 5% discount. |
| $22.99 Save $3 $39.80 Save 15% | Value Prices | Enjoy acceptable discounts on products that are probably higher quality than the anchor price pink sleeping bag. Get it now, while you can save. |
| $26.97 Sleeping Pad #1 Best Seller 46% off Limited Time Deal List price: $49.98 | Anchor Price on individual product | Clearly, Amazon is telling consumers this is the sleeping bag accessory they need. What a deal! There’s no time for delay! |
“Compare with similar items” is formatted as a feature comparison chart. In this pricing strategy example, we see six electric kettle options. All of them share similar functionality, such as capacity, material and customer rating. The main differences are price, shape and color.
Again, Amazon shows its proficiency at steering consumers using price. Here are a few observations:
- Each individual product has its own anchor price, shown as a crossed-off list price. Consumers are comforted that, no matter what price point they’re comfortable with, they’re going to get a solid deal.
- Consumers who want “the best deal” can go for the kettle that’s 27% or 23% off.
- Price-sensitive consumers have a “reasonable” $29.99 price point.
- Top-of-the-line consumers can choose the “luxury” $84.99, $79.99 or $72.99 price points, depending on which style they prefer.
Pricing strategy as a discipline has been researched and refined for decades. These anchor pricing strategy examples are just a small part of the overall body of knowledge. Insight to Action’s Pricing Strategy Resources offer more advice and perspectives. For instance, we explore price thresholds in “2 Pricing Strategy Examples You’ll Love this Valentine’s Day.”
To get personalized pricing recommendations for your brand, contact us and start a conversation. Or, RSVP for one of our Open Office Hours. And subscribe to our newsletter for regular insights.
