404 of the Week

Anchoring As Basis Of Value

By July 28, 2010 2 Comments

An anchor.

I read an interesting article on “anchoring” as it applies to assessing the perceived worth of a product. It helps explain how some people are cajoled into purchasing a new bit of tech, even if the actual value isn’t so great. However, it can be applied to not only a physical good, but also an idea, or even a relationship.

To break it down simply: an anchor is established (start price), and then a salesperson follows that by telling the customer a sale price. Even though the product is worth much less than the sale price, the perceived value set by the high anchor makes the customer think they are getting a deal.

In a bit of a reverse of the above breakdown: if you establish X expectation (anchor) early in a relationship or idea – great communication, thoughtful, etc. – and then you are offered something less, it is difficult to give up that original X expectation.  That initial anchor  is now permanently affixed to the entire transaction (relationship, impression, idea, etc.) and colors the entire perception of value.

It’s worth reading if for no other reason than to understand how we, as humans, work when confronted with a ‘great savings’: http://youarenotsosmart.com/2010/07/27/anchoring-effect/

In fact, the whole blog You Are Not So Smart is awesome.  Go ahead and read everything to get a dose of  psychology and sociology from a journalistic perspective.

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