From the course: Pricing Strategy: Value-Based Pricing
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Frame and anchor your price high
From the course: Pricing Strategy: Value-Based Pricing
Frame and anchor your price high
- Pricing psychology is a fascinating topic and very relevant, why? Because in the end, customers don't make purchase decision based on the price, but based on their own perception of a price. In other words, every pricing manager should also be a perception manager. Dozens of psychological theories can be applied to pricing decision, and the very central one is anchoring. Anchoring means that you put an anchor price in the minds of consumers against which they will evaluate other prices. Let me share with you a real-world experiment I conducted a few years ago at my school IMD in Lausanne, Switzerland. I presented a scenario to almost 900 participants. You are visiting friends in a foreign country. You can stay at their house for free, and you know the family won't accept any payment. You also know that the teenage daughter has an Apple iPod on her wishlist, so you decide to buy an iPod as a gift. Here are all the options you can choose from. How much are you going to spend? The…
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