The Bias of Reference Point

Anchoring is a cognitive bias where an individual depends too heavily on an initial piece of information offered when making decisions.

Example :

Why negotiation technique of most people wrong ?

We generally start negotiation of a price for a shirt based on the first price told by the shop keeper. We ask for $10 - $20 less than the amount what shop keeper has quoted.

Example 2 :

Why discounting works ?

Generally any discount starts with stating the original price and then stating the discounting price. The original price is always higher than the discounted price. Here original price acts as anchor and make the discounted price looks worthy.

How To Take Advantage Of It

Trick 1 : First impressions

First impressions is the best impression - This happens because of Anchor effect kicks in

Logo is the first piece of information your customer come across . If you're business logo is unique and not derived from some standard templates then customer treat your brand differently. They may be get the feel that your brand is unique and may pay higher price for the products

The same apply to your company name , website design , shop interior design.

Trick 2 : Product Package Pricing

When you have 3 price packages for a product, then show them one beside the other. Show the top-priced package first. This package will likely be their anchor. Then show the low price package beside to it. Then they will likely select the package the one in the middle.