Latest / Marketing Psychology with Fexingo: Behavioral Triggers, Persuasion, and Consumer Behavior / The Anchoring Effect and Why the First Number You See Matters
Transcript
- Lucas: If these marketing conversations have sparked something you've actually used — a pricing tweak, a subject line rewrite, whatever — that's the whole point of this show. And the reason we can keep doing it without interruption is that we don't run ads. Luna: No sponsors, no mid-roll breaks, no 'this episode is brought to you by' anything. Lucas: Right. And the people who make that possible are listeners who toss a few dollars into the kitty at buy me a coffee dot com slash fexingo. If the show has saved you time or given you an idea you used, that link is the simplest way to keep it ad-free. No pressure — just an honest option. Luna: I like that it's a choice, not a pitch. Okay — so what are we digging into today? Lucas: Today we're talking about the anchoring effect. The idea that the first number you encounter — even if it's completely irrelevant — becomes a mental reference point that everything else is judged against. Luna: Classic. Kahneman and Tversky, 1974, right? The wheel of fortune experiment? Lucas: Exactly. They spun a rigged wheel that landed on either 10 or 65. Then they asked participants what percentage of African nations were in the UN. People who saw 10 guessed around 25 percent. People who saw 65 guessed around 45. The wheel had zero informational value, but it pulled everybody's estimate toward it. Luna: And that wasn't a fluke. The effect has been replicated dozens of times. Even when participants are explicitly warned about anchoring, they still do it. Lucas: That's the part that really matters for marketers. You can't just tell people to ignore the first number. The bias operates below conscious awareness. So if you're setting a price, a suggested donation, a subscription tier — the first number the customer sees essentially frames the entire transaction. Luna: Let's talk about a concrete example. There was a well-known study in 2022 — actually, a meta-analysis of real estate transactions — that showed just how powerful anchoring is in a market where everyone thinks they're rational. Lucas: Yeah, the real estate one is fascinating. Researchers looked at thousands of home sales and found that the list price — which is just a seller's aspiration — had a surprisingly large effect on the final sale price, even after controlling for the home's actual characteristics. A list price that was ten percent higher predicted, on average, a final price that was roughly three to four percent higher. Luna: And that's with professional agents involved. People whose entire job is pricing homes. Lucas: Right. And it gets worse. In one experiment from that same literature, they gave real estate agents all the same information about a house — comparable sales, square footage, days on market — but changed the 'asking price' on the sheet to a deliberately different number. Agents who saw a higher asking price appraised the house as worth more, even though they knew the number was arbitrary. Luna: So nobody is immune. The question for a marketer is: how do you use this without being manipulative? Lucas: That's the right question. And the answer is: use it honestly, but use it intentionally. There's a classic retail example — Williams-Sonoma introduced a breadmaker at $275. It didn't sell well. But when they added a second breadmaker at $375, sales of the $275 model doubled. The $275 model was still expensive, but next to a $375 option it looked reasonable. Luna: They created an anchor that made the target product seem like a bargain. Lucas: Exactly. Now, some people call that a decoy — and we've done an episode on the decoy effect — but here the mechanism is specifically numerical anchoring. The $375 price sets a high reference point, so $275 feels like a discount. Luna: Another place anchoring shows up that a lot of marketers overlook is in online ratings. There was a Stanford study — I think it was from 2020 — that looked at Amazon reviews. They found that the very first rating a product receives has a disproportionate influence on all subsequent ratings. Lucas: Because that first rating becomes an anchor. If the first review is five stars, later reviewers tend to rate slightly higher. If it's one star, they rate lower. Even though they're supposed to be giving their own independent opinion. Luna: Right. And this is why some brands launch products with an 'early reviewer' program — not to fake reviews, but to ensure the first few ratings are from enthusiastic customers, which sets a positive anchor. Lucas: Let's bring it back to a practical framework. If you're pricing a new subscription service, for example, the anchoring principle suggests you should show the most expensive tier first. Not last. Because when the customer sees the premium option first, the mid-tier looks more affordable by comparison. Luna: And your default option matters too. If you're a SaaS company and the default plan is $99 a month, that becomes the anchor. If you want people to choose the $199 plan, you should prominently show a $299 plan as the anchor. Lucas: One more example I want to mention: charitable donations. In a well-known experiment, a museum asked visitors for donations. When the suggested donation was $2, the average gift was around $1.50. When they raised the suggestion to $10, the average jumped to about $4.50. The higher anchor didn't get more people to give — but those who did gave significantly more. Luna: And that's not a dark pattern — it's just giving people a reference point. The museum is transparent about what it's asking. It's not tricking anyone. Lucas: Right. And that leads to my first takeaway: never let a competitor set your anchor. If you're in a category where the dominant player charges $200, and you come in at $150, your customer judges $150 against that $200 anchor. But if you come in at $300, you've now set a new anchor — and $150 becomes a discount. Luna: That's counterintuitive. Most companies think they should price below the market leader to win on value. Lucas: And that can work if you're genuinely competing on price. But if you're competing on value, you want to set a high anchor and then offer a middle option — the one you actually want to sell — as the sensible choice. Luna: Takeaway number two? Lucas: Raise the first number before you discount. If you plan to sell a product for $100, the worst thing you can do is start at $100. Start at $150, announce a 'limited-time' reduction to $100, and now the customer experiences $100 as a saving. The anchor is $150. Luna: And the key word is 'announced'. You have to actually show the original price. If you just charge $100 from day one, there's no anchor effect. Lucas: Exactly. Takeaway three: audit your default. Whatever price or option you put first on a landing page, in a dropdown, or in a subscription table — that's your anchor. Make sure it's the one that makes your target option look good. Luna: So if you want to sell the mid-tier, don't put the mid-tier first. Put the premium first. Lucas: Exactly. And a quick caveat: anchoring works best when the customer has uncertainty about the value of what they're buying. If they're buying a commodity — like a gallon of milk — they already have a strong internal anchor from years of shopping. But for anything new, unique, or infrequently purchased — a software subscription, a consultancy package, a piece of art — anchoring is incredibly powerful. Luna: And context matters too. The same price feels different depending on what's around it. A $50 bottle of wine looks expensive next to a shelf of $15 wines, but cheap next to a $200 bottle. Lucas: Right. And that's essentially what a wine list does. Restaurants know this — they put one or two very expensive bottles on the list specifically to make the mid-range bottles feel like a reasonable choice. Luna: So the anchoring effect is everywhere. The question is whether you're using it intentionally or leaving it to chance. Lucas: And that's the real point. Anchoring isn't a trick. It's a feature of human cognition. Every customer walks into a decision with some anchor. The question is whether you're the one providing it.