The Anchoring Effect
Depending on how you’re wired, a term like “anchoring effect” either thrills you or bores you.
If you’re among the bored category, please read on for another 5 sentences (approximately 13.53 seconds).
I’m speaking directly to you, who are teetering on the brink of boredom:
- Yes, “anchoring effect” is a psychology term.
- Yes, that probably gives you horrifying flashbacks to your freshman year when you took Psych 101.
- But, the anchoring effect is the psychological equivalent of taking powerful steroids, without the nasty side effects and bothersome illegality. In other words, this little principle could juice your conversion optimization efforts, transforming you from the scarecrow that you are right now, into the Iron Man of conversion optimization.
Ready to read on?
Now, let me make a few remarks to those of you who experience intellectual salivation at the term “anchoring effect.”
Guys, this one is for real. I’m sure you’ve heard of other psychological gimmicks, in which the term “psychology” was tacked onto someone’s half-baked dumb idea.
This is not such a gimmick. What’s more, it has direct and actionable value for the conversion optimizers out there.
Where we’re going in this article
As a first course, I’m going to straight up tell you what anchoring effect is. Then, I’m going to do a little tour of its psychological origins. Don’t lose me. I’ll be throwing in a few images and wisecracks to make the going easy.
This will be really easy stuff:
I’ll pull out the real guns of the article at the end, where I show you some actual how-to on the anchoring front.
What is the anchoring effect?
The anchoring effect happens when people make a decision based on the first information that they encounter.
It sounds so simple. And it is.
Psychologists (or you, if you’re smart) may refer to the anchoring effect by a few other terms:
- Anchoring bias
The bias word indicates that this is a human mental trait that is somehow flawed or not optimal. The focalism word reminds us that the anchoring effect tends to make us focus on one thing to the exclusion of others.
And that’s basically what happens in the anchoring effect. Here’s how it happens:
- You’re faced with a decision.
- Immediately, the mind’s decision-making mode is activated.
- The mind begins to search around frantically looking for some source of information that affects the decision.
- It secures upon the first bit of information that it sees.
- This information immediately affects the decision, moving it in a particular direction.
- Later, if recalling the decision or postponing it, the impact of that information will remain primary in the mind, affecting the ultimate outcome of the decision.
I like the term focalism, because it creates a visual image that is so accurate.
When an individual focuses on one thing, they have to not focus on other things. That’s why happens in the anchoring bias. The person is so focused on one thing that they place far too much weight on that factor.
Okay, so this makes sense in some contexts, right? Like you walk into Sears. You see a coat. The sign says “Originally $250, now only $200!” The $250 anchor is presented as a way of securing in the potential buyer’s mind the fact that this is a really low-priced coat.
But anchoring is a lot more sinister than the shopping rack reduction technique. Let me explain.
I can’t say it better than Kahneman does in this explainer video. The sonorous accented narration is Kahneman himself. The video was presumably created by fans.
Now, Daniel Kahneman, as you may or may not know, is a freaking genius.
Kahneman is a presidentially awarded, Nobel-winning, highly decorated, venerable demigod of psychology. He has accomplished breakthrough after breakthrough in the field of psychology and economics. He has more degrees than your thermometer.
Oh, this is just a screenshot of the honorary degrees from his Princeton CV.
Basically, he’s kind of smart. He came up with the description and much of the testing that bolsters the idea of the anchoring effect.
Now that you have an idea of what anchoring is, let’s dive in a little deeper. Let’s make sure we understand some of the manifestations and applications of the anchoring effect.
These 4 things are true about the anchoring effect.
1. The anchoring effect is a cognitive bias.
The anchoring effect is a principle of the mind. As such, it falls into the category of cognitive bias.
What, pray, is cognitive bias? According to Princeton University’s definition, cognitive bias is a feature of human thinking that “can lead to perceptual distortion, inaccurate judgment or illogical interpretation.”
Did you catch that? Distortion. Inaccurate. Illogical. That’s the net effect of the anchoring effect. It plunges the human mind into an inextricable vortex of error.
2. The anchoring effect is nearly impossible to overcome.
So, you’re pretty smart. You know about the anchoring effect. You can deal with it, right? Though others may fail prey to the bias, you can exercise your mental powers to refuse its impact upon your own stalwart intellect.
Meh. Prolly not.
Kahneman and his colleague Amos Tversky conducted this experiment to demonstrate the power of anchoring:
In 1974, Amos Tversky and Daniel Kahneman conducted a study asking … people to estimate how many African countries were part of the United Nations, but first they spun a wheel of fortune. The wheel was painted with numbers from 0 to 100, but rigged to always land on 10 or 65. When the arrow stopped spinning, they asked the person in the experiment to say if they believed the percentage of countries was higher or lower than the number on the wheel. Next, they asked people to estimate what they thought was the actual percentage. They that found people who landed on 10 in the first half of the experiment guessed around 25 percent of Africa was part of the U.N. Those who landed on 65 said around 45 percent.
Most behavioral psychologists hold consensus on this fact. The cognitive bias of focalism is an unrecoverable mental fixture.
The anchoring effect is so powerful, in fact, that the rare few who try to argue against its sway insist that the only way to do so is by meditating on the opposite of the anchoring point.
For example, you enter into a real estate negotiation. The seller mentions that he is willing to sell the property for a million bucks. If you want to overcome his anchoring tactic, then you have to force yourself to consider that instead the seller gives you a million bucks to take the property.
Researchers at the Universität Würzburg published this theory in the Personality and Social Psychology Bulletin:
Based on the Selective Accessibility Model, which assumes that anchoring is mediated by the selectively increased accessibility of anchor-consistent knowledge, the authors hypothesized that increasing the accessibility of anchor-inconsistent knowledge mitigates the effect. Considering the opposite (i.e., generating reasons why an anchor is inappropriate) fulfills this objective and consequently proves to be a successful corrective strategy.
The fact remains that, although the effects of the anchoring effect may be mitigated, they are nonetheless very real and very forceful.
3. The anchoring effect causes people to adjust other relevant information based on the anchor information.
Because the anchoring effect misleads the mind’s rational ability to sort out information in priority, there will be some hierarchical shortcomings.
Let me explain this by an example. Let’s say you’re at a used car lot. You walk up to a Toyota, and hear a guy nearby you shout “High mileage!” in an angry and exasperated tone.
Remember, you’re shopping for a used car, for which mileage is a significant consideration. Also, you’re in decision-making mode. And that shout of indignation, because it was unusual, anchored your mind.
So, you look at the Toyota. It’s nice. It’s loaded. It’s clean. It’s strong. It’s awesome.
And it has 40,000 miles.
You are very likely to focus on that one feature, and consider all other features of the car to be less important than the mileage. Why? Because some guy nearby shouted the word as you were strolling to take a look at the car.
- But what about the fact that it has been meticulously maintained? Mileage.
- But what about its leather interior and immaculate cleanliness? Mileage.
- But what about the engine overhaul and transmission tune-up? Mileage.
- But what about the low MPG? Mileage.
- But what about the … mileage?
All other features of the car, good or bad, are organized unintentionally by the first thing you inadvertently focused on — the car’s mileage.
A lot of people assume that Californians are happier. After all, it’s warmer. There are palm trees!
This is what Kahneman insightfully determined:
Judgments of life satisfaction in a different location are susceptible to a focusing illusion: Easily observed and distinctive differences between locations are given more weight in such judgments than they will have in reality.
No. People in California are not necessarily happier. The emphasis on climate and cultural opportunities are elevated as stronger determinants of an individual’s happiness than are other happiness areas such as job satisfaction, family, income level, etc.
4. The greater the difference, the more powerful the anchor.
Kahneman’s research indicates that wide variations in anchoring points produce equally wide variations in the amount that a product is worth.
For example, he mentions “$150,000” in the discussion of a German car, and “$500.” Well, clearly those are both very unrealistic prices for the average German automobile. But if you heard the higher number first, then you’re likely to conjecture that a German automobile is worth a higher amount than a person would guess if they head heard the lower number first.
It all depends on the anchor. Even unrealistic and illogical anchor points can skew a person’s decision making.
Disclaimer: The anchoring effect, like everything in life, has its limits. In some situations, if you make the difference too vast, it can appear ridiculous. For example, I’ve seen infomercials in which the announcer declares that this is a “Fifteen thousand dollar value, but today we’re giving it away for free.” Clearly, there’s something a bit gimmicky going on there.
How can you use the anchoring effect in marketing and conversion optimization?
To give you some real-life insight and ideas for using the anchoring effect, I’m going to show you a few examples of how other websites have done it.
The number you show them first is the number that will be the anchor.
The best advice that Kahneman gives in using the anchoring effect is the “say it first” move. If you go into a negotiation, you want to be the first one to say a number.
In online marketing, the approach takes a slightly different tack. You want to present your higher price first in order to anchor the user’s mind on the high end of the financial spectrum.
Here’s how Crazy Egg makes this work:
The Pro plan is priced at $99 a month. It is, no coincidence, listed on the left side — the place where most viewers are likely to see it first.
Once that “$99” hits the user’s retina, there is no going back. Their perception of the value of the product is incontrovertibly set by that anchor. Now, in comparison the plus plan — which the viewer looks at next — seems so low! It’s only half the price!
The first number or statement is of absolute importance. The mind seizes instantly upon that information, and uses it as the arbiter and determinant of all future considerations on that topic.
If you’re the first to present that number, then you’ve won the anchoring game. A conversion is more likely to follow if you have dropped the right anchor.
Focus on one thing.
Apple does a great job at marketing, right? Okay, look at how they market the iPad.
It’s classic Apple simplicity. Stark white. Single hand. Svelte device.
And it’s genius. They’re focusing on the feel of a $400 device. How it feels!?
If you’re thinking through it analytically, you know that the feeling of the device has jack to do with its performance. What about speed? WiFi? Interactivity? Battery time? Charging cables? Accessories? Strength? Pixels? Resolution? Camera? Memory? And what about those one billion apps?!
Not. A. Word.
Just the size.
Do you see the dark arts of psychology lurking behind that glistening white simplicity? It’s the anchoring effect.
Apple’s possessed marketers know that if you remember how that device feels in your hand then you’ll forget about most everything else. A satisfying tactile memory presents itself as paramount in your mind.
Later on, someone asks, “How did you feel about the iPad?” The fact that you first saw this image about its feel in your hand has created a cognitive bias, an anchor, upon that feel — the airy lightness, its slim contours, and its well-distributed weight.
When marketers try to sell a product, they love to wax eloquent on the many, many, many, many benefits of their product or service.
That’s a mistake.
A few disclaimers are in order. Am I suggesting that you dispense with bulleted lists or pages about benefits and features? No. This is all-important information that affects decision making. But remember the principle of anchoring. It’s the first or primary information that has the greatest impact upon a person’s subsequent decisions.
That’s why I suggest that you refine landing pages, product pages and other focused pages to hone the emphasis to one salient feature. That’s the anchor. That’s what the customer will remember. That’s what you want to sell. That’s what will turn the right visitor into a customer, provided you’ve chosen the correct feature.
How do I apply the anchoring effect to conversion optimization?
One of the great things about psychological nuggets like this one is that they embed themselves into your inner mind. You may not be able to articulate it or define it, but you’re able to use these principles in subtle and unexpected ways in the course of your conversion work.
The anchoring effect is one of those things. To many marketers it’s just common sense — merely a confirmation of what they’ve been doing all along as a marketer. Knowing that is has a name is nothing more than mild amusement.
Realizing the power of the anchoring effect is the first step in using it. With the power of this knowledge, you can unleash some serious psychological wizardry on your website.