How Anchored are Your Prices?
Ever been to a fancy restaurant, where the staff are dressed in black and white? There are pure white linen table cloths on the table, silver cutlery and crystal wine glasses. The décor is sumptuous and all the customers are dressed in their finest.
As the waiter formally greets you at the table, and hands you the parchment menu, you open it with trepidation, and your eyes fall on the price list and you feel your wallet tremble. As you gaze down the list, each dish looks as if it had been described by an English Literature professor, but highlighted above all the others is their signature dish, their most expensive dish, and there is a quick intake of your breath as you mentally decide which of your children you will need to sell to pay for this meal.
As you inspect the menu further, you notice that the other dishes are quite a bit less expensive than the signature dish. Still pricy, but you can keep the kids, although they will have to go to public schools. You then proceed to choose amongst one of the other dishes which all appear to be wonderful, even if they are slightly less wonderful than the signature dish.
What you have just experienced is anchor pricing. Firstly, you knew the place was going to be expensive when you booked. In the guide it had 3 chef hats and was described as fine dining. As you walked into the restaurant, all the visual clues told you it would be expensive, but still you didn’t run. You had prepared yourself for this, although, maybe not for how expensive it really was.
The signature dish was the anchor price. Few people order the signature dish, it’s real purpose is to make the other dishes look relatively cheaper. So now it becomes easier to accept the high prices of the other dishes, and as you settle into the menu, the decision turns into one of scope rather than the prices which you have now accepted.
Apple do the same thing with their products. You can see another example of this from the late, great Steve Jobs. Remember the starting price of the iPad was more than double their competition at the time, and he starts with an anchor price of $1000.
How could you use anchor pricing in your business to increase your prices? This is just one of 57 different pricing strategies that I reveal in my book: Price: How to Increase Your Prices without losing Sales. Listen to an interview with me on Pricing Strategy on the books website for even more pricing strategies. How many of them could you apply to your business?
May Your Business Be – As You Plan It.
Dr Greg Chapman – The Profit Whisperer
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