Anchor Effect – How does Anchor effect change price dramatically ?

Anchor Effect – Where you plant a number in someone’s mind and change their way of looking at things.

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Simple example is the above image where you sell something at $199, by just showing a big number to someone like $500 , this $500 has just a simple role of planting that big number in buyers mind and nothing else.

Lets see another example where you want DONATION

I want donation from someone for some cause and do not want to force them with an exact number here are two ways to do it

Option 1 : Sir, We are doing XYZ for poor children, some donation from you will help!, how much would you like to contribute ?

Option 2 : Sir, We are doing XYZ for poor children, some donation from you will help! . A lot of people have donated their 1 week salary , which is equal to Rs 10,000 , but you can donate whatever you want !
The Guy – Rs 10,000 seems too much to me right now , I can do maximum Rs 1,000 .

You – Fine , any amount is good for poor children

So you got Rs 1,000 because you anchored the person subconsciously with Rs 10,000 and that is used as benchmark for taking decision.

So anchoring is just a trick to plant a number in other’s mind so that you are benefitted.

Another example is this

Client – Hey financial advisor, What is your fees ?

Advisor – Rs 10,000

Client – What ! .. thats too much !
NOW with Anchor Effect

Client – Hey Financial Advisor – Whats your fees ?

Advisor – Rs 50,000

Client – What ? Are you kidding me ?

Advisor – You should be thankful, if this was US , you would be paying $1,000 per hour, thats Rs 60,000 per hour and given you need to work for at least 20 hours for a project , its Rs 12 lacs . In India its damn cheaper to work with financial advisors , from that angle, Rs 50,000 is nothing in India , provided we do much better work then US counterparts

Client – Come on , this is just insane, no one will pay that much in India

Advisor – What do you think is right number in India ?

Client – Rs 15,000 – 20,000 is maximum one will pay ? I can not go beyond Rs 15,000 ?

Advisor – hmm.. Fine – Lets go ahead

I know its not exactly how the conversation will go on, but ANCHOR effect surely helps !

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