How to resist price anchoring

Posted on April 6, 2010

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Mint.com has a great post on price anchoring.  We’re all constantly being duped by this.  Price anchoring is creating an artificially high price to compare the normal price to.  If someone is selling a smergasborg for $20, and we see it elsewhere for $10, we’ll think it’s a great deal, even if we don’t need a smergasborg.

Anyway, Mint says that resisting price anchoring is impossible, and instead offers advice on how to use it on others. That’s good advice to those who sell things, but for shoppers, it’s a bit depressing… and not entirely true.

Setting your own anchors.

“Anchoring” works because it allows you to compare your current price to a price you already have in your head.  If it’s on sale, you compare it the original price.  Seems like a good deal!  But there are other prices available for you to compare this to besides the “original” price and the sale price.  You can do this by comparing prices between stores and brands, as well as over time.

Spatial anchors

Remember when your momma told you to “shop around?”  It’s good advice, not because you’ll always get the best price, but because it may prevent you from buying something on sale from one store that might be cheaper not on sale from another store.  If you know you need something, and it isn’t urgent, check around.  For instance, I am running out of black pepper.  At Meijer’s, it’s about $3.50.  At Rite Aid it was $2.  At the dollar store, it was $1.  So the next time I go to the dollar store I will pick up black pepper.  Also, remember not to generalize, for example, to all spices.  Ground cinnamon is $.50 at Meijer’s but $1 at the dollar store.

Temporal anchors

It’s also a good idea, if you buy something a lot, to keep a running total of the lowest price for something.  I do this with the frozen chicken breasts I buy regularly at Meijer’s.  Its usual price is $10 for 4 lbs, which is $2.50/lb.  This is too much, especially since the fresh chicken is sometimes $2/lb.  I won’t buy it unless it’s $8 or less, and won’t stock up unless it’s $7 or less.  Remember to compare across sizes; the best price I ever got on it was when the 2.5 lb bags were on sale.  And remember to keep an eye on competing brands; I remember once observing a girl lugging around the full price bags of Meijer’s chicken when the Tyson’s version was cheaper per lb (and it’s more tender, too!)

Memorization is key

So you see, you can avoid being duped by “for sale” signs as long as you memorize the per poundage prices from the past, per ounce prices from other brands, or per gallon prices from other stores.  Your impressions are unreliable, but your memory works just fine.  Of course, this only works if something is common enough to comparison shop or if you buy it often enough to keep a running total of the prices you’ve paid.  Also…

There’s no help for you if it’s something you don’t need.

Price anchoring can also get you to buy something you don’t need.  Earlier we bought a $10 smergasborg because it seemed cheap.  But I don’t even know what a smergasborg is.  If you are about to buy something you have never bought before, ask yourself, do I really need this?  How often will I use it?  Have I wanted to get this in the past?  I fell into this trap just a few days ago.  Gum was on sale for $.99 from $1.49 in big, orange signs.  I never chew gum.  Ever.  And yet for some reason I bought some.  And guess what?  They charged me $1.49 for it anyway!

Be wary of buying things you can’t anchor yourself.

Some things you can’t price anchor, period.  Like art.  And that makes buying art a pretty dangerous activity.  Even if you bargain with the artist, you’ll end up paying more for it than you would have if they had set the initial price lower. This happened to me at an art fair where my husband bought a mobile.  It was originally $140, and we paid $80 for it.  He was all pleased he got a good deal, and now I look at it and think it’s worth more like $20, if that.

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Posted in: Hacks