This week we examine another principle of psychology that marketers use called anchoring. Anchoring is a type of heuristic where individuals make decisions steered subconsciously by information they’ve been exposed to, intentionally or unintentionally, that becomes a reference point for comparison or an anchor. Psychologists have found that these seemingly innocuous exposures have a profound impact on the decisions we make. Anchoring in marketing is about leveraging the fact that we use benchmarks to evaluate options to be able to make decisions more quickly, no matter how arbitrary the anchors may be. (The Behaviours Agency, 2020) Let’s take a closer look at what anchoring is and how its used in marketing to get all in your head.

What is the Anchoring Bias?

Anchoring is a cognitive bias that causes us to rely too heavily on the first piece of information we’re given about a topic. The new and initial information becomes a reference point and thus a metaphorical anchor in our mind. When we become anchored to a specific figure, idea, or plan of action, all new information following ends up being filtered through the initial framework drew up in our mind, often distorting our perception. Although anchoring is the minds way of simplifying decision making, it can skew judgement and prevent revising plans, predictions and decisions, even when the situation calls for it.

Price Anchoring

There are a few different ways anchoring can be used in marketing. The most common tactic is known as price anchoring. This is when businesses use a high starting price as an “anchor” to make subsequent prices seem more attractive. Nearly all businesses use this tactic but it’s perhaps most easily recognized in retail. Most of us have probably shopped at a Kohl’s department store at one point. They’re known for regularly running sales on their merchandise and offering an extra 10, 20, or 30% off on top of whatever the item’s sale price is. For someone buying a $65 sweater (the anchor price) but paying $50, in their mind they got a pretty good deal. But if they could’ve gotten the same sweater at another store for $40 and the actual value of the sweater is $35, they were ensnared by the anchoring effect.  The video below further explains how price anchoring biases are used everyday by businesses.

Anchoring is a cognitive bias that causes us to rely too heavily on the first piece of information we’re given about a topic.

 

Why It Happens

There are two dominant theories behind anchoring bias. The first one, the anchor-and-adjust hypothesis, says that when we make decisions under uncertainty, we start by calculating some initial value and adjusting it, but our adjustments are usually insufficient. The second one, the selective accessibility theory, says that anchoring bias happens because we are primed to recall and notice anchor-consistent information. (Anchoring Bias, n.d.)

Can It be Avoided?

Avoiding anchoring bias entirely probably isn’t possible, given how ubiquitous and powerful it is. Like all cognitive biases, anchoring bias happens subconsciously, and when we aren’t aware something is happening, it’s difficult to interrupt it. Even more frustrating, some of the strategies that intuitively sound like good ways to avoid bias might not work with anchoring. For example, it’s usually a good idea to take time with making a decision, thinking it through carefully. However, in this case, thinking more about an anchor may actually make the effect stronger because it results in more anchor-consistent information being activated.

One strategy to combat anchoring bias, that is evidence-based, is coming up with reasons why that anchor is inappropriate for the situation. Another alternative option that can be a good idea to aid decision making, is a strategy similar to that of red teaming, which involves designating people to oppose and challenge the ideas of a group. By building a step into the decision making process that is specifically dedicated to exposing the weakness of a plan, and coming up with alternatives, you are more likely to reduce the influence of an anchor. (Anchoring Bias, n.d.)

 

 

 

 

References:

The Behaviours Agency. (2020, September 18). Anchoring in marketing: How to use it effectively. https://thebehavioursagency.com/anchoring-in-marketing/

Anchoring Bias. (n.d.). The Decision Lab. https://thedecisionlab.com/biases/anchoring-bias