Anchoring Effect
Most people only know what they truly want when they reach a specific situation.
- We want to buy a sports bike, but don’t know which model, until we see a champion of the Tour de France advertising a certain model, and then we can clarify our desired purchase;
- We want to replace speakers, but don’t know what kind, until we hear a set that is better than the original, and then we are clear;
- We don’t even know how to live, until relatives or friends one day give us a sudden realization that the life they are living is exactly what we aspire to.
Everything is relative; that is the key.
For example, Sam the TV salesman, when grouping the TVs on display, plays the same kind of trick on us: 36-inch Panasonic $690. 42-inch Toshiba $850. 50-inch Philips $1,480.
Which one would you choose? Sam knows very well that customers find it difficult to calculate the value of different TVs. (Who can accurately know that the $690 Panasonic is a better deal than the $1,480 Philips?) Sam also knows that after giving the customer three choices, most people will choose the $850 model. This feeling is like an airplane landing between two sets of runway lights. Can you guess which brand Sam placed in the middle? Exactly! It is the one he wants to sell the most!
One phenomenon is that a high price tag on a main course on a menu can increase the restaurant’s profit—even if no one orders it. Why? Because although people generally won’t order the most expensive dish on the menu, they are likely to order the second most expensive. For this purpose, the restaurant introduces a high-priced dish, which can entice customers to order the next most expensive dish (thus cleverly increasing the profit margin of that dish).