“Price is what you pay. Value is what you get.” – Warren Buffett
Perception is a fascinating phenomenon, especially in business. More often than not, the perceived value of an offer plays a monumental role in a customer’s purchasing decision. Enter the concept of price anchoring—a strategy that subtly influences the customer’s perception of value by establishing an initial price reference.
Consider the world of art auctions. Before the bidding begins, an estimated value range is given for each piece. This serves as an anchor, setting a framework for potential buyers and influencing how much they’re willing to bid. If the auctioneer starts with a masterpiece estimated at $5 million, the subsequent piece with an estimate of $1 million seems more affordable by comparison, even though the amount is still significant.
Jeff Bezos brilliantly applied this with Amazon’s Prime membership. By bundling a host of services—free shipping, streaming, early access deals, and more—under one umbrella, the perceived value was increased, making the annual or monthly fee appear like a nominal price for the total benefits it provided.
Price anchoring isn’t about manipulating your customer. Instead, it’s about presenting your offerings in a way that increases their value. It’s about showcasing the value of what you bring to the table. By first introducing a premium product or a comprehensive package and then contrasting it with a more basic offer, the latter suddenly feels like a deal.
Action Step: Take a moment to analyze your offers. Do you have a premium service or product that can be the anchor? Or perhaps, can you create bundled packages that serve this purpose? Remember, it’s about helping customers discern value, not just price.
In a marketplace saturated with choices, clarity in value can be the difference between a missed opportunity and a loyal customer. So, it’s worth considering: How are you anchoring the value of your offerings?
If you compete on price, a competitor can often undercut you leading to smaller and smaller margins. But, if you compete on value, you can continually increase the value you deliver to provide a product/service your customers are willing to pay for.
To learn more about the price anchoring, and increasing the value of your offers, be sure to check out our book of the week: “$100M Offers” by Alex Hormozi.