Anchor pricing and reference pricing are strategies used by online retailers to influence customers' perceptions of value. Anchor pricing involves setting a high initial "anchor" price to make subsequent discounted prices seem like a good deal. Reference pricing compares a product's price to competitors' or a previously advertised higher price to seem lower. Online retailers can use tiered pricing, display competitors' prices, or set artificially high reference prices followed by discounts to take advantage of these effects and guide customers toward desired purchase choices and prices.

1. E-MARKETING –II
INDIVIDUAL CLASS LEADERSHIP
Anchor & Reference Pricing
SOHAM SANGHAVI
ISHAN AGGARWAL

2. Steve Jobs Price Anchoring Master Class
https://www.youtube.com/watch?v=f0uBANguiQs

3. WHAT IS PRICE ANCHOR?
• The initial price that your customer first comes across would be
considered the anchor price because that’s the price that’s going to stick
in their mind and it’s the price that they’re going to base all other prices
on when it comes to that specific product.
• The key to this pricing strategy is to set the anchor high.
• When you all of a sudden set a “sale” price, which in reality is your
normal price, for that item, customers will believe they are getting a deal
on the “discounted” item.
• Many online retail stores use this method because it’s very effective.

4. Anchor prices are used to make other tiers of services
seem like great values

5. For example, let’s look at this laptop advertisement

6. The MacBook Air is an anchor price to make the Windows
laptops seem like a bargain.

7. ONLINE TICKET BOOKING
This snaphot is taken from sky scanner website. We can seen that the website displays
competitors pricing.

8. How e-marketers can take advantage?
1. Price perception
• A product is truly never "cheap" or "expensive"; it’s all relative. People love
to compare when valuing products and having an anchor price allows them
to do that. If you’re out shopping for a TV, you might look at two different
models and compare their features and prices. One might be 50 inches and
cost $1,000 while the other might be 48 inches and cost $600.
• In this case, you’ll probably think that the $600 TV offers the best value
because you’re paying $400 less for a TV that’s only 2 inches smaller. That
thought process is exactly what the retailer intended for you to do. They
wanted the $1,000 TV to be an anchor so the $600 TV looked like a bargain
in comparison.

9. 2. Decision making and the power of
suggestion
• Humans are naturally indecisive creatures. If you’ve ever been to an
ice cream stand and felt conflicted about choosing between mint
chocolate chip or cookie dough.
• The decision can become so debilitating that some folks might even
walk away because of the anxiety.
• Yet, a great way to prevent this flight is to label choices as the "most
popular" option or the "flavor of the day."

10. 3. Avoiding extremes
• As humans, we may like risks and extremes in theory, but most of us like to
keep with the crowd and not wander to extremes.
• This is also reflected in something as simple as buying your morning cup of
coffee.
• Most people choose a medium coffee as opposed to a small or a large because
it's more than the least filling option, and less than the biggest.
• This kind of behavior translates especially to price anchoring as well.
• Essentially, you should surround the ideal option with a higher and a lower tier.
• The higher and lower tier on your pricing page effectively function as anchor
prices, which then push your customers toward purchasing that middle tier.

12. How to implement it online?
• Create a tiered pricing strategy, providing different versions of a core
product at different prices. This automatically builds in your anchor
prices and allows you to take advantage of the multi-price mindset.
• Another potential strategy is to show your competitors’ prices on
your pricing page.

13. What is Reference Pricing?
Reference pricing refers to how much consumers expect to pay for
goods in relation to other competitors and the previously advertised
price.

14. How amazon uses reference pricing?

15. How Reference Pricing is Used
• A firm can sell goods at a price
just below the main price of its
competitor.
• A firm can sells goods at a large
discount to a previously
advertised ‘reference price’.

16. How E Stores can use Reference Pricing
• Set an Artificially High Reference Price
They establish a high reference price
for its product, and later offer
discounts. Consumers think they are
getting a good deal because they have
a discount on the reference price.
• Charge High for Shipping
Consumer relate ‘virtual’ stores to
lower overhead cost and expect these
lower costs to be passed to the
consumers. But sometimes they
charge higher prices when shipping
costs are included.

17. THANK YOU