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Have you ever thought about why we’re so strongly influenced by things like the Black Friday sale?
Does it strike you as odd when people vehemently support causes that seem strange to you?
Have you landed on a website and instantly thought “this place is a scam?”
The human brain can only process a very finite amount of information at any given time. In our hyper-connected world, we’re bombarded with thousands of inputs every minute. In order to cope and not fry our neural circuitry, the brain makes a series of snap judgments.
The brain gives preference to the first bit of information or the most prominent bit of information. This phenomenon is a cognitive bias called the anchoring bias — we’ll go deeper into that later.
Usually, these cognitive biases help us navigate the world around us, but sometimes, they force us into making the wrong snap judgments EG., first impressions.
As a creative entrepreneur, blogger, and tribe builder this can spell disaster if your visitors are making the wrong snap judgments about you and your website.
It doesn’t have to be that way, in fact, it shouldn’t be that way. In this post, I’m going to show you what the anchoring effect is, and how to use the anchoring bias to improve engagement, reduce bounce rate, and of course increase conversions.
The Anchoring Bias is something we all succumb to on a daily basis. Those decisions you make because you “feel it in your gut” are a direct result of you using information in front of you or available through your subconscious.
We anchor on that information and use it as a reference point for future decisions. Sometimes, the anchor is obvious like a shirt that’s usually $1,000 being sold for $250. Sometimes it’s not so obvious like when you bought a shit product from a website that looked like this:
It makes you hesitate before buying a product from a website that looks even remotely similar.
See how powerful the anchoring bias is?
The anchoring bias is especially prominent in times of uncertainty. Let’s say you’re trying to decide on a reasonable price to pay for a new car. Your previous experience with these types of cars lets you know you should be paying around $25,000.
From that price point, you can now make adjustments as needed based on the brand, model, and additional features. The higher your starting point, the more likely you are to settle on a higher final purchase price. The lower your starting point, the more likely you are to settle on a lower purchase price.
In a demonstration of the anchoring effect, subjects were asked to estimate various quantities, stated in percentages (for example, the number of African countries in the United Nations). For each quantity, a number between 0 and 100 was determined by spinning a wheel of fortune in the subject’s presence.
Different groups were given different numbers and this number had a marked effect on their estimate of African countries in the United Nations. The average estimate for groups that got 10 and 65 were 25 and 45 countries respectively.
The groups given 10 as the starting number consistently estimated less of African countries. The groups given 65 as a starting number consistently estimated more African countries.
FYI, Daniel and Amos are the same people that came up with the framing effect. Yea, they’re badasses.
Numbers are used to determine the effect of the anchoring bias on our decision-making process, but what about ideas?
Think about your concept of faith or religion in general. I’m sure this has nothing to do with numbers, but you’re gung-ho about what you believe.
Dan Airley gives a great Ted talk about decision making and the anchoring bias (watch from 11:00).
What values, assumptions, or ideas do you hold dear and use as a reference — an anchor — to make decisions every single day? That’s just one of the many reasons it’s important to do in-depth market research before going off to build your tribe.
In order for the anchoring bias to work, the information you present needs to draw the attention of the person. For what you want to accomplish — improving conversions — we’re going to mix and match a few psychological phenomenon.
The recency effect, also known as the primacy-recency effect, is the phenomenon in which we have a better recollection of what comes first and what comes last. It also has major implications for teaching new subjects and concepts to students. That’s a topic for a different day.
So here we have the recency effect and the anchoring bias. The recency effect says we remember the first and last touch points the best. The anchoring bias says we’re affected by numbers – whether relevant or not – and prominent information when making decisions.
Together, they make a world of difference.
Before we jump into strategies and tactics, I want to share an interesting statistic I found recently. 67% of all bloggers own dogs. Crazy right? You know what’s even crazier; I made that number up off the top of my head.
In reality, that number is closer to 19%.
Ok, I made that number up too, but it seemed much more reasonable than 67% of bloggers. After you saw 67% of bloggers had dogs, you likely raised an eyebrow. When I brought it down to 19% you started to nod in agreement. When I said I made that up too, you were probably a little annoyed.
The fact is, once I anchored you on the number 67, anything less than that would’ve seemed more reasonable.
Brian Wansink, Robert Kent, and Stephen Hoch showed the power of multiple unit pricing on the amount of goods purchased. In their experiment, they used 4 rolls of toilet paper for $2 as opposed to each roll for $0.50c.
The bundled pricing performed 40% better than the individual pricing. In this particular experiment, the brain anchored on the 4 rolls of tissue as opposed to the unit pricing.
Regina of byRegina.com uses bundle pricing to encourage more sales of her online courses. In a situation where someone would only spend $100 or a little more, she bundles multiple courses and makes the visitor anchor on the number of courses they’re getting.
In another study by Wansink, Kent, and Hoch, they evaluated the effect of purchase limits on how much people bought. In the experiment, people could buy as many cans of soup as they pleased, were limited to 4 cans, and 12 cans respectively.
Buyers with no limit left the store with an average of 3.3 cans. Those with a limit of 4 left the store with 3.5 cans of soup. Buyers with a Limit 12 cans left the store with an average of 7 cans of soup.
Bryan Harris, the founder of Videofruit, uses purchase limits in his mentorship program. He only allows up to 20 students at a time. He anchors the number 20 and couples it with a healthy dose of scarcity.
How can you introduce limits into your marketing? Can you create a special challenge that’s only open to the first 100 people that sign up? Can you make a premium variation of your services that only allow for a certain number of people like Bryan does?
Remember, the higher the perceived limit, the more people will eventually sign up or purchase the offer.
This takes advantage of the recency effect coupled with anchoring. The first price presented is the highest package you offer. This allows the viewer to anchor everything with that price – your most expensive one. As they view the rest of your offers, everything from that point on becomes more reasonable.
Used car salesmen do this all the time. They’ll throw the highest price they can reasonably say to anchor you. That’ll be the reference point from which you’ll adjust down. Try going to the farmers market and note the first prices you’re told. They’re usually unreasonable but they’re the point you use as an anchor to negotiate.
Online, popular SaaS (software as a service) companies such as Crazyegg and Unbounce use it well to give their conversions that extra lift.
To the very left of the pricing page, you’re shown their most feature rich plan. At $99, you can get the most functionality out of Crazyegg. All the way to the right, the basic plan is hiding at only $9. They’ve even shortened the column to reduce its salience.
In the same vein, the Unbounce team tweaks the pricing page to make the most of their highest offering.
Their premium price point is much higher than Crazyegg, but still serves the same purpose. After anchoring the Enterprise plan in your mind for $499, they go ahead and highlight the Small Business plan with contrasting colors.
When making products and services, you should always have multiple packages. At the very least, you should have two. That way, people have a way of comparing one against the other. When you create your pricing page or include the pricing on a landing page, put the most expensive package first.
The example I want to share is one of my favorite uses of the anchoring bias in its truest form. It was so over the top that it landed a place in The Guinness Book of Records.
Serendipity 3, a popular eatery in New York that attracts a large summer crowd, introduced a $69 hot dog. “The Foot long Haute Dog” can’t be ordered on the spot, you’ve got to give at least 24 hours notice to the head chef.
As opposed to being just a publicity stunt, the $69 hot dog serves another very important purpose. The people running Serendipity 3 know a lot of their guests are tourists. These tourists have come from all over the country for a New York vacation.
The prices for things like milkshakes and hamburgers are very different from back home so they look at the menu items to decide how much they can afford to spend. Against the backdrop of a $69 hotdog, a $17 hamburger doesn’t seem so crazy does it?
This isn’t the only time Serendipity 3 decided to create an impossibly expensive dish. They’ve been known to introduce thousand dollar milkshakes to the menu from time to time.
If your products and services lend themselves to it — and your tribe won’t shoot you — supersize one of the prices on your packages. Make it prohibitively expensive so that all the other ones seem reasonable by comparison. You may be pleasantly surprised to see that a few people will still buy that one.
The simplest and most effective use of the anchoring bias is to just focus. Focus all the viewer’s attention on the most important benefit or feature you have. Instead of telling them your gizmo does X, Y, and Z better than everyone else, focus on just X.
“My gizmo does X better than any other brand in the world.” We also do y and z as well as the next man.
I was recently shopping for a new razor because I can get gruesome bumps after shaving. Lotions and creams don’t help. I stumbled across OneBlade — the perfect blade. OneBlade focuses on one thing, the perfect shave.
The razor was built from the ground up with the perfect shave in mind. Because of that, the best materials, the perfect shape, and the huge price point are a matter of fact. Watch the video below.
From the first image to the last, you’re anchored in a feeling of luxury and sophistication because you deserve nothing less. When you do finally decided to buy it, the $299 price point isn’t too unreasonable for all the work that went into crafting the perfect blade. I’ve been anchored on “the perfection” of the blade.
If you’ve been paying attention, you realized the anchoring bias is being used all around you – a lot. It’s used in the farmers market, in supermarkets, on websites, and anywhere else you can think of.
You’re probably well aware of its existence and have even used it a few times yourself. This article was more of a refresher than anything else. A way to put a name to the psychological phenomenon you’re so familiar with.
I’ve suggested many ways to use the anchoring bias, but the list is by no means exhaustive. Mix and match your pricing tables, hone the focus of your message, and tweak your product bundles to see which anchor is most effective at engaging your tribe and improving your conversion rate.
Remember, you’re not limited to using the anchoring bias for just pricing pages and service offerings. In the same vein, you can use it to increase optins to your mailing list.
When you’re going about your day and realize someone is trying to get you to succumb to the anchoring bias, remember, 19% of bloggers own dogs.
Let me know what you think about the anchoring bias in the comments and don’t forget to share. You never know who could use it.