The Anchoring Effect in Marketing: Description, Psychology, Examples

The anchoring effect is the psychological phenomenon that causes the first number you see to influence the way you value and make decisions for that item around pricing, discounts, negotiations, etc.

The anchoring effect illustrated with a discount price tag.

Ever walked into a store planning to spend £20 and walked out £100 lighter? Or felt pleased with yourself for buying a £50 jumper that was “originally” priced at £100? Welcome to the fascinating world of the anchoring effect – one of the most powerful psychological tools in a marketer’s arsenal.

What Is The Anchoring Effect?

The anchoring effect is a cognitive bias where individuals rely excessively on the first piece of information (the “anchor”) encountered during decision-making, even if that information is completely irrelevant. This initial information creates a reference point that influences subsequent judgments and decisions.

In everyday terms, it’s why:

  • A £100 bottle of wine seems reasonable after you’ve just seen a £300 bottle
  • A £30 subscription feels like a bargain when displayed next to a £60 premium plan
  • Estate agents show you a property beyond your budget before showing you the one they actually expect you to buy

This bias was first formally identified by psychologists Amos Tversky and Daniel Kahneman in their groundbreaking 1974 paper, “Judgment Under Uncertainty: Heuristics and Biases.” Their research demonstrated that even completely arbitrary numbers could significantly influence people’s estimates and decisions.

How The Anchoring Effect Works (The Psychology Behind It)

The Cognitive Mechanism

At its core, the anchoring effect works through a mental shortcut called “anchoring-and-adjustment.” Here’s how it unfolds in your brain:

  1. You encounter an initial piece of information (the anchor)
  2. You use this anchor as a starting point for forming your judgment
  3. You make adjustments away from this anchor to arrive at your final decision
  4. These adjustments are typically insufficient, keeping your final judgment closer to the anchor than it should be

Research shows this happens even when people are fully aware they’re being anchored. In one famous experiment, Tversky and Kahneman asked participants if the percentage of African nations in the UN was higher or lower than a random number generated by a wheel of fortune. Even though participants knew the number was random, their subsequent estimates were significantly influenced by the initial anchor.

The Neural Activity

Neurologically, anchoring appears to work through selective activation of information consistent with the anchor. When you see a high price first, your brain activates memories and associations related to higher values, making subsequent lower prices seem more reasonable by comparison.

This effect is remarkably robust. Studies have found that anchoring influences:

  • Judges making sentencing decisions
  • Consumers evaluating products
  • Negotiators setting opening offers
  • Investors making financial decisions
  • Doctors making medical judgments

Even experts with years of training show susceptibility to anchoring biases in their respective fields.

Real-World Examples of The Anchoring Effect

Beyond Marketing

The anchoring effect permeates many areas of life:

  • Negotiations: The party who sets the first offer typically gains an advantage, as all subsequent counteroffers become anchored to that initial number.
  • Supermarket Psychology: A study found that signs saying “Limit 12 cans per customer” increased Campbell’s soup purchases from 3.3 to 7 cans per shopper. The number “12” served as an anchor for what constituted a reasonable purchase amount.
  • Cultural Traditions: De Beers’ famous marketing campaign established the expectation that engagement rings should cost “two months’ salary.” This artificial anchor has shaped consumer expectations and pricing norms for decades.
  • Judicial Decisions: Research shows that even experienced legal professionals are influenced by anchors when making sentencing decisions, regardless of their irrelevance to the case.

In Marketing and Advertising

Marketers regularly leverage anchoring to influence consumer decisions. Some well-documented examples include:

  • Williams-Sonoma Bread Maker: When the company introduced a bread maker priced at $275, sales were sluggish. After introducing a more advanced model at $429, sales of the original $275 model increased significantly. The higher-priced model created an anchor that made the original seem like a bargain by comparison.
  • KFC Australia’s “1-Dollar Chips” Campaign: The fast food chain used the headline “A deal so good you can only buy four,” creating an artificial purchase limit. This scarcity anchor resulted in a remarkable 56% increase in sales, as customers who might have normally purchased just one portion were influenced to buy more.
  • SaaS Pricing Pages: Companies like Mailchimp strategically display their most expensive subscription plan first, followed by cheaper options. The premium price serves as an anchor, making subsequent plans seem more affordable by comparison.

How The Anchoring Effect Affects Consumer Behaviour

Psychological Impact

The anchoring effect fundamentally alters how consumers perceive value. By establishing a reference point (the anchor), marketers can manipulate what feels expensive or inexpensive.

For instance, when a consumer sees a product originally priced at £100 but now on sale for £70, several psychological processes occur:

  1. Reference dependence: The consumer evaluates the £70 price in relation to the £100 anchor
  2. Loss aversion: They perceive getting the product for £70 as “gaining” £30
  3. Perceived value: The product seems more valuable precisely because of the higher anchor price

The Psychological Triggers That Amplify Anchoring

Several factors can strengthen the anchoring effect:

  • Uncertainty: The less someone knows about a product category, the more susceptible they are to anchoring
  • Cognitive load: When people are tired, distracted, or overwhelmed, anchoring effects become stronger
  • Precision: More precise anchors (£4,999 vs £5,000) often have stronger effects
  • Authority: Anchors presented by experts or authoritative sources have greater impact
  • Extreme values: Extremely high or low anchors can shift perception more dramatically

Case Studies: How Marketers Use The Anchoring Effect in Advertising

KFC Australia’s Purchase Limit Strategy

KFC Australia’s “1-Dollar Chips” campaign provides a masterclass in anchoring psychology. By advertising “A deal so good you can only buy four,” they established an anchor of what constituted a reasonable purchase.

The results were impressive: a 56% sales increase. The four-unit limit created an anchor in consumers’ minds about what was an acceptable or normal quantity to purchase. Many customers who might have bought just one portion ended up buying multiple, influenced by this artificial anchor.

This campaign demonstrates how anchoring can work through quantity limits, not just price points. The purchase limit created an artificial benchmark in customers’ minds.

Williams-Sonoma’s Premium Product Strategy

Williams-Sonoma, the American retail company specializing in kitchenware, offers another classic anchoring example. When they initially introduced a bread maker priced at $275, sales were unimpressive. Their solution was counterintuitive but psychologically brilliant – they introduced a more advanced bread maker priced at $429.

The result? Sales of the original $275 model increased significantly. The more expensive model served as an anchor, making the original bread maker appear reasonably priced by comparison. Customers who would have previously hesitated to purchase the $275 model now saw it as the “budget-friendly” option.

This case study illustrates the power of premium products to boost sales of mid-tier offerings – a strategy now common in many industries.

Practical Applications for Google Ads & Lead Generation

tips to use the anchoring effect in Google Ads

Google Ads Copywriting & Strategy

Anchoring can significantly improve your Google Ads performance when applied thoughtfully:

  1. Price Anchoring in Headlines:
    • Test two ad variations with different anchoring approaches:
      • Ad A: “Professional Website Design: £500”
      • Ad B: “Was £700, Now £500 – Professional Website Design”
    • Track which generates higher click-through rates and conversions
  2. Savings Emphasis:
    • Rather than simply stating your service costs £500, frame it as “Save £200 on Professional Website Design (Normally £700)”
    • This creates a high-value anchor point that makes your actual price seem more attractive
  3. Value Anchoring:
    • Instead of focusing on price, establish a value anchor:
    • “Our £500 Website Design Delivers £2000+ in Business Value”
    • This anchors the service’s worth at a much higher point than its cost

Landing Page Optimization for Lead Generation

Strategic application of anchoring can boost conversion rates on lead generation pages:

  1. Tiered Service Packages:
    • Present your premium package first (e.g., a consultant offering a £1,000 comprehensive service package)
    • Follow with the standard package (£500) that most clients will actually choose
    • The higher price anchors expectations, making the standard package seem like excellent value
  2. Limited Availability Anchoring:
    • Create urgency with specific number anchors: “Only 5 consultation spots available this month”
    • This establishes scarcity while anchoring the idea that your service is in demand
  3. Lead Magnet Value Anchoring:
    • When offering free content in exchange for email addresses, establish its monetary value:
    • “Download our Complete Marketing Guide (£199 Value) – Free for a Limited Time”
    • This anchors the perceived value of your lead magnet at a high price point

Website UX and Form Optimization

Anchoring can also improve user experience and form completion rates:

  1. Simplified Form Fields:
    • Anchor expectations by stating: “Just 3 quick questions to get your free quote”
    • This creates a mental anchor for how simple the process will be
  2. Positioning of Plans:
    • Always display your highest-priced plan on the left and the lowest-priced on the right
    • Western readers process information left-to-right, so they encounter the high anchor first
  3. Social Proof Anchoring:
    • Use specific numbers in testimonials: “We increased lead generation by 237% for Company X”
    • Precise figures serve as stronger anchors than rounded numbers

Why Marketers Should Care About The Anchoring Effect

The Power of First Impressions

The anchoring effect fundamentally reveals that first impressions don’t just matter – they dominate our subsequent judgments. For marketers, this means the first piece of information you present to prospects anchors all future perceptions of your brand, products, and pricing.

Consider these implications:

  • The first price a customer sees on your website sets expectations for all other prices
  • The first statistic you share about your service’s effectiveness anchors performance expectations
  • The first feature you highlight becomes the reference point for evaluating all other features

Ethical Considerations and Responsible Use

While the anchoring effect provides powerful tools for marketers, it carries significant ethical responsibilities:

  1. Transparency vs. Manipulation:
    • Using artificial “was” prices that never existed is misleading and potentially illegal in many jurisdictions
    • Creating false scarcity (“only 5 left” when supply is unlimited) erodes trust
  2. Creating Genuine Value:
    • Ethical anchoring should reflect real value differentials, not arbitrary price points
    • When offering discounts, these should represent genuine savings from legitimate original prices
  3. Long-term Relationship Building:
    • Short-term gains from manipulative anchoring typically harm brand reputation over time
    • Customers who feel misled rarely become loyal advocates

The most sustainable approach uses anchoring to highlight genuine value rather than create false perceptions.

How to Implement The Anchoring Effect in Your Marketing Strategy

Step-by-Step Implementation Guide

  1. Identify Your Anchor Points:
    • What is the first piece of information prospects typically see about your offering?
    • Where can you strategically place anchors in your marketing funnel?
    • Which metrics, prices, or values would best serve as beneficial anchors?
  2. Create Strategic Pricing Structures:
    • Introduce a premium or “decoy” option priced higher than your target offering
    • Present your most expensive option first in all listings
    • Use precise figures rather than rounded numbers (£497 rather than £500)
  3. Craft Anchor-Optimized Copy:
    • Begin sales pages with high-value propositions or statistics
    • Use specific numbers in headlines and opening paragraphs
    • Compare your offerings to higher-priced alternatives in your market
  4. Test and Measure:
    • A/B test different anchor points in ads, landing pages, and emails
    • Track how different anchors affect conversion rates and average order values
    • Measure the lifetime value of customers acquired through different anchoring strategies

Best Practices and Common Pitfalls

Best Practices:

  • Keep your anchoring simple and focused on a single, clear message
  • Ensure your anchors are specific and precise rather than general
  • Make your highest-value anchors visually prominent
  • Support anchor prices with objective value justifications

Common Pitfalls:

  • Using too many anchors, which dilutes their effectiveness
  • Creating anchors so extreme they lose credibility
  • Failing to test different anchoring approaches
  • Employing manipulative tactics that damage trust

A/B Testing Ideas to Measure Effectiveness

  1. Google Ads Headline Test:
    • Version A: “Professional Website Design Services”
    • Version B: “Save £200 on Professional Website Design”
    • Measure: Click-through rate and conversion rate differences
  2. Lead Generation Form Test:
    • Version A: Standard form with no anchoring
    • Version B: Form with “Average clients see 127% ROI within 90 days” at the top
    • Measure: Form completion rates and lead quality
  3. Pricing Page Test:
    • Version A: Packages displayed low-to-high pricing
    • Version B: Packages displayed high-to-low pricing
    • Measure: Package selection distribution and average sale value

Related Psychological Biases & Effects

Understanding the anchoring effect works best when you recognize its relationship to other cognitive biases:

  • The Decoy Effect: Adding a strategically inferior option to make another option look more attractive. This works hand-in-hand with anchoring to guide consumer choices.
  • The Framing Effect: How information is presented (framed) influences decision-making. While anchoring relies on reference points, framing depends on presentation context.
  • Loss Aversion: People prefer avoiding losses to acquiring equivalent gains. Anchoring leverages this by establishing high initial values that make discounted prices feel like “avoiding a loss.”
  • The Halo Effect: When one positive attribute creates a positive impression that influences other judgments. Like anchoring, it creates reference points that affect overall perception.
  • Availability Bias: People overestimate the likelihood of events based on how easily examples come to mind. Unlike anchoring’s focus on initial information, availability relates to memory accessibility.

The anchoring effect represents one of the most powerful and consistently reliable psychological principles in marketing. By understanding its mechanisms and implementing it ethically, marketers can significantly influence consumer perception and decision-making in ways that benefit both businesses and customers.

Understanding the anchoring effect isn’t just about selling more – it’s about communicating value effectively. When used responsibly, anchoring helps prospects make better decisions by providing meaningful reference points for evaluating your offerings against alternatives.

Could The Anchoring Effect Add £1 Million To Your Sales?

See what I did there? You’re already thinking about that juicy extra seven digits of sales coming your way simply by employing this psychological method to your advertising and landing pages. Your next step is to find out exactly how you we can help you achieve this, so Book your Discovery Call now.

FAQs About anchoring effect

What is the anchoring effect in psychology?

The anchoring effect is a cognitive bias where individuals rely excessively on the first piece of information they encounter (the “anchor”) when making decisions, even if that information is irrelevant. This initial anchor skews subsequent judgments, as people tend to make insufficient adjustments away from it. For example, when negotiating, the first number mentioned often serves as a powerful anchor that influences the final agreement, regardless of its actual reasonableness.

How does the anchoring effect influence our decision making process?

The anchoring effect influences decision making through an anchoring-and-adjustment mechanism where people make insufficient adjustments from initial reference points. When faced with a decision, we typically start with the first value presented (the anchor) and adjust our thinking from there, but these adjustments are usually inadequate. This affects numerous everyday decisions, from negotiations and car purchases to investment choices and budgeting. For instance, car buyers tend to perceive lower prices as reasonable if they’ve already been anchored to higher ones.

Who first discovered or studied the anchoring effect in depth?

Amos Tversky and Daniel Kahneman first formalized the anchoring effect in their landmark 1974 paper Judgment Under Uncertainty: Heuristics and Biases. Their pioneering experiment asked participants to estimate the percentage of African countries in the UN after being given a random number generated by a wheel of fortune. Despite knowing the number was random, participants’ estimates were significantly influenced by this initial anchor, demonstrating how arbitrary information can affect judgment even when people are aware of its irrelevance.

What are some famous real-world examples of the anchoring effect?

Several verified real-world examples demonstrate the anchoring effect:

  1. Williams-Sonoma Bread Maker: Sales of a $275 bread maker increased significantly after introducing a premium $429 model, making the original seem like a bargain.
  2. KFC’s Australia Campaign: Using “A deal so good you can only buy four” as a headline increased sales by 56% by anchoring an acceptable purchase quantity.
  3. De Beers’ Diamond Marketing: Successfully anchored the idea that an engagement ring should cost 1-3 months’ salary, reshaping consumer expectations globally.
  4. Supermarket Purchase Limits: Signs stating “Limit 12 cans per family” increased Campbell’s soup purchases from 3.3 to 7 cans per shopper.

How is the anchoring effect different from other cognitive biases like the halo effect?

The anchoring effect differs from other cognitive biases in several key ways:

  • Anchoring vs. Framing Effect: Anchoring relies on a specific reference point that influences subsequent judgments, while the framing effect is about how information presentation affects decisions.
  • Anchoring vs. Availability Bias: Anchoring is tied to the order of information (first information received), whereas availability bias relates to how easily examples come to mind.
  • Anchoring vs. Halo Effect: The halo effect occurs when one positive trait creates an overall positive impression of a person or product. In contrast, anchoring specifically involves a numerical or conceptual reference point that influences estimates or valuations.

In what ways do marketers intentionally use the anchoring effect to influence consumers?

Marketers leverage the anchoring effect through several verified strategies:

  1. Tiered Pricing: Displaying the most expensive option first (like many SaaS companies do) makes subsequent options seem more affordable.
  2. “Was/Now” Pricing: Showing original prices crossed out beside sale prices establishes a high anchor point, making discounts seem more valuable.
  3. Scarcity Anchoring: Setting artificial limits (e.g., “Maximum 4 per customer”) increases perceived value and encourages higher purchase quantities.
  4. Decoy Pricing: Introducing a slightly less attractive third option makes the premium version seem like the obvious choice.
  5. Service Packaging: Consultants and service providers offer premium packages first before presenting more affordable options that now appear to be bargains.

Are there any ethical concerns about exploiting the anchoring effect for manipulation?

Yes, there are ethical concerns regarding the anchoring effect in marketing. The main ethical issue is manipulation through artificially inflated “original” prices that create a false sense of value. This practice can erode consumer trust when discovered. For example, some retailers have faced criticism for marking prices up only to immediately discount them. There are also concerns about how unrealistic anchors in advertising and social media can negatively impact self-esteem and create unrealistic expectations. The ethical approach is to create genuine value by choosing reasonable anchor points rather than deliberately misleading consumers.

How can I avoid being overly influenced by the anchoring effect in my daily life?

To reduce the anchoring effect’s influence on your decisions:

  1. Recognize when anchoring occurs by questioning the first numbers or values presented in negotiations, sales, or pricing scenarios
  2. Seek multiple reference points rather than relying on a single anchor—research comparable products, services, or data points
  3. Delay your decision when possible to allow time for more objective evaluation
  4. Set your own anchor before entering negotiations or viewing others’ prices
  5. Challenge your initial impressions by deliberately considering values far from the anchor
  6. Use objective criteria like market research, competitive analysis, or expert opinions to guide your judgments

These strategies won’t eliminate anchoring completely, but they can significantly reduce its impact on your decisions.

What are some trending or commonly searched terms related to the anchoring effect?

Common search terms related to the anchoring effect include:

  • Anchoring bias in decision making
  • Cognitive bias in marketing
  • Price anchoring strategies
  • Psychological pricing techniques
  • Heuristics and biases in consumer behavior
  • Anchoring effect in negotiations
  • How to avoid anchoring bias
  • Marketing psychology principles
  • Behavioral economics examples
  • Cognitive biases in everyday life
  • Anchoring and adjustment heuristic
  • Pricing strategy psychology

These terms reflect interest in both understanding the psychological mechanism and its practical applications in business and daily life.

How can content creators optimize their SEO for queries about the anchoring effect?

Content creators can optimize for anchoring effect queries by:

  1. Target specific applications like “anchoring effect in negotiation,” “price anchoring in marketing,” or “overcoming anchoring bias”
  2. Include practical examples from verified case studies such as Williams-Sonoma’s bread maker or KFC’s limited quantity strategy
  3. Create how-to content around implementing or combating anchoring effect in business and daily life
  4. Use relevant terminology including “cognitive bias,” “heuristics,” “psychological pricing,” and “behavioral economics”
  5. Reference key figures like Tversky and Kahneman to establish credibility
  6. Include visual elements such as before/after pricing examples and decision-making scenarios
  7. Structure content with clear headings for “definition,” “examples,” “applications,” and “strategies” to improve snippet opportunities
  8. Link to reputable psychology and marketing sources to strengthen content authority