Anchoring & Decision Making (Advanced Persuasion Tactics)

1. Selling the Un-Sellable Painting

Who would buy such an exquisite yet expensive painting?

A gallery owner is in a quandary. He has one painting that is un-sellable. No one has bought it since past 3 months that it has been on the wall. People appreciate the painting. They praise its vibrant use of colors and strokes. But when they hear its price they shrink away.

People advice the gallery owner to reduce the price of that painting. But the gallery owner doesn’t budge. Instead, he commissions another painter to create a new painting with the same style and colors – but to make that painting on a much bigger canvas.

When the big new painting is completed, the gallery owner showcases it right next to the original un-sellable painting. And values it at almost double the price of the original painting.

Do you know what happens next? The original painting that didn’t sell for 3 whole months is now sold within a day.

People don’t make buying decisions in a vacuum. They compare it with other available alternatives. In this case, they would now gush over the big new painting. But hearing its price, they would balk. Then they would see a smaller painting with similar style and buy that without a further thought.

2. African Anchoring Confusion

Amos Tversky and Daniel Kahneman are two psychologists who conduct a classic experiment.

They ask a group of people: Is the number of African countries in the United Nations greater or less than 10%?

Most people say that 10% is too low. Maybe its somewhere near 25%.

The 2 psychologists than ask another group of people: Is the number of African countries in the United Nations greater or less than 65%?

This time, most people said that 65% is too high. Maybe the correct answer is 45%!

Peoples answer changes based on the first number they are given!

3. Economist Changes the Anchor to Persuade People

Economist magazine gives the following pricing options to people who want to subscribe:

• Website-only subscription: $59.00 per year.

• Print-only subscription: $125.00 per year.

• Print & web: $125.00 per year.

Dan Ariely, a behavioral economist himself is confused: why would the Economist offer the same price for print-only subscription as well as for print & web subscription? It didn’t make sense to him.

So Dan started investigating and found out why Economist gave the 2nd print-only option that they knew no one would go for.

He gathered 2 groups of 100 students each and asked them to subscribe to the Economist. To the first group, he made the same offer that the Economist makes. And the results of what people chose are:

• Website-only subscription: 16

• Print-only subscription: 0

• Print & web: 84

For the 2nd group, Dan removes the 2nd print-only pricing option. The results this time are:

• Website-only subscription: 68

• Print & web: 32

Economist gives the 2nd pricing option that they know no one will buy because it increases the number of sales their higher priced 3rd option gets!

Action Summary:

• People don’t make decisions in a vacuum. They make them by comparing various factors with each other.

• People pick an anchor and base their final conclusion near and in comparison to that anchor. So make sure that the answer you want is close to the anchor point.

• To persuade people, change their frame of mind by giving them a different anchor point. And they’ll decide in your favour.

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Comments:

Comment by Vimal

2008-06-11 16:12:10

One more wonderful post Ankesh

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Comment by Ankesh Kothari

2008-06-11 19:35:46

Thanks for the comment Vimal.

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Comment by Michelle

2008-06-11 18:44:29

I don’t think I’ll be looking at pricing the same way anytime soon. As for the African example, I’ve got to try that one on my students.

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Comment by Ankesh Kothari

2008-06-11 19:35:17

Hehe - Thanks for commenting Michelle.

Do let us know how the African experiment goes with your students. Should be a lot of fun when you share the results with them!

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Comment by Michael Martin

2008-06-11 18:48:54

Very interesting post! The Economist example is fascinating. I’m going to keep this in mind for the future, thanks.

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Comment by Ankesh Kothari

2008-06-11 19:43:14

Thanks Michael for the comment.

I’ve shared the Economist case studies during my presentation and on another newsletter I run too - and its been a big hit.

Am glad it helps you too.

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Comment by Skellie

2008-06-12 05:36:06

Hey Ankesh,

You have a way of explaining this stuff in a crystal clear manner. Have you thought about switching the focus of the blog to be marketing/entrepreneurship only? You’re particularly stellar when it comes to this kind of content.

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Comment by Ankesh Kothari

2008-06-18 01:26:18

Thanks Skellie for your comment!

I actually do publish a marketing newsletter (and have been publishing it since 4+ years). And am thinking of starting a blog dedicated to marketing too

But at NonToxin.com, I plan to publish all sorts of ideas. Because my purpose with NonToxin.com is to help make people better thinkers.

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Comment by Piyush

2008-06-16 20:03:41

amazing. I enjoyed reading it very much. Keep writing

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Comment by Ankesh Kothari

2008-06-18 01:17:54

Thanks Piyush.

Do subscribe to NonToxin’s RSS feed and you will be notified automatically whenever a new post is published.

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Comment by Harshil P. Zaveri

2008-06-16 21:00:36

Wow… got any more like these? Would definitely help in increasing sales!!

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Comment by Ankesh Kothari

2008-06-18 01:19:18

Hi Harshil,

You could check out BizTactics.com for more marketing case studies. Its one of the websites I run that is devoted to marketing and advertising.

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Comment by Brisbane web designer

2008-06-17 04:44:45

Nice article. I think I read something similar in Freakonomics. Anchoring works a treat with children. Would you rather do 2 hours homework and have 2 hours computer time, or one hour on and one hour off for 6 hours?

Either way the parent wins.

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Comment by Ankesh Kothari

2008-06-18 01:20:19

Thanks for talking about Freakonomics. Its a damn good book.

(Although I don’t recall reading the research you talk about… maybe it was on their blog and not in their book?)

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Comment by Bas

2008-06-17 18:28:01

This is fascinating. Great content. Signing up to your affiliate program! (very smart affiliate program by the way)

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Comment by Ankesh Kothari

2008-06-18 01:21:18

Thank You Bas for your kind words.

And thanks for signing up for the affiliate program! I hope it helps you earn some chump change

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Comment by mike garrett

2008-06-18 06:10:25

Great food for thought…will try out in my college classes…will send results. Thanks, Mike

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Comment by Ankesh Kothari

2008-06-18 19:43:44

Thanks Mike for commenting!

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Comment by Mongol

2008-06-18 18:14:59

This really sounds confusing but makes perfect sense with the example for the magazine subscribation.

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Comment by Dezamasezon

2008-06-20 00:28:46

Awesome post.

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Comment by Ankesh Kothari

2008-06-26 15:13:37

Thanks Dezamasezon!

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Comment by Kevin

2008-06-20 00:51:09

Great examples.

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Comment by Ankesh Kothari

2008-06-26 16:18:57

Thanks Kevin!

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Comment by gully

2008-06-20 20:09:23

Thanks for your informations.

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Comment by Ankesh Kothari

2008-06-26 16:23:37

Thanks Gully for taking the time to post a comment!

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Comment by osabin

2008-06-20 20:14:00

cool!

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Comment by Tage

2008-06-21 12:01:34

Wow, that is very, very interesting! I would be the type of guy who says, “No one will even buy that, why even list it as an optin!” Hmm, I guess that is why it really pays to do studies.

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Comment by Ankesh Kothari

2008-06-26 16:20:49

Thanks Tage.

Kudos should be given to the copywriter for Economist who first came up with the pricing options. Unfortunately, I could not find out who she was…

Hence I wrote about the subsequent study.

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Comment by Michael Ross

2008-06-22 03:44:07

Another Trick is the Way the options are listed.

you might think that with prices, you list low first and as you go down the page you list the higher ones. But Tests have proven, when you start with the higher price first you make more sales of it.

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Comment by Ankesh Kothari

2008-06-26 15:15:19

Thanks Michael. You are spot on.

Another research also shows that if three not so close price points are given, people usually opt for the middle price.

Maybe I’ll write another post on pricing psychology some time later… Thanks!

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Comment by Malcolm Lambe

2008-06-23 20:45:16

Hmmm…we’re funny creatures aren’t we? I have a new site where I’m selling a widget of three lyric words for $3 - it links song lyrics to sites and blogs. People are baulking at paying a dollar a word. Maybe I need to try one of these options? Any ideas?

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Comment by Ankesh Kothari

2008-06-26 16:23:07

Malcolm,

Thanks for commenting.

Unfortunately, I’m not too sure whether there is a demand for buying links from lyrics for $3. Comparison pricing won’t help a lot if the demand is not present…

(But don’t rely on my advice alone. I thought the million dollar homepage wouldn’t sell out all its pixels either when I first came upon it. Boy was I wrong. So I wish you best of luck on your venture!)

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Comment by Noreen

2008-06-25 01:44:03

Great post…really gives you something to think about.

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Comment by Ankesh Kothari

2008-06-26 15:13:13

Thanks Noreen for the comment

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Comment by Paul

2008-06-27 06:23:44

Interesting post. I read this article after it appeared on stumbleupon by the way

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Comment by Enam

2008-06-29 12:34:35

Nice marketing tips and tricks with real examples. Marketing also needs creativity.

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Comment by Anthem

2008-06-30 09:02:20

fascinating on the example of subscription, very clever and it makes sense once you know it. now i am wondering how i can apply that to my business, it is just to good

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Comment by Jug

2008-07-03 15:18:47

This is truly an amazing post. Great ideas, great concepts. Thanks for posting this Ankesh.

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Comment by Ben Koshkin

2008-07-04 04:09:22

very smart, its true people don’t always make their decisions rationally.

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Comment by Mike Adkinson

2008-07-04 04:12:14

I also found this through Stumbleupon - thumbs up

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Comment by Zombierepellent

2008-07-04 04:13:54

There is no game theory for zombies, they just hunger!!!

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Comment by vlad

2008-07-07 21:45:11

Everything IS relative I guess….

Fantastic examples.

http://www.tGossip.com

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Comment by Lorne Williams

2008-07-27 10:29:42

I’d love to do a test to see how far above the anchor one can go without losing the effect. I’m referring to the Economist example…

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Comment by Options Trading

2008-09-02 07:03:49

Please don’t make decisions in a vacuum and should be informed before being tricked into their purchase. I really enjoyed this example because it shows that “perception” is “other people’s reality”.

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