Usual price $800. Now, available for $325. Feels like a good deal, doesn’t it?

In 2010, the popular New York eatery, Serendipity 3’s introduced a $69 hot dog called ‘Foot-Long-Haute-Dog’ with Exotic dressings & gained plenty of publicity when the Guinness Book of World Records certified it as the most expensive wiener of all time. The true purpose of this overpriced item, however,  was to make the next most expensive item on the menu seem cheaper. Customers who were drawn by the Haute Dog’s publicity ordered the menu’s $17.95 cheeseburger in droves, driving record sales for the store.

Some years earlier. Serendipity 3 offered a $1000 ‘Golden Opulence Sundae’ that was only available with a 48 hour-notice. They sold only one Sundae per month. Nevertheless, it intrigued customers who then, compared the $1000 sundae to 'less expensive options' such as the $15.50 'fruit and fudge' confection or the $22.50 'Cheese Cake Vesuvius' and helped drive their sales, all the while completely convinced that they were getting a great deal, with the most expensive item acting like an anchor against which everything else seemed ‘reasonable’

The assumption that people carefully weigh all pros and cons, and make decisions rationally, is one the biggest myths that existed in the field of economics and marketing. The reality is that more often than not, people unconsciously latch onto the first fact they encounter, basing their decisions on that first fact, irrespective of its accuracy, in a demonstration of a phenomenon called Anchoring Effect.

In 1974, psychologists Tversky and Kahneman published 'Judgment under Uncertainty: Heuristics and Biases' documenting the first clinical evidence of the Anchoring Effect. They described an Anchoring Effect experiment which challenged two groups of high school students to complete a lengthy multiplication problem. One group was given 5 secs to estimate the answer to  1 x 2 x 3 x 4 x 5 x 6 x 7 x 8. The other group was given same time to solve this : 8 x 7 x 6 x 5 x 4 x 3 x 2 x 1. The Anchoring Effect led the students whose problem started with lower numbers to estimate lower. While the students who solved the problem in reverse anchored to the higher numbers, resulting in a higher estimate. Each group was unduly affected by the first numbers they saw.
 
The Anchoring Effect has been extensively used to influence response to pricing, promotions, subscriptions, negotiations, customer service training. Telling a customer, for instance, that a wait time to get a table is 30 min, and then saying that it is available in 20 mins. makes them happier than if you were to tell them that the wait time is 15 minutes, and then having to tell them to wait another 5 minutes. In both the scenarios, the final wait time is the same, but the customer satisfaction levels widely different.
 
Anchoring Effect is a significant reference point, guiding & effecting our decisions way more strongly than we’d like to accede. While anchoring has often been used to drive profits & sales, one of the strongest & most sustainable, anchoring points to use in marketing, is the Brand’s Purpose & the values it stands for (should stand for).  As people get bombarded with information in this overstuffed, over communicated media environment, keeping the Brand’s Values and Purpose, front, back and Centre, as a constant, will help audiences, follow these values, through their path to purchase.

​Remember that when it comes to decision -making, it’s often about the first thing people see.