When one buys various things, one aims to spend one’s hard-earned money wisely. Unfortunately, when shopping for products, one’s mind can do a lot of illogical thinking and make one pay more than what the products are actually worth. One example of such thinking is what psychologists call the “anchor effect” and we will discuss it here. Salespeople often use the anchor effect to trick people, so it is worth being aware of it!
The anchor effect is about when one’s mind sees a series of numbers, it attaches more importance to the first number it sees. In the example below, when one’s mind sees a series of prices, it especially keeps note of the first price that it saw, i.e. 1000.
Now imagine that one’s mind needs to compare all the prices so that one can decide which is the lowest price. Unfortunately, one’s mind can tend to compare the prices to only the first price it saw, rather than comparing the prices with each other as well. For example, it will compare 1000 with 600, but not compare 600 with 300 or 300 with 320.
This way of comparing numbers is meaningless, as there is nothing special about the first number that was seen, and it can lead to one misjudging other numbers as shown in the example below.
Mary was looking to buy a dress for an important event and she visited an online shop to buy one. As she visited the site, the first dress shown to her had a price tag of 1000 dollars. While the dress looked good the price of 1000 dollars was way beyond what she could afford.
Mary moved on to see the other dresses and saw the prices of 600, 300 and 320 dollars.
Mary ended up buying the dress costing 600 dollars, as it felt like a bargain. In reality, 600 dollars was still way more than what Mary could afford to spend on a dress. What happened was that the anchor effect made her feel that it was a bargain, because she only compared 600 dollars with the first price she saw, i.e. 1000 dollars.
If Mary compared the 600 dollars with the 300 dollars and 320 dollars, she would have realised that the dress was quite expensive. This would have given her a more realistic view of the average cost of dresses, rather than being influenced only by the first price she saw.
Salespeople can use the anchor effect to trick you. Shops often display a few products that they know are too expensive for most people to buy. They just put them there for the shopper’s minds to get anchored to the high prices. This then tricks the shoppers into believing that everything else in the shop is a bargain. Resist the temptation to only compare the price with the first price you have seen. Instead, make sure to check out other prices as well.