Anchoring On Price Tags

The price tags on sale items often use anchoring very effectively by including the higher regular price alongside the discounted sale price.

The pricing glossary section contains a more complete definition of price anchoring but basically it takes advantage of the fact that humans tend to place to much information on the first piece of information received and evaluate subsequent information in relation to it. That first piece of information becomes the "anchor". In the case of pricing the anchor price is designed to make the other prices seem more attractive.

The glossary uses the example of Steve Jobs introducing the first iPad. At the time tablets were virtually unknown to consumers and Apple wasn't just introducing a new product, they were introducing a new class of device.

And since people knew almost nothing about tablets they also knew nothing about how to value them. Apple need to define the expectation of value for this new class of tablet. They used anchor pricing.



For several minutes the price of $999 dominates the screen, and is even referenced in the presentation. This all serves to establish $999 as the anchor.


What should we price it at? Well, if you listen to the pundits we're going to price it at under a thousand dollars, which is code for $999.


Then the price of $499 comes creating down from the top of the screen, crushing the $999, and the crowds goes wild. It works because the anchor price of $999 had already been established in their minds and $499 felt like an incredible deal in comparison.

Other examples of price anchoring abound on the price tags of sale items. Take a look at the images below:



In each case the regular price is prominently displayed, the anchor that serves to establish the "real" value of the item. Immediately below it is the heavily discounted price that looks so good in comparison.

Without the anchor the value is perceived very differently. That same garment presented at the discounted price but without mention of the higher anchor price, might still seem like a good deal but some of the magic would be lost. The magic is that you can get a $1375 garment for just $529! And that only happens because of anchor pricing.