Price Anchoring Reduces Friction During the Sales Process
Definition
Price Anchoring is the practice of establishing a price that prospects can relate to when making a buying decision. This price acts as an anchor, and it makes them more likely to then acquire the product or service offered.
Price Anchoring is derived from the idea of Anchoring itself. Anchoring is a type of cognitive bias that describes how humans tend to rely on the first piece of information that is shared with them, and that bias affects all subsequent decisions.
3 Examples
An automation provider can more easily sell a $1 million solution if the company also offers a slightly better offer for $2M. While a standalone $1M project may seem expensive, when accompanied by a more expensive option, it helps set the scenario that the lower-priced solution is actually a reasonable option, and a good value for the money.
Another example would be a third-party logistics provider (3PL) that shares the competitor’s prices (if higher), or shares a competitor’s similar price while emphasizing its superior service. Either way, it helps build the case that their price actually provides a great value.
Alternatively, a robotics supplier can offer higher-priced autonomous mobile robots (AMRs) with add-on features and premium services, for just slightly more than the baseline model. This helps the customer make a decision, by highlighting the value provided by the premium option.
Additional Benefits
Other benefits of this tactic are that:
1) It discourages clients to engage in price research, given that the company is already providing a gamut of alternatives.
2) It veers the negotiations away from pricing, since it places the prices within a contextual framework that includes higher and lower options.
As a result, price anchoring reduces friction during the sales process, helping prospects decide faster and with more confidence.
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