Anchoring, Framing, and Pricing: The Hidden Psychology of Sales

Have you ever noticed that you buy certain items not because of immediate need but because the “50%” tag just cannot be avoided? Why is it that we feel better adding to the cart the item on sale for ₹999 after a 20% discount and hesitate to buy an item at ₹1000 despite being of higher importance? While you may answer, “Oh, it is the psychology of sales,” the question to ask is, then why are we not able to resist ourselves?

Every day, marketing teams are analysing data and finding newer and better strategies using psychological principles to influence how we perceive value and spend our money. The interesting relationship between psychology and economics makes the discount almost irresistible for us. While this might sound complex at first, understanding the hidden mechanisms can make us smarter and more efficient consumers.

Read More: The Psychology of Discount: Reasons Behind A Consumer Behaviour

The First View Decides How You Perceive the Next View 

Imagine walking into a clothes showroom to buy a jacket. The first jacket you see is ₹15,000.  A second jacket priced at ₹8000 and at a discount of 25% suddenly feels like a bargain, although ₹8000 itself is much higher than your initial budget.  

This is known as anchoring. A cognitive bias where the first piece of information acts as a reference point for future judgements. Although the initial number is arbitrary, the brain judges the later values with respect to the previously encountered ones (Tversky &  Kahneman, 1974).  Displaying a higher price at the very first makes the later prices seem affordable even though they might exceed the amount the consumer had decided to spend initially. 

Read More: Marketing the Mind: The Psychology Behind Consumer Buying Decisions

Presentation Drives Consumer 

Now imagine you are walking in a shopping mall trying to find yoghurt. You come across the yoghurt section, and the first one is labelled as “90% fat-free”, and the one just beside it is labelled “contains 10% fat only”. While both the labels imply the same thing, most people will take the first one. This is called the framing effect. In this, the decision is biased by how the information is presented rather than what the information says. Our emotional responses often incline towards choices that feel more rewarding (Tversky & Kahneman, 1981). 

Price Is Not Just a Number 

One of the most common marketing schemes is price perception. Haven’t you noticed how many products cost ₹999 instead of ₹1000? It is not a mere fancy trend. Individuals often tend to focus on the leftmost digit, which makes ₹999 feel cheaper than ₹1000, although the difference is just one rupee. Our brain registers prices quickly rather than analytically; thus, pricing formats are influential (Thomas & Morwitz, 2005). Similarly, premium pricing can create a perception of the product being superior in terms of quality and other factors. However, the reality might not be so.  

Read More: Therapy for the Algorithm:How Psychologists Are Being Hired to Shape User Behavior

Comparisons Decide Decisions  

Most people do not judge a product by analysing their quality and reading the ingredient and ratio labels. Products are judged by their prices and by comparing them with the available options. Restaurants often add an extremely expensive dish, which a handful of people might even order. However, the purpose of the dish is not to increase the revenue generated but to make the moderately expensive dishes seem like reasonable choices.

You can try noticing this the next time you visit a restaurant. Similarly, stores often display an “original price” tag just beside the discounted price tag to increase the value of the offer perceived by consumers. Studies have concluded that humans often evaluate the value of an item based on comparisons (Kahneman & Tversky, 1979). 

Marketing Is About Understanding the Customer 

Studies have suggested that consumers are not rational thinkers but individuals whose decisions are influenced by cognitive biases (Ariely, 2008). Therefore, advertisers carefully design product displays to increase the perceived value. Getting a discount is not just about saving money, but it is the feeling of winning that makes consumers buy the item. When the buyer believes the deal is better than their expectations were, the deal becomes emotionally satisfying (Thaler, 1985). Limited-time offers and countdown timers amplify this excitement by creating urgency and fear of losing a great deal.  

In the modern market, both online and offline, there are hundreds of variations under a single category, which demands a proper analysis of every option before making an absolute decision to buy. Our brain often tends to make quicker decisions by applying certain techniques. Anchoring, framing and price comparisons are examples of the approaches adopted by the brain. While they help in making quicker decisions, individuals become vulnerable to influence (Gigerenzer & Gaissmaier, 2011). 

Read More: The Role of Introspection in Overcoming Cognitive Biases

Become a Smarter Customer 

While knowing about the techniques used by companies does not guarantee that an individual will not be prey to them, it does help them to take a pause before deciding on a purchase. Before buying items, you should question yourself if you truly need them and try to evaluate their true value. Looking beyond the fancy display, discounts and taglines can help in making better financial decisions. Research has shown that awareness about cognitive biases helps in making more efficient decisions (Kahneman, 2011). 

Conclusion 

Every tagline and price tag has two different values attached to it. One tells of the economic and psychological value, while the other brings an emotional value which influences the human mind to buy the product. While anchoring shapes expectations, framing influences emotions, and pricing strategies make an individual believe that the price is reasonable. Thus, next time you come across a discount, always make sure to question yourself before you purchase whether you truly need that item. In a world where every advertisement competes for our attention, it is important that we stay aware of the choices we make.  

References +

• Tversky, A., & Kahneman, D. (1974). Judgment under uncertainty: Heuristics and biases. Science, 185(4157), 1124–1131. 
• Kahneman, D., & Tversky, A. (1979). Prospect theory: An analysis of decision under risk. Econometrica, 47(2), 263–291. 
• Tversky, A., & Kahneman, D. (1981). The framing of decisions and the psychology of choice.  Science, 211(4481), 453–458. 
• Thaler, R. H. (1985). Mental accounting and consumer choice. Marketing Science, 4(3), 199– 214.
• Thomas, M., & Morwitz, V. G. (2005). Penny wise and pound foolish: The left-digit effect in price cognition. Journal of Consumer Research, 32(1), 54–64. 
• Ariely, D. (2008). Predictably irrational: The hidden forces that shape our decisions.  HarperCollins. 
• Gigerenzer, G., & Gaissmaier, W. (2011). Heuristic decision making. Annual Review of  Psychology, 62, 451–482. 
• Kahneman, D. (2011). Thinking, fast and slow. Farrar, Straus and Giroux.