Not every sales tactic or strategy is going to work for your business, mostly because not every sales tactic or strategy is MEANT for your business—especially when it involves price anchoring (and other psychological pricing strategies).
And, while, yes, price anchoring could work for your service-based business, it’s currently being misconstrued and misapplied—so, let’s clear some things up:
What Does Price Anchoring Mean in Sales?
Anchor in marketing and sales is when a buyer creates an “anchor” in their decision-making process about what they expect from a sale and what parameters they want to negotiate.
It’s a cognitive bias that serves as context—essentially, you’re establishing a reference point for consumers to compare prices to.
How Does Price Anchoring Work?
Price-anchoring is typically used in product-based sales. For example, a jeweler might use it when selling an engagment ring. They would start with the anchor, “You’re probably looking at something around $10,000,” after you’ve shopped around a bit, they’ll bring you a ring and say, “Here’s this really great option though for $8,500.”
You think you got a really good deal, but did you? Or does it only feel that way because you were already expecting something more expensive?
The jeweler knew exactly what he was doing and probably never intended to sell you a $10,000 ring.
We also see this when companies (like Amazon) promote sales and leave their original price on the page with a “now only X!” next to it. They intentionally show you the larger number because your brain is anchoring to it, and when you see the “new price,” you think, “A STEAL!!”
What’s the Big Deal?
There’s nothing inherently wrong with price anchoring—but business mentors and coaches are encouraging their mentees and followers to incorrectly employ price anchoring on their websites and pricing pages.
They’re saying things like, “You need to start with your highest price and trickle down to your lowest-priced option. This will make people think they’re getting a better deal and make them more likely to say yes to your middle tier.” OR, “Start with an incredibly expensive option first; you know no one is actually going to book. This will make it more likely they book the NEXT option—which is the one you wanted them to book anyway.”
Here’s the issue—the science on this isn’t 100% clear. In fact, when I spoke with consumers and read hours of research, I found the opposite to be true.
Why Price Anchoring Might Not Work for You
Service providers are not typically comparing their “best option” with “not great” options.
You’re comparing your, “This has everything you can ever want, need, dream of, and more.” with your “This is jam-packed and will certainly cover your needs.” and your “This is for the person who can’t afford what I do, but it at least gives you a taste.” options.
People are making a calculated decision based on VALUE, their needs, their feelings toward you as a brand/provider, and, yes—their budget.
When you’re standing in the supermarket trying to decide between two brands of cereal (they’re the same thing, just a different brand— unlike your service options), you’re just making the decision based on price (assuming you like both brands).
That’s why price anchoring works in those scenarios—because your deciding factor is only price.
As a service provider, there are so many other reasons someone should want to choose you. And it’s probably worth your time to focus on those.
I’m not saying price anchoring CAN’T work for your service-based business. If you employ this type of pricing structure and it works for you, amazing! What I AM saying is this strategy isn’t a “sure thing” like it’s been made out to be.
What to Do Instead
So you decide to skip this tactic but still want to utilize intuitive, science-backed pricing techniques—what do you do?
- Do your research. Read journal articles and books from reputable sources. Listen to science-backed podcasts. And QUESTION YOUR COACH. Don’t just take her word as Bible
- Try to keep your service options to 3. This number has routinely been shown as the sweet spot to limit decision fatigue and encourage consumers to choose the middle option. In this context, you could start with the most or least expensive; it doesn’t matter
- Consider UX over EVERYTHING. Instead of worrying about how to persuade (i.e., trick) your consumer into spending more money on you, figure out how to set up your website/shop in a consumer-friendly way. Make it easy as heck for them to find what they’re looking for, know what they’re looking at, and make a purchase/decision
- Skip charm pricing (ending in a 9 “10.99” vs. “11.00”) if you’re a luxury or high-end brand. This only works for budget brands (according to research)
- Create bundles and use a la carte options for more accessibility for your consumers
And finally, never stop learning. You should always be looking for ways to improve your craft and marketing, even if it’s just reflecting on the mistakes of past launches or products to see where you could improve (this is actually essential).But if you’re looking for a more structured approach to learning, join The Selling Series, a self-paced, digestible sales course to help you sharpen your sales with nine targeted masterclasses taught by six expert teachers—Learn more here.
