Psychological Sales: The Anchoring Effect

By Colin Sheehan, RCS Reporter. 

What is the anchoring effect? And how can you use it to increase sales in your business?  

Cognitive psychologists Daniel Kahneman and Amos Tversky first discovered what they called the anchoring effect, or anchoring heuristic, back in the 1960s. It is among a collection of cognitive bias discoveries, like loss aversion or selection bias, that describe the influencing factors behind people’s decision making. 

Companies have been using “anchoring” in marketing and sales campaigns for a long time, as it is incredibly effective even when people are aware of it. Let’s be clear, anchoring is not a way to scheme someone into buying a less than adequate product. Instead, the anchoring effect is a tool that can effectively boost sales for your justly priced, quality products and services. 

What is the anchoring effect? 

Tversky and Kahneman describe anchoring as a process in which “people make estimates by starting from an initial value that is adjusted to yield a final answer.” There have been many studies demonstrating the anchoring effects where participants are given an arbitrary number or value, like 30 or 79, and then asked to provide an estimate for the value of an unrelated product. Their estimates are nearly always influenced by the initial, arbitrary anchor. So, participants shown higher numbers estimate the value of something as higher than participants shown lower numbers.  

Relationship anchoring  

Relationship anchoring is a different, but excellent way to increase sales using relationship building strategies. Especially in the trades, where the success of a roofing contractor business is highly dependent on the number of relationships you have and the quality of those relationships, utilizing methods of anchoring can bring added depth to your customer relationships and ensure they will call you first whenever they need roof repair or replacement work. 

Angi (Formerly HomeAdvisor) mentions a variety of ways roofing owners can anchor their customer relationships including using warranty visits as an opportunity to talk to past customers and let them know you appreciate their business. This is also an excellent time to ask for an online review, letter of recommendation or referral.  

Simple ways to practice anchoring 

Below are several small things you can do to implement the power of anchoring into your business today: 

1 – Don’t overlook your website’s home page  

Showing website visitors high numbers before they encounter your priced services is an effective way to influence how they will perceive the value of your products or services and, consecutively, how much they are willing to pay. Several studies on the anchoring effect indicate that people will use the first piece of information they receive as an “anchoring point” and judge all proceeding information in relation to that point.  

Displaying any large number on the front page of your website will create this effect. You could use the number of roofs completed, the number of satisfied customers, the years of experience of your crew members, or any other high number you can think of.  

2 – End your prices in 99 

Have you ever wondered why most prices end in 99? The truth is people are unconsciously influenced by the numbers they see.  

A study conducted by David Sprott and Kenneth Manning illustrates how prices are perceived differently based on the literal numbers. In this study, participants chose between two similar, but not identical, ballpoint pens priced at $1.99 and $3.00. While it comes as no surprise that 82% of participants chose the cheaper pen, when the prices were changed to $2.00 and $2.99, only 56% chose the cheaper pen. In the second experiment, participants saw the price difference between the pens as less significant, even though the price drop was all of two pennies.  

3 – Send postcards and birthday cards 

This suggestion falls under the category of relationship anchoring. HomeAdvisor suggests sending out postcards to the surrounding neighborhood informing them when a project is about to go underway. The number of neighbors you send the postcards to depends on the scale of the project. This is an excellent way to spread your company’s name, create word-of-mouth communication within neighborhoods and garner respect from a local customer base. 

Another excellent way to anchor your customer relationships is to keep a list of your customers and their birthdays. By sending them a card in the mail, you are showing them your appreciation and that you remember them. Adding a personal touch to your relationships with customers will help you build a solid customer base that will provide the stable foundation you need to effectively grow your business. 

Learn more about Angi (Formerly HomeAdvisor) in their RoofersCoffeeShop® Directory or visit www.pro.homeadvisor.com.