What You Need To Know About Anchors - Part 1

If you don't know anything about anchors, definitely give this a read.  And no, I'm not talking about the kind you use to keep a ship from drifting away at sea.  I'm talking about price anchors. 

Although we people tend to think we are rational creatures, and pride ourselves in our ability to think and make decisions in a logical manner, the truth of the matter is most of us simply do not operate in that way.  At least not to anywhere near the degree that we think we do.

That's great, but what's an anchor and what does this have to do with me making money online?  Simple, in your marketing, on your sales pages, etc., there are techniques you can use to "help" people set their price anchors without them even realizing it.  This way, the price points will seam more reasonable, you'll have less people not purchasing because of price issues, and will thus make more sales.  This can be useful for affiliate marketing as well.  I'll get into that in more in just a bit, along with some real life examples i've used.

But first, what exactly is the price anchor?  An anchor is simply something that serves as a monetary baseline for the price point of any given item.  For example, if you are used to paying $3.50 for regular unleaded at the gas pump, that would be your anchor.  Anything below that is instantly recognized as being cheaper, anything over it is instantly believed to be expensive.  That seems pretty logical right, you've been paying 3.50, so that's the anchor?  But here's what you may not know.... we anchor to things that are TOTALLY IRRELEVANT as well.  AND, this part is important, we hold quite strongly to our initial anchors.  The "first impression."

So if you offer something at a discount, but someone doesn't have the means to pay for it that day (one of those upsell "you'll only see this page once" sales pages for example) they have been anchored to that price, and are much less likely to purchase at the "full" price later on, even if they later have the means to make the purchase.  Now, if you can first anchor them to the original price, they may want to take advantage of the sale price but if they don't have the means, they will be much more likely to tell themselves "You know what, whatever, when I have the $997 I will go ahead and pay full price, 'cause that is STILL a killer value."

I'm not saying throw out the one time only upsell discounts, as even without any strategic anchoring, your sales by people who DO have the means at that given time who want to take advantage will likely still be plenty.  But if you're not anchoring properly you may be leaving money on the table, so it's worth checking out.  Run some split tests and see the results for yourself!

What kind of totally irrelevant things do we use as anchors?  It could be a wide variety of things, but must be something you actively focus on and think about in the moment.  For example, if it is hot outside, you could even use the temperature.  If you've got a product you want to sell for 75 dollars you will be more likely to make sales if you can find a way to anchor them to a number ABOVE 75, rather than below it.  If you're using a higher price point to try to set the anchor for that particular item, like the old "I used to sell this to my private training students as an optional bonus module for $247" approach, you'll need to make sure you can get them to actually consider THEMSELVES making that purchase for that price.  So you might play with the wording and try to get them thinking about it in terms of what THEY would pay or could IMAGINE themselves paying, not only what others have paid.

You can try to get tricky with it, like I said, things like the temperature outside, get them focusing on that, then when they see the price they've inadvertently already anchored themselves to a higher number and will be more likely to pay.

I'm going to wrap up part 1 so you can sink your mind into this concept of anchors.  Many of you might be sitting there in disbelief, in fact I'd say most people that haven't studied much economics and specifically the particular branch of economics that studies this sort of thing, would probably read about the idea of people's baseline associated price point for a marketing product being set by how hot or cold it could be outside and think I'm totally crazy.  But I assure you, this stuff has been studied and tested, and this concept of anchors is just one of many external factors that often lead us to coming to illogical conclusions in spite of ourselves.

I've used the concept of anchoring and done quite a bit of testing of my own with it in the online marketing arena since first hearing about and reading studies on it.  Here's one real world application where anchoring has worked for me.

I was running some PPC ads last year for products in 3 different niches.  In all 3 I felt like I'd come up with some pretty good ad copy rotations, and was just toying with and tweaking some really minor wording changes, but seeing mostly the same kind of numbers.  In 2 of the cases I was bouncing people to landing pages of mine where I had links to affiliate products but also my own opt-in forms, and in one of the cases I was directing them (using some "sneaky" methods) straight to an affiliate sales page.  Using some catchy ad headlines was great, but I decided to test out the idea of anchoring.  I included numbers in the headlines, all about 30-50% higher than the highest possible sale price. of the actual items I was promoting.  I used a couple of different methods, 2 of them straight up in a "for only $xxx you can get this" type of way, and also using things totally unrelated to price.  One product was related to cars, and I used a sort of "how fast to 100mph" type of approach which served to both set their anchor, and peak their curiosity.

Here's what happened.  The sales conversions for all 3 products increased by a few percent.  For the car-related product, sales conversions more than doubled.  My opt-in rate also increased fairly drastically compared to my initial hopes and projections, and a pretty cool added effect, the sales figures generated from my first 3 mailings with affiliate products for people who opted in also grew by a healthy margin.  Ultimately, I was able to double my earnings on those products with some sneaky anchoring techinques.

I've done additional testing, that's just an example from one series of affiliate marketing promotions that I was doing last year. Definitely worth paying attention to!

I'll talk further in part 2 about some specific anchoring techniques for marketers.  Any thoughts, opinions, anyone already using anchoring and didn't even realize it?  Or maybe you already knew about it and have some additional thoughts?  Leave your comments below and don't forget to rate the article if you found it interesting, thought provoking and/or helpful!

Take it easy,

jM