Last week was wild.
We brought 128 marketers together at Underdog Influence Con. Lots of knowledge was shared, and from the survey – people enjoyed it.
We took a break from the newsletter last week. Today, we're restarting with a short story on price anchoring.
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Price is a perception.
How much you decide to charge doesn't actually matter. What matters is if your customers feel they receive so much value, that they are willing to pay the price for it.
What's the difference between a RM400 and a RM4,500 shoe?
Why is it that some people happily swipe their credit card for an RM4,500 belt, but take days to decide whether to buy a book?
One of the easiest things we can do in pricing is to use anchoring to our advantage. Price anchoring is when people use the first presented price to make judgments about the second price they see.
Shops that sell watches do this well. You enter the shop and first see the RM30,000 watches at the front display. Then you walk to the back, and suddenly RM8,900 watches now feels affordable.
When restaurants use price anchoring.
After all the work for Underdog Influence Con, I wanted a treat.
So over the weekend, I went to a cafe with some friends. Flipping the menu open, I saw Steak Frites for RM97 and Nashville Chicken Burger for RM31.
Suddenly the chicken burger seems affordable now, right? That's price anchoring in effect. And it works. Looking around, I saw many people chose the chicken burger.
Once you understand price anchoring and how it affects us every day, you'll start to see it everywhere. Here are some examples:
We usually charge RM20,000 to build a website, but since you are our first-time customer, we'll do it for RM9,700.
A Honda CR-V is RM146,900. With comparable (and more) features, the Proton X70 drives as great, if not better at only RM98,800.
The current market rate for fresh graduates is RM2,200. At XYZ Consulting, we offer a bigger salary of RM3,500.
Price anchoring works in reverse as well.
We have 3 baby stroller models. The Ivvi is RM3,748, Trvl is RM2,640, and Tavo for RM1997. If you're just using them in the city, the Tavo is great value!
During recently talked pricing with some marketer friends, and learnt that they charge around RM8,500 per month for social media work. I'm in the RM5,200 range.
Turns out being boutique (a nice word for being small and just starting out) can be a strength. Here's an example:
Huge lawyer firms usually charge RM50,000 for a project like this. But since we're smaller and more agile, we can charge a more competitive rate of RM15,000.
Are you already using price anchoring in your business? At Daily CMO we used price anchors as well. In fact, we use it all the time to sell tickets to Underdog Con.