What is the most Powerful Idea in Pricing Psychology?
Anchoring – If I tell you that there are 1.2 billion Chinamen in the world and by the way the price for my product is $5,000. The $5,000 seems relatively small. Conversely, if I tell you the price of Big Mac is $5 and by the way the price for my product is $5,000, suddenly that price seems to be very significant.
The human tendency is to compare the second number with the first. The higher the first number, the smaller the second number feels emotionally. Anchoring is so powerful, that even if you know the facts about anchoring cognitively, you can’t really separate it from your decision making.
How should you apply this understanding to your price presentations? You want to get a big number out there first, even if it has nothing to do with your price, such as the number of Chinamen in the world. If you offer your customers package options, something I highly recommend, then present your most expensive package first. This makes your middle package seem even more valuable.
Anchoring works. You should be thinking about it in all your price presentations.