Browse Definitions :
Definition

anchoring effect

Anchoring effect is a form of cognitive bias that causes people to focus on the first available piece of information (the "anchor") given to them when making decisions. It particularly affects decisions regarding numerical values like pricing, both value-based and cost-plus, since customers tend to decide on amounts skewed toward the anchor value. Similar to framing effect, how the anchor value is presented can influence a customer's buying decision.

Anchoring effect is often taken advantage of in sales situations to set prices for products. Setting a price too high might normally deter a potential customer from making a purchase. However, when the vendor then advertises the lower sale price (which may be the price they had actually intended to sell the product for), the original higher price serves as an anchor, making the new sale price seem like a much better deal. The customer will then be much more willing to make the purchase than they would have been if the product had been marked with the lower sale price originally. This can hinder the customer's ability to find a fair and reasonable price.

An example of this is an advertisement run by the magazine The Economist, which offered three subscription options: a web-only subscription, which cost $59; a print-only subscription, which cost $125; or both web and print, which also cost $125. Given these options in a study, no subjects chose the print-only subscription, which was the clearly inferior option, and a majority chose the dual print and web subscription. However,  when they removed the print-only option, the majority of people chose the web-only subscription. Even though nobody was interested in the print-only option, it served as an anchor to make the more expensive, dual subscription seem like a much better deal.

Anchoring can also affect negotiations for prices or salaries. The first suggested price will set a precedent for all subsequent suggestions, including the final price. Therefore, the seller will usually set a high price first. For salaries, an employer might anchor with a low salary offer to a prospective employee in hopes that the employee will counter with a higher salary request that makes both parties comfortable. Anchoring effect has widespread influence, including on professionals who are well-educated on the related topic (like real estate agents evaluating the value of houses) and people who are aware of the potential effect of anchoring and know to adjust for it.

This was last updated in March 2017

Continue Reading About anchoring effect

SearchNetworking
  • network packet

    A network packet is a basic unit of data that's grouped together and transferred over a computer network, typically a ...

  • virtual network functions (VNFs)

    Virtual network functions (VNFs) are virtualized tasks formerly carried out by proprietary, dedicated hardware.

  • network functions virtualization (NFV)

    Network functions virtualization (NFV) is a network architecture model designed to virtualize network services that have ...

SearchSecurity
  • data breach

    A data breach is a cyber attack in which sensitive, confidential or otherwise protected data has been accessed or disclosed in an...

  • insider threat

    An insider threat is a category of risk posed by those who have access to an organization's physical or digital assets.

  • data compliance

    Data compliance is a process that identifies the applicable governance for data protection, security, storage and other ...

SearchCIO
  • data privacy (information privacy)

    Data privacy, also called information privacy, is an aspect of data protection that addresses the proper storage, access, ...

  • leadership skills

    Leadership skills are the strengths and abilities individuals demonstrate that help to oversee processes, guide initiatives and ...

  • data governance policy

    A data governance policy is a documented set of guidelines for ensuring that an organization's data and information assets are ...

SearchHRSoftware
SearchCustomerExperience
  • recommerce

    Recommerce is the selling of previously owned items through online marketplaces to buyers who reuse, recycle or resell them.

  • implementation

    Implementation is the execution or practice of a plan, a method or any design, idea, model, specification, standard or policy for...

  • first call resolution (FCR)

    First call resolution (FCR) is when customer service agents properly address a customer's needs the first time they call.

Close